Executive Summary

Record first-quarter software revenue ($158.4M) and total revenue ($172.9M), with adjusted EBITDA at $45.8M; management said Q1 exceeded expectations and topped the high end of guidance .
Guidance: Q2 outlook tempered by deals pulled forward into Q1 and ~$4M FX headwind across H1; FY24 guidance lowered in reported currency but maintained in constant currency (software $590–$600M; total revenue $652–$662M; adj. EBITDA $138–$146M) .
Billings declined 5.7% YoY to $154.1M; free cash flow strong at $70.7M, and cash reached $557.6M, supporting capital flexibility post June 1 note maturity .
Strategic catalysts: Cambridge Semantics acquisition expands data fabric and generative AI grounding; Research in Flight adds aerospace CFD capability; upcoming SimSolid for Electronics release targeted at PCB/IC multiphysics .

What Went Well and What Went Wrong

What Went Well

Record-high quarterly software revenue and total revenue; “first quarter exceeded our expectations” (CEO) and “revenues and profit were ahead of expectations” (CFO) .
Strong profitability and cash generation: adjusted EBITDA $45.8M (26.5% margin), free cash flow $70.7M; non-GAAP gross margin expanded to 83.3% .
Vertical and product wins across geographies (BFSI expansion on Monarch/SLC; energy wins on SimSolid and PollEx; automotive adoption of SimSolid/romAI/RapidMiner) with new channel partners added .

What Went Wrong

Billings fell 5.7% YoY to $154.1M due to services/other softness and FX; management flagged seasonal shift and earlier deal closures impacting Q2 .
Engineering services and other revenue decreased YoY to $14.5M from $16.4M, diluting total revenue growth vs software .
Q2 guide came in below some models; FX (~$4M H1 impact) and the Q1 pull-forward constrained near-term growth despite constructive macro commentary .

Financial Results

Sequential and YoY Performance

Metric	Q3 2023	Q4 2023	Q1 2024
Total Revenue ($M)	$134.0	$171.5	$172.9
Software Revenue ($M)	$119.1	$155.9	$158.4
Adjusted EBITDA ($M)	$15.5	$53.6	$45.8
GAAP Diluted EPS ($)	$(0.05)	$0.22	$0.20
Non-GAAP Diluted EPS ($)	$0.14	$0.46	$0.40
Gross Margin (%)	78.3%	83.0%	82.1%
Non-GAAP Gross Margin (%)	80.1%	84.3%	83.3%
Operating Income ($M)	$(11.3)	$22.6	$20.9

Prior-Year Comparison

Metric	Q1 2023	Q1 2024
Total Revenue ($M)	$166.0	$172.9
Software Revenue ($M)	$149.6	$158.4
Engineering Services & Other Revenue ($M)	$16.4	$14.5
Adjusted EBITDA ($M)	$43.1	$45.8
GAAP Diluted EPS ($)	$(0.02)	$0.20
Non-GAAP Diluted EPS ($)	$0.36	$0.40
Gross Margin (%)	80.3%	82.1%
Non-GAAP Gross Margin (%)	81.9%	83.3%

Segment/Category Breakdown (Q1)

Category ($M)	Q1 2023	Q1 2024
License	$112.4	$117.7
Maintenance & Other Services	$37.2	$40.7
Total Software	$149.6	$158.4
Engineering Services & Other	$16.4	$14.5
Total Revenue	$166.0	$172.9

KPIs and Cash

KPI	Q1 2023	Q1 2024
Billings ($M)	$163.5	$154.1
Ending Deferred Revenue ($M)	$141.9	$144.9
Free Cash Flow ($M)	$57.5	$70.7
Cash & Equivalents ($M)	$378.9	$557.6
Adjusted EBITDA Margin (%)	25.9%	26.5%

Estimates vs Actuals (Q1 2024)

Metric	Consensus	Actual	Beat/Miss
Revenue ($M)	N/A (S&P Global consensus unavailable)	$172.9	N/A
Primary EPS ($)	N/A (S&P Global consensus unavailable)	$0.20	N/A

S&P Global consensus data was unavailable via tool mapping; estimate comparisons are therefore not included. Values retrieved from S&P Global would normally populate this table.

Guidance Changes

Metric	Period	Previous Guidance (Feb 22, 2024)	Current Guidance (May 2, 2024)	Change
Software Revenue ($M)	FY 2024	$600–$610 (midpoint $605.0)	$590–$600 (midpoint $595.0)	Lowered (FX)
Total Revenue ($M)	FY 2024	$663–$673 (midpoint $668.0)	$652–$662 (midpoint $657.0)	Lowered (FX)
Adjusted EBITDA ($M)	FY 2024	$143–$151 (midpoint $147.0)	$138–$146 (midpoint $142.0)	Lowered (FX)
Free Cash Flow ($M)	FY 2024	$129–$137	$124–$132	Lowered (FX)
Net Cash from Ops ($M)	FY 2024	$140–$148	$135–$143	Lowered (FX)
Software Revenue ($M)	Q2 2024	N/A	$131–$134	New issuance
Total Revenue ($M)	Q2 2024	N/A	$145–$148	New issuance
Adjusted EBITDA ($M)	Q2 2024	N/A	$15–$18	New issuance
GAAP Net (Loss) Income ($M)	Q2 2024	N/A	$(12.3)–$(9.4)	New issuance
Non-GAAP Net Income ($M)	Q2 2024	N/A	$12.7–$15.0	New issuance

Management emphasized constant currency guidance was maintained for FY24; reported reductions reflect FX changes .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 2023, Q4 2023)	Current Period (Q1 2024)	Trend
AI/technology initiatives	Platform upgrade, engineering AI momentum; convergence of simulation/AI; strong vertical adoption	SimSolid for Electronics releasing; Cambridge Semantics acquisition to ground genAI; FlightStream acquisition adds aerospace CFD	Accelerating product innovation and AI integration
Macro/demand	2023 macro challenging; prudent FY24 guide; seasonality shifting away from Q1	“Gradually improving environment”; pipeline growing; Q2 tempered by pull-forwards and FX	Improving demand with near-term FX/seasonality headwinds
Billings/seasonality	Q3 billings modest growth; hardware exit aided margins	Q1 billings down 5.7% YoY; services softness; typical Q2/Q3 lighter quarters	Seasonality and mix effects persist
Vertical GTM/channel	Sales verticalization; indirect channel expansion	7 new channel partners; leaders hired for healthcare/DoD; vertical wins in BFSI/energy/auto	Execution deepen across targeted verticals
Regulatory/security	—	ISO/IEC 27001:2022 certification achieved (May)	Strengthening enterprise trust posture
Industry consolidation	Synopsys-ANSYS: potential opportunities amid uncertainty	Customers uncertain; could advantage Altair; open to opportunities	Potential share gains

Management Commentary

“Altair continued its positive momentum… with record-high quarterly software revenue and total revenue. The first quarter exceeded our expectations” — James Scapa (CEO) .
“Revenues and profit were ahead of expectations… driven by growth across all three major geographies and multiple verticals” — Matt Brown (CFO) .
On product road map: “SimSolid for Electronics… fast, easy and precise multiphysics scenario exploration… first release will support structural and thermal analysis… full-wave electromagnetic analysis coming” — James Scapa .
On AI/data fabric: “Knowledge graphs are critical for successful generative AI… eliminate hallucinations and dramatically improve response quality” — Cambridge Semantics acquisition rationale .
On demand: “We are feeling like things are improving… pipeline grow… verticals… are taking hold” — James Scapa .

Q&A Highlights

Q2 guidance reconciliation: Earlier deal closures in Q1 and ~$4M FX impact across H1 explain Q2 softness; first half largely in line/slightly ahead after FX .
Billings: Down YoY due to services/other and FX; within expectations given seasonal shift out of Q1; revenue slightly above expectations .
Demand environment: “Improving” vs last year; cautious but positive tone .
RPO duration: Mix of longer-duration commitments to improve sales efficiency; generally annual licensing/billing patterns maintained .
Hiring/channel: Careful hiring aligned to verticals/regions; increasing indirect go-to-market .
Industry consolidation: Synopsys-ANSYS creates customer uncertainty; Altair sees potential advantage but remains focused on competing .

Estimates Context

S&P Global Wall Street consensus data was unavailable due to a missing CIQ mapping for ALTR in the tool, so numeric comparisons to consensus EPS/revenue are not included.
Qualitatively, one analyst noted Q2 guidance was “a little bit below” their model/consensus; management attributed this to Q1 pull-forwards and FX .
Where estimates may adjust: FX reductions to FY reported metrics, Q2 bridge from earlier closes imply modest near-term consensus recalibration; constant currency trajectory maintained .

Key Takeaways for Investors

Strong start to 2024: Record software/total revenue, higher margins, robust FCF; mix shift toward software continues .
Near-term optics: Q2 guide soft vs some models due to pull-forward and FX; second-half setup constructive with typical Q4 acceleration .
Strategic expansion: Cambridge Semantics bolsters data fabric/knowledge graphs for genAI; FlightStream broadens aerospace portfolio; SimSolid for Electronics opens PCB/IC multiphysics TAM .
Vertical execution: BFSI, energy, auto, aerospace/defense show momentum; indirect channel expanding with seven new partners .
Balance sheet strength: $557.6M cash supports note maturity and optionality for organic and M&A investments .
Operating leverage discipline: Adj. EBITDA margin at 26.5% in Q1; FY24 margin guide reflects FX and targeted investments, with constant currency revenue guide maintained .
Watch catalysts: SimSolid electronics release, enterprise security certification (ISO/IEC 27001:2022), cloud channel expansion (Altair One on Google Cloud), potential benefits from industry consolidation uncertainty .

Altair Engineering Inc. (ALTR)·Q1 2024 Earnings Summary