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Altair Announces Second Quarter 2022 Financial Results

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Altair Engineering Inc.
Altair Engineering Inc.

Second Quarter Results Exceed Expectations

TROY, Mich., Aug. 04, 2022 (GLOBE NEWSWIRE) --  Altair (Nasdaq: ALTR), a global leader in computational science and artificial intelligence (AI) that provides software and cloud solutions in simulation, high-performance computing (HPC), data analytics and AI, today released its financial results for the second quarter ended June 30, 2022.

“Altair had a strong second quarter, driven by high double-digit software revenue growth, with all our key metrics coming in above our guidance ranges,” said James Scapa, founder, chairman and chief executive officer of Altair. “While we are in a period of geopolitical and economic uncertainty, I am confident Altair's culture, customer relationships, high recurring revenue and utilization, high-value business model, and exceptional technology leaves us well-positioned for the remainder of the year.”

“The second quarter was another big success, achieving revenue and profit ahead of expectations,” said Matt Brown, chief financial officer of Altair. “Led by our year-over-year software product revenue growth of over 17% in the second quarter, we continued to deliver on our commitment to software product revenue growth and margin expansion. While we are encouraged by our strong first half of 2022, we are reducing our full year guidance ranges for revenue and profit due to the impact foreign exchange rates are having on our results in reported currency.”

Second Quarter 2022 Financial Highlights

  • Software product revenue was $116.9 million compared to $99.6 million for the second quarter of 2021, an increase of 17.4%

  • Total revenue was $132.7 million compared to $119.9 million for the second quarter of 2021, an increase of 10.6%

  • Net loss was $(33.8) million compared to $(13.6) million for the second quarter of 2021. Diluted net loss per share was $(0.43) based on 78.9 million diluted weighted average common shares outstanding, compared to diluted net loss per share of $(0.18) for the second quarter of 2021, based on 75.3 million diluted weighted average common shares outstanding. Net loss margin was (25.5%) compared to (11.4%) for the second quarter of 2021

  • Non-GAAP net income was $10.9 million, compared to non-GAAP net income of $5.6 million for the second quarter of 2021, an increase of 94.7%. Non-GAAP diluted net income per share was $0.13 based on 86.3 million non-GAAP diluted common shares outstanding, compared to non-GAAP diluted net income per share of $0.07 for the second quarter of 2021, based on 80.3 million non-GAAP diluted common shares outstanding

  • Adjusted EBITDA was $16.4 million compared to $9.5 million for the second quarter of 2021, an increase of 73.1%. Adjusted EBITDA margin was 12.4% compared to 7.9% for the second quarter of 2021

  • Cash provided by operating activities was 12.3 million, compared to 18.2 million for the second quarter of 2021

  • Free cash flow was $11.0 million, compared to $15.8 million for the second quarter of 2021.

Business Outlook

Based on information available as of today, Altair is issuing the following guidance for the third quarter and full year 2022:

(in millions)

Third Quarter 2022

 

Full Year 2022

 

Software Product Revenue

 

$

99.0

 

to

$

104.0

 

 

$

487.0

 

to

$

498.0

 

Total Revenue

 

$

115.0

 

 

$

120.0

 

 

$

555.0

 

 

$

566.0

 

Net Loss

 

$

(34.9

)

 

$

(31.0

)

 

$

(66.1

)

 

$

(56.5

)

Non-GAAP Net Income

 

$

(1.2

)

 

$

1.8

 

 

$

60.6

 

 

$

68.0

 

Adjusted EBITDA

 

$

0.0

 

 

$

4.0

 

 

$

89.0

 

 

$

99.0

 

Net Cash Provided by Operating Activities

 

 

 

 

 

 

 

$

15.1

 

 

$

23.1

 

Free Cash Flow

 

 

 

 

 

 

 

$

8.0

 

 

$

16.0

 

Conference Call Information
What: Altair’s Second Quarter 2022 Financial Results Conference Call
When: Thursday, August 4, 2022
Webcast: http://investor.altair.com (live & replay)

Non-GAAP Financial Measures

This press release contains the following non-GAAP financial measures: Non-GAAP Net Income, Non-GAAP Net Income Per Share, Adjusted EBITDA, Free Cash Flow, Non-GAAP Gross Profit and Non-GAAP Operating Expense.

Altair believes that these non-GAAP measures of financial results provide useful information to management and investors regarding certain financial and business trends relating to its financial condition and results of operations. The Company’s management uses these non-GAAP measures to compare the Company’s performance to that of prior periods for trend analysis, for purposes of determining executive and senior management incentive compensation and for budgeting and planning purposes. The Company also believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing the Company’s financial measures with other software companies, many of which present similar non-GAAP financial measures to investors.

Non-GAAP net income excludes stock-based compensation, amortization of intangible assets related to acquisitions, restructuring charges, asset impairment charges, non-cash interest expense, other special items as identified by management and described elsewhere in this press release, and the impact of non-GAAP tax rate to income tax expense, which approximates our tax rate excluding discrete items and other specific events that can fluctuate from period to period.

Non-GAAP diluted common shares as defined starting with Q1 2022, includes the diluted weighted average shares outstanding per GAAP regardless of whether the Company is in a loss position. All periods presented will be adjusted to align with this new definition.

Adjusted EBITDA represents net income adjusted for income tax expense, interest expense, interest income and other, depreciation and amortization, stock-based compensation expense, restructuring charges, asset impairment charges and other special items as identified by management and described elsewhere in this press release.

Free cash flow consists of cash flow from operations less capital expenditures.

Non-GAAP gross profit represents gross profit adjusted for stock-based compensation expense, restructuring expense and other special items as identified by management and described elsewhere in this press release.

Non-GAAP operating expense represents operating expense excluding stock-based compensation expense, amortization, restructuring charges, asset impairment charges and other special items as identified by management and described elsewhere in this press release.

Company management does not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of these non-GAAP financial measures is that they exclude significant expenses and income that are required by GAAP to be recorded in the Company’s financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgment by management about which expenses and income are excluded or included in determining these non-GAAP financial measures. Altair urges investors to review the reconciliation of its non-GAAP financial measures to the comparable GAAP financial measures, which it includes in press releases announcing quarterly financial results, including this press release, and not to rely on any single financial measure to evaluate the Company’s business.

Reconciliation tables of the most comparable GAAP financial measures to the non-GAAP financial measures used in this press release are included with the financial tables at the end of this release.

About Altair

Altair is a global leader in computational science and artificial intelligence (AI) that provides software and cloud solutions in simulation, high-performance computing (HPC), data analytics and AI. Altair enables organizations across all industries to compete more effectively and drive smarter decisions in an increasingly connected world – all while creating a greener, more sustainable future. To learn more, please visit www.altair.com.

Cautionary Language Concerning Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to, our guidance for the third quarter and full year 2022, our statements regarding our expectations for 2022, and our reconciliations of projected non-GAAP financial measures. These forward-looking statements are made as of the date of this release and are based on current expectations, estimates, forecasts and projections as well as the beliefs and assumptions of management. Words such as “expect,” “anticipate,” “should,” “believe,” “hope,” “target,” “project,” “goals,” “estimate,” “potential,” “predict,” “may,” “will,” “might,” “could,” “intend,” variations of these terms or the negative of these terms and similar expressions are intended to identify these forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond Altair’s control. Altair’s actual results could differ materially from those stated or implied in our forward-looking statements due to a number of factors, including but not limited to, the risks detailed in Altair’s quarterly and annual reports filed with the Securities and Exchange Commission as well as other documents that may be filed by the Company from time to time with the Securities and Exchange Commission. Past performance is not necessarily indicative of future results. The forward-looking statements included in this press release represent Altair’s views as of the date of this press release. The Company anticipates that subsequent events and developments will cause its views to change. Altair undertakes no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. These forward-looking statements should not be relied upon as representing Altair’s views as of any date subsequent to the date of this press release.

Media Relations
Altair
Dave Simon
248-614-2400 ext. 332
ir@altair.com

Investor Relations
The Blueshirt Group
Monica Gould
212-871-3927
ir@altair.com


ALTAIR ENGINERING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

 

 

June 30, 2022

 

 

December 31, 2021

 

(In thousands)

 

(Unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

Cash and cash equivalents

 

$

416,137

 

 

$

413,743

 

Accounts receivable, net

 

 

103,483

 

 

 

137,561

 

Income tax receivable

 

 

11,412

 

 

 

9,388

 

Prepaid expenses and other current assets

 

 

23,282

 

 

 

27,529

 

Total current assets

 

 

554,314

 

 

 

588,221

 

Property and equipment, net

 

 

39,370

 

 

 

40,478

 

Operating lease right of use assets

 

 

24,977

 

 

 

28,494

 

Goodwill

 

 

385,989

 

 

 

370,178

 

Other intangible assets, net

 

 

90,327

 

 

 

99,057

 

Deferred tax assets

 

 

7,943

 

 

 

8,495

 

Other long-term assets

 

 

25,588

 

 

 

28,352

 

TOTAL ASSETS

 

$

1,128,508

 

 

$

1,163,275

 

LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY

 

CURRENT LIABILITIES:

 

 

 

 

 

 

Accounts payable

 

$

4,962

 

 

$

6,647

 

Accrued compensation and benefits

 

 

31,084

 

 

 

42,307

 

Current portion of operating lease liabilities

 

 

9,433

 

 

 

9,933

 

Other accrued expenses and current liabilities

 

 

49,444

 

 

 

122,226

 

Deferred revenue

 

 

92,141

 

 

 

93,160

 

Convertible senior notes, net

 

 

 

 

 

199,705

 

Total current liabilities

 

 

187,064

 

 

 

473,978

 

Operating lease liabilities, net of current portion

 

 

16,340

 

 

 

19,550

 

Deferred revenue, non-current

 

 

20,785

 

 

 

12,872

 

Convertible senior notes, net

 

 

304,676

 

 

 

 

Other long-term liabilities

 

 

41,471

 

 

 

42,894

 

TOTAL LIABILITIES

 

 

570,336

 

 

 

549,294

 

Commitments and contingencies

 

 

 

 

 

 

MEZZANINE EQUITY

 

 

 

 

 

784

 

STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

Preferred stock ($0.0001 par value), authorized 45,000 shares, none issued and outstanding

 

 

 

 

 

 

Common stock ($0.0001 par value)

 

 

 

 

 

 

Class A common stock, authorized 513,797 shares, issued and outstanding 52,191
and 51,524 shares as of June 30, 2022, and December 31, 2021, respectively

 

 

5

 

 

 

5

 

Class B common stock, authorized 41,203 shares, issued and outstanding 27,745
shares as of June 30, 2022, and December 31, 2021

 

 

3

 

 

 

3

 

Additional paid-in capital

 

 

687,338

 

 

 

724,226

 

Accumulated deficit

 

 

(100,394

)

 

 

(102,087

)

Accumulated other comprehensive loss

 

 

(28,780

)

 

 

(8,950

)

TOTAL STOCKHOLDERS’ EQUITY

 

 

558,172

 

 

 

613,197

 

TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY

 

$

1,128,508

 

 

$

1,163,275

 



ALTAIR ENGINEERING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

(in thousands, except per share data)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

License

 

$

82,688

 

 

$

66,632

 

 

$

188,857

 

 

$

163,027

 

Maintenance and other services

 

 

34,205

 

 

 

32,926

 

 

 

68,933

 

 

 

66,072

 

Total software

 

 

116,893

 

 

 

99,558

 

 

 

257,790

 

 

 

229,099

 

Software related services

 

 

7,376

 

 

 

7,481

 

 

 

16,437

 

 

 

15,579

 

Total software and related services

 

 

124,269

 

 

 

107,039

 

 

 

274,227

 

 

 

244,678

 

Client engineering services

 

 

7,047

 

 

 

10,268

 

 

 

15,059

 

 

 

20,945

 

Other

 

 

1,340

 

 

 

2,605

 

 

 

3,151

 

 

 

4,452

 

Total revenue

 

 

132,656

 

 

 

119,912

 

 

 

292,437

 

 

 

270,075

 

Cost of revenue

 

 

 

 

 

 

 

 

 

 

 

 

License

 

 

4,120

 

 

 

3,617

 

 

 

8,807

 

 

 

9,012

 

Maintenance and other services

 

 

12,884

 

 

 

12,043

 

 

 

25,603

 

 

 

23,598

 

Total software *

 

 

17,004

 

 

 

15,660

 

 

 

34,410

 

 

 

32,610

 

Software related services

 

 

5,464

 

 

 

5,731

 

 

 

11,499

 

 

 

11,853

 

Total software and related services

 

 

22,468

 

 

 

21,391

 

 

 

45,909

 

 

 

44,463

 

Client engineering services

 

 

5,914

 

 

 

8,293

 

 

 

12,555

 

 

 

17,181

 

Other

 

 

1,141

 

 

 

2,262

 

 

 

2,662

 

 

 

3,724

 

Total cost of revenue

 

 

29,523

 

 

 

31,946

 

 

 

61,126

 

 

 

65,368

 

Gross profit

 

 

103,133

 

 

 

87,966

 

 

 

231,311

 

 

 

204,707

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development *

 

 

46,477

 

 

 

38,757

 

 

 

89,571

 

 

 

77,033

 

Sales and marketing *

 

 

39,116

 

 

 

31,909

 

 

 

74,798

 

 

 

63,979

 

General and administrative *

 

 

24,367

 

 

 

21,861

 

 

 

47,936

 

 

 

45,787

 

Amortization of intangible assets

 

 

6,208

 

 

 

4,615

 

 

 

12,111

 

 

 

9,492

 

Other operating income, net

 

 

(5,767

)

 

 

(585

)

 

 

(6,548

)

 

 

(1,202

)

Total operating expenses

 

 

110,401

 

 

 

96,557

 

 

 

217,868

 

 

 

195,089

 

Operating (loss) income

 

 

(7,268

)

 

 

(8,591

)

 

 

13,443

 

 

 

9,618

 

Interest expense

 

 

700

 

 

 

2,988

 

 

 

1,285

 

 

 

5,961

 

Other expense, net

 

 

21,907

 

 

 

708

 

 

 

23,975

 

 

 

1,543

 

(Loss) income before income taxes

 

 

(29,875

)

 

 

(12,287

)

 

 

(11,817

)

 

 

2,114

 

Income tax expense

 

 

3,899

 

 

 

1,361

 

 

 

10,429

 

 

 

1,402

 

Net (loss) income

 

$

(33,774

)

 

$

(13,648

)

 

$

(22,246

)

 

$

712

 

(Loss) income per share:

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income per share attributable to common
stockholders, basic

 

$

(0.43

)

 

$

(0.18

)

 

$

(0.28

)

 

$

0.01

 

Net (loss) income per share attributable to common
stockholders, diluted

 

$

(0.43

)

 

$

(0.18

)

 

$

(0.28

)

 

$

0.01

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares used in computing
net (loss) income per share, basic

 

 

78,948

 

 

 

75,263

 

 

 

79,204

 

 

 

74,959

 

Weighted average number of shares used in computing
net (loss) income per share, diluted

 

 

78,948

 

 

 

75,263

 

 

 

79,204

 

 

 

79,851

 

*        Amounts include stock-based compensation expense as follows (in thousands):

 

 

(Unaudited)

 

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

(in thousands)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Cost of revenue – software

 

$

2,030

 

 

$

1,222

 

 

$

3,933

 

 

$

2,380

 

Research and development

 

 

8,979

 

 

 

4,143

 

 

 

16,337

 

 

 

7,329

 

Sales and marketing

 

 

7,664

 

 

 

3,659

 

 

 

14,699

 

 

 

7,127

 

General and administrative

 

 

2,527

 

 

 

1,624

 

 

 

4,845

 

 

 

3,460

 

Total stock-based compensation expense

 

$

21,200

 

 

$

10,648

 

 

$

39,814

 

 

$

20,296

 



ALTAIR ENGINEERING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)

 

 

Six Months Ended June 30,

 

(In thousands)

 

2022

 

 

2021

 

OPERATING ACTIVITIES:

 

 

 

 

 

 

Net (loss) income

 

$

(22,246

)

 

$

712

 

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

15,819

 

 

 

13,180

 

Provision for credit loss

 

 

114

 

 

 

205

 

Amortization of debt discount and issuance costs

 

 

829

 

 

 

5,631

 

Stock-based compensation expense

 

 

39,814

 

 

 

20,296

 

Deferred income taxes

 

 

(64

)

 

 

(1

)

Gain on mark-to-market adjustment of contingent consideration

 

 

(5,304

)

 

 

 

Expense on repurchase of convertible senior notes

 

 

16,621

 

 

 

 

Other, net

 

 

115

 

 

 

34

 

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

29,270

 

 

 

24,852

 

Prepaid expenses and other current assets

 

 

2,056

 

 

 

(3,367

)

Other long-term assets

 

 

4,397

 

 

 

(5,067

)

Accounts payable

 

 

(2,070

)

 

 

(967

)

Accrued compensation and benefits

 

 

(9,742

)

 

 

1,548

 

Other accrued expenses and current liabilities

 

 

(61,648

)

 

 

2,999

 

Deferred revenue

 

 

10,080

 

 

 

(5,333

)

Net cash provided by operating activities

 

 

18,041

 

 

 

54,722

 

INVESTING ACTIVITIES:

 

 

 

 

 

 

Payments for acquisition of businesses, net of cash acquired

 

 

(37,660

)

 

 

 

Capital expenditures

 

 

(3,457

)

 

 

(5,391

)

Other investing activities, net

 

 

(322

)

 

 

(389

)

Net cash used in investing activities

 

 

(41,439

)

 

 

(5,780

)

FINANCING ACTIVITIES:

 

 

 

 

 

 

Proceeds from issuance of convertible senior notes,
net of discounts and commissions

 

 

224,265

 

 

 

 

Repurchase of convertible senior notes

 

 

(192,792

)

 

 

 

Proceeds from employee stock purchase plan contributions

 

 

4,431

 

 

 

 

Repurchase and retirement of common stock

 

 

(4,387

)

 

 

 

Proceeds from the exercise of common stock options

 

 

1,689

 

 

 

885

 

Payments of debt issuance costs

 

 

(1,157

)

 

 

 

Payments on revolving commitment

 

 

 

 

 

(30,000

)

Other financing activities

 

 

(131

)

 

 

(206

)

Net cash provided by (used in) financing activities

 

 

31,918

 

 

 

(29,321

)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

(6,226

)

 

 

(847

)

Net increase in cash, cash equivalents and restricted cash

 

 

2,294

 

 

 

18,774

 

Cash, cash equivalents and restricted cash at beginning of year

 

 

414,012

 

 

 

241,547

 

Cash, cash equivalents and restricted cash at end of period

 

$

416,306

 

 

$

260,321

 

Supplemental disclosure of cash flow:

 

 

 

 

 

 

Interest paid

 

$

289

 

 

$

339

 

Income taxes paid

 

$

4,891

 

 

$

3,744

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

 

Property and equipment in accounts payable, other current liabilities
and other liabilities

 

$

1,530

 

 

$

631

 


Financial Results

The following table provides a reconciliation of Non-GAAP net income and Non-GAAP net income per share – diluted, to net (loss) income and net (loss) income per share – diluted, the most comparable GAAP financial measures:

 

 

(Unaudited)

 

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

(in thousands, except per share amounts)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net (loss) income

 

$

(33,774

)

 

$

(13,648

)

 

$

(22,246

)

 

$

712

 

Stock-based compensation expense

 

 

21,200

 

 

 

10,648

 

 

 

39,814

 

 

 

20,296

 

Amortization of intangible assets

 

 

6,208

 

 

 

4,615

 

 

 

12,111

 

 

 

9,492

 

Non-cash interest expense

 

 

422

 

 

 

2,837

 

 

 

839

 

 

 

5,637

 

Restructuring expense

 

 

 

 

 

1,732

 

 

 

 

 

 

5,078

 

Impact of non-GAAP tax rate (1)

 

 

79

 

 

 

(601

)

 

 

(4,957

)

 

 

(9,678

)

Special adjustments and other (2)

 

 

16,737

 

 

 

 

 

 

18,229

 

 

 

 

Non-GAAP net income

 

$

10,872

 

 

$

5,583

 

 

$

43,790

 

 

$

31,537

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income per share, diluted

 

$

(0.43

)

 

$

(0.18

)

 

$

(0.28

)

 

$

0.01

 

Non-GAAP net income per share, diluted

 

$

0.13

 

 

$

0.07

 

 

$

0.51

 

 

$

0.39

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP diluted shares outstanding

 

 

78,948

 

 

 

75,263

 

 

 

79,204

 

 

 

79,851

 

Non-GAAP diluted shares outstanding (3)

 

 

86,281

 

 

 

80,303

 

 

 

86,516

 

 

 

79,851

 

  1. The Company uses a non-GAAP effective tax rate of 26%.

  2. The three months ended June 30, 2022, includes $16.6 million expense on the repurchase of convertible senior notes, $5.4 million currency losses on acquisition-related intercompany loans and a $5.3 million gain from a mark-to-market adjustment of contingent consideration associated with the World Programming acquisition. The six months ended June 30, 2022, includes $16.6 million expense on the repurchase of convertible senior notes, $6.9 million currency losses on acquisition-related intercompany loans and a $5.3 million gain from a mark-to-market adjustment of contingent consideration associated with the World Programming acquisition.

  3. The Non-GAAP diluted shares outstanding for the three and six months ended June 30, 2021, has been changed to align with the current definition.

The following table provides a reconciliation of Adjusted EBITDA to net income, the most comparable GAAP financial measure:

 

 

(Unaudited)

 

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

(in thousands)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net (loss) income

 

$

(33,774

)

 

$

(13,648

)

 

$

(22,246

)

 

$

712

 

Income tax expense

 

 

3,899

 

 

 

1,361

 

 

 

10,429

 

 

 

1,402

 

Stock-based compensation expense

 

 

21,200

 

 

 

10,648

 

 

 

39,814

 

 

 

20,296

 

Interest expense

 

 

700

 

 

 

2,988

 

 

 

1,285

 

 

 

5,961

 

Depreciation and amortization

 

 

8,133

 

 

 

6,494

 

 

 

15,819

 

 

 

13,180

 

Restructuring expense

 

 

 

 

 

1,732

 

 

 

 

 

 

5,078

 

Special adjustments, interest income and other (1)

 

 

16,282

 

 

 

(79

)

 

 

17,929

 

 

 

(173

)

Adjusted EBITDA

 

$

16,440

 

 

$

9,496

 

 

$

63,030

 

 

$

46,456

 

(1) The three months ended June 30, 2022, includes $16.6 million expense on the repurchase of convertible senior notes, $5.4 million currency losses on acquisition-related intercompany loans and a $5.3 million gain from a mark-to-market adjustment of contingent consideration associated with the World Programming acquisition. The six months ended June 30, 2022, includes $16.6 million expense on the repurchase of convertible senior notes, $6.9 million currency losses on acquisition-related intercompany loans and a $5.3 million gain from a mark-to-market adjustment of contingent consideration associated with the World Programming acquisition.


The following table provides a reconciliation of Free Cash Flow to net cash provided by operating activities, the most comparable GAAP financial measure:

 

 

(Unaudited)

 

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

(in thousands)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net cash provided by operating activities (1)

 

$

12,255

 

 

$

18,151

 

 

$

18,041

 

 

$

54,722

 

Capital expenditures

 

 

(1,267

)

 

 

(2,352

)

 

 

(3,457

)

 

 

(5,391

)

Free cash flow (1)

 

$

10,988

 

 

$

15,799

 

 

$

14,584

 

 

$

49,331

 

(1) The six months ended June 30, 2022, includes a $65.9 million payment in January 2022 for a legal judgement acquired in December 2021.

The following table provides a reconciliation of Non-GAAP gross profit to gross profit, the most comparable GAAP financial measure:

 

 

(Unaudited)

 

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

(in thousands)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Gross profit

 

$

103,133

 

 

$

87,966

 

 

$

231,311

 

 

$

204,707

 

Stock-based compensation expense

 

 

2,030

 

 

 

1,222

 

 

 

3,933

 

 

 

2,380

 

Restructuring expense

 

 

 

 

 

161

 

 

 

 

 

 

936

 

Non-GAAP gross profit

 

$

105,163

 

 

$

89,349

 

 

$

235,244

 

 

$

208,023

 

Non-GAAP gross margin

 

 

79.3

%

 

 

74.5

%

 

 

80.4

%

 

 

77.0

%

The following table provides a reconciliation of Non-GAAP operating expense to Total operating expense, the most comparable GAAP financial measure:

 

 

(Unaudited)

 

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

(in thousands)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Total operating expense

 

$

110,401

 

 

$

96,557

 

 

$

217,868

 

 

$

195,089

 

Stock-based compensation expense

 

 

(19,170

)

 

 

(9,426

)

 

 

(35,881

)

 

 

(17,916

)

Amortization

 

 

(6,208

)

 

 

(4,615

)

 

 

(12,111

)

 

 

(9,492

)

Gain on mark-to-market adjustment of
contingent consideration

 

 

5,304

 

 

 

 

 

 

5,304

 

 

 

 

Restructuring expense

 

 

 

 

 

(1,571

)

 

 

 

 

 

(4,142

)

Non-GAAP operating expense

 

$

90,327

 

 

$

80,945

 

 

$

175,180

 

 

$

163,539

 



Business Outlook
The following table provides a reconciliation of projected Non-GAAP net (loss) income to projected net loss, the most comparable GAAP financial measure:

 

 

(Unaudited)

 

 

 

Three Months Ending
September 30, 2022

 

 

Year Ending
December 31, 2022

 

(in thousands)

 

Low

 

 

High

 

 

Low

 

 

High

 

Net loss

 

$

(34,900

)

 

$

(31,000

)

 

$

(66,100

)

 

$

(56,500

)

Stock-based compensation expense

 

 

23,700

 

 

 

23,700

 

 

 

86,400

 

 

 

86,400

 

Amortization of intangible assets

 

 

6,100

 

 

 

6,100

 

 

 

24,400

 

 

 

24,400

 

Non-cash interest expense

 

 

500

 

 

 

500

 

 

 

1,800

 

 

 

1,800

 

Impact of non-GAAP tax rate

 

 

3,400

 

 

 

2,500

 

 

 

(4,100

)

 

 

(6,300

)

Special adjustments and other(1)

 

 

 

 

 

 

 

 

18,200

 

 

 

18,200

 

Non-GAAP net (loss) income

 

$

(1,200

)

 

$

1,800

 

 

$

60,600

 

 

$

68,000

 

(1) Year ending December 31, 2022, includes $16.6 million expense on the repurchase of convertible senior notes, $6.9 million currency losses on acquisition-related intercompany loans and $5.3 million gain from a mark-to-market adjustment of contingent consideration associated with the World Programming acquisition.

The following table provides a reconciliation of projected Adjusted EBITDA to projected net loss, the most comparable GAAP financial measure:

 

 

(Unaudited)

 

 

 

Three Months Ending
September 30, 2022

 

 

Year Ending
December 31, 2022

 

(in thousands)

 

Low

 

 

High

 

 

Low

 

 

High

 

Net loss

 

$

(34,900

)

 

$

(31,000

)

 

$

(66,100

)

 

$

(56,500

)

Income tax expense

 

 

3,000

 

 

 

3,100

 

 

 

17,200

 

 

 

17,600

 

Stock-based compensation expense

 

 

23,700

 

 

 

23,700

 

 

 

86,400

 

 

 

86,400

 

Interest expense

 

 

200

 

 

 

200

 

 

 

1,300

 

 

 

1,300

 

Depreciation and amortization

 

 

8,000

 

 

 

8,000

 

 

 

32,000

 

 

 

32,000

 

Special adjustments and other(1)

 

 

 

 

 

 

 

 

18,200

 

 

 

18,200

 

Adjusted EBITDA

 

$

 

 

$

4,000

 

 

$

89,000

 

 

$

99,000

 

(1) Year ending December 31, 2022, includes $16.6 million expense on the repurchase of convertible senior notes, $6.9 million currency losses on acquisition-related intercompany loans and $5.3 million gain from a mark-to-market adjustment of contingent consideration associated with the World Programming acquisition.

The following table provides a reconciliation of projected Free Cash Flow to projected net cash provided by operating activities, the most comparable GAAP financial measure:

 

 

 

 

 

 

(Unaudited)

 

 

 

 

 

Year Ending
December 31, 2022

 

(in thousands)

 

 

 

 

 

Low

 

 

High

 

Net cash provided by operating activities (1)

 

 

 

 

 

$

15,100

 

 

$

23,100

 

Capital expenditures

 

 

 

 

 

 

(7,100

)

 

 

(7,100

)

Free cash flow (1)

 

 

 

 

 

$

8,000

 

 

$

16,000

 

(1) Includes $65.9 million payment in January 2022 for legal judgement acquired in December 2021.