Altair tops targets in Q1, acquires rest of FluiDyna

May 15, 2018 | Hot Topics

Altair made several significant announcement over the last week, culminating yesterday with its first quarter results. Quickly, Altair reported Q1 revenue that beat expectations, sending its share price up a couple of percentage points after the announcement hit the wires. More on that after recaps of the rest.

First, the company last week announced that it has acquired the bit of FluiDyna that it did not already own. You may recall that in 2015, Altair announced it was investing in FluiDyna to help advance GPU-optimized computational fluid dynamics (CFD) applications. At the time, Altair said that relatively inexpensive graphics processing units (GPUs) make CFD solves less expensive, faster –potentially 4 to 5 times, according to Altair CEO Jim Scapa– and more energy-efficient when compared to the same job run on central processing units (CPUs). As a result of that partnership, ultraFluidX, for aerodynamics simulation, and nanoFluidX, for particle-based fluid dynamics simulation, were made available to Altair customers via the HyperWorks Alliance. FluiDyna’s codes are based on the Lattice Boltzmann Method (LBM), while the rest of Altair’s CFD solvers use Navier-Stokes (see here for my quick explanation of the differences). That means that, in addition to the GPU tech, Altair acquires LBM, à la DS and Exa.

Why now? Mr. Scapa told investors that Altair believes nanoFluidX “is pretty mature. A lot of customers are beginning to use it and get good results. ultraFluidX is less mature than it needs to be, but we’re working with a consortium of several automotive and trucking companies and feel very optimistic about our ability to solve their problems in the coming year or two. The fact that it’s GPU based means it’s considerably faster than the codes that are out there right now and that’s extremely important in an area like this”.

The company also announced that it has signed an agreement with General Electric (GE) that makes Altair the exclusive distributor of GE’s Flow Simulator engine system modeling solution. Flow Simulator already has more than 1,500 users in the aerothermal and combustion engineering — all at GE.  Mr. Scapa says it take some work to make this more generally applicable, but that GE’s competitors have already expressed interest in the product upon its commercial release.

Now to yesterday’s earnings. The details:

  • Total revenue was $92 million, up 19% from a year ago and up 13% in constant currencies (cc)
  • Software product revenue was $68 million, up 26% (up 19% cc), including a one-time $800,000 deal related to an acquisition
  • Software-related services revenue was $9.5 million, up 6%
  • Client engineering services revenue was $2 million, essentially flat year/year

Mr. Scapa told investors that Altair’s subscription-based licensing makes it easy for customers to expand their CAE usage, citing a major European automaker that is expanding its use of optimization by 30%, growing “from their power train organization into chassis and vehicle engineering”. That’s significant: it means that Altair was able to establish a beachhead in one department at this automaker, and work upwards and outwards to these other departments — they typically aren’t under the auspices of the same person. And it’s not just in Altair’s historical core automotive industry, as Mr. Scapa said that Altair closed a similar expansion order from a European aerospace systems supplier.

Most people know Altair for its pre- and post- solutions, but CFO Howard Morof pointed out that much of today’s growth is based on solvers: “We’ve had a significant emphasis on [acquiring and selling] solvers. And we continue to hear that that’s really one of the foundational elements that’s helping support expansion opportunities at existing customers. It’s also giving us entry into new customers that we haven’t had before. [The investor asking the question was also interested in sales headcount, so Mr. Morof continued,] Now that doesn’t just happen; it takes a sales force that’s entrenched and well trained. It all kind of works together.” And one last thing: Mr. Scapa told investors at an event today that Altair’s typical customer uses 15 products (from Altair and its partners, via the Altair Partner Alliance token system). That’s a lot, and argues to Altair’s stickiness and the success of its expansion from the HyperMesh-dominated company you may remember.

Finally, outlook:  The company said that its strong Q1 performance leads it to raise its full-year forecasts to total revenue between $369 million and $373 million, up 10% to 12%, led by 13% to 14% growth in software product revenue, to $276 million to $280 million. Q2 is expected to have total revenue of $91 million to $92 million, with software product revenue between $$69 million to $70 million.