Altair has a great Q1 on the convergence of CAE, HPC & AI
Altair CEO Jim Scapa started off the company’s Q1 earnings call by saying that their vision of the “convergence of simulation, HPC [high-performance computing] and AI [artificial intelligence] driving enterprise decisions is emerging as a clear imperative embraced by customers” and that customers are investing in these technologies as a strategic move.
First, the details and then some thoughts:
- Total revenue in Q1 was $150 million, up 14%. Altair reports that “a few million dollars” in deals that had been expected to close in Q2 jumped ahead to Q1
- Software revenue was $130 million, up 20%
- Within that Software total, License revenue was $96 million, up 24%
- Maintenance and other services revenue was $33 million, up 7%
- “These results were balanced across all regions and product categories” but were not quantified
- Client engineering services revenue was down 23% to $11 million. Altair said this decrease again reflects customers furloughing and reducing CES staff working hours as a result of COVID-19
- Other revenue was down 16% to just under $2 million, “primarily due to reduced sales from toggled, our LED lighting business, driven by COVID-19”. Interesting, no? A software company that makes lightbulbs
Just about all of this was ahead of the company’s forecasts and investment analysts’ consensus. Part of this is due to Altair’s incredibly conservative guidance (it’s easier to beat a modest target than an ambitious one) but it seems that a lot of it is just natural caution given all of the unknowns in Altair’s end-markets.
Looking ahead, Altair guides to total Q2 revenue of $111 million to $114 million (up 14%ish), and total revenue between $504 million and $512 million, up 8%ish, for 2021.
A lot of this growth (though not quantified by the company) is due to SimSolid, which is the “fastest-growing product in Altair’s software portfolio”. In Q1 SimSolid was adopted by a strategically important aerospace account that Mr. Scapa believes holds the potential for internal expansion as well as leadership across aero that could see SimSolid’s broader adoption. He also highlighted a study done by the structural analysis department of General Motors that he believes showed the ability of SimSolid to decrease analysis timelines while still achieving 97% correlation to traditional simulation methods in modal analysis at the component level. Mr. Scapa believes that SimSolid is emerging as the standard for structural simulation among designers, a potentially huge market.
Mr. Scapa told investors that AI and ML (machine learning) are in their early stages and that Altair is working to embed more elements of neural networks across the portfolio, and on generalized tools that enable customers to build their own tools to take AI into their work processes.
As far as customer sentiment, Mr. Scapa said that “it’s very clear this is a much more robust year [than last year], as good as we’ve ever seen. It’s very broad-based: all verticals are very healthy, all regions are growing.” He also spoke about conditions in India but said that Altair isn’t seeing anything unusual there at this point.
Altair will hold an investor event on May 27th, when we should learn more about performance in the various business segments and end industries.
And if you see Mr. Scapa in a hallway somewhere, please congratulate him. He participated in the earnings call after welcoming his fifth grandchild. More little Scapas!