I think we can get started. Hi, everyone. I'm Joe Vruwink. I cover vertical software at Baird. Our next presentation comes from Altair Engineering, one of the leading vendors when it comes to computer-aided engineering software or simulation, along with a comprehensive portfolio of high-performance computing solutions, data analytics, and AI. Joining us today from the company is Matt Brown, CFO. This is gonna be a presentation, and then we'll move into fireside. If those in the audience have questions, you can email sessiontwo@rwbaird.com, and I'll read those off the iPad. But to begin, I'll turn it over to Matt, and he can give an overview of Altair. Thanks. Great. Yeah. Thank you for having me. Welcome, everybody. Go through some slides here very quickly. Just wanna point out the safe harbor statement. I will be making some forward-looking statements, so please just take a minute to read through that, and I'll jump right in here. Okay, so just a quick snapshot of Altair, for those of you who are not familiar. Company was founded in 1985 by our current CEO, and we IPO'd in 2017. We've got more than 16,000 customers, over $600 million in revenue, and adjusted EBITDA approaching $130 million in fiscal year 2023, so about 21.1%. Pretty different company today compared to where we were at our IPO, so we've made a lot of progress. Altair at IPO, back in 2017, had about 5,000 customers, roughly evenly split across the world in about a third across Americas, EMEA, and APAC, respectively. But our software mix relative to total was about 73% software, and the remainder was services and other. In terms of our vertical concentration, we were most heavily concentrated in automotive, about 50% in automotive. And then aerospace and defense was our next largest vertical. Fast-forwarding to today, we've got many more customers, so more than 16,000 customers today. We're still roughly evenly split throughout the world, but software now makes up a much greater portion of our revenue, so we've been concentrating more and more on driving software growth. So software is now roughly 90% of our revenue, with the remaining 10% being services and other. That software revenue growth has grown at a CAGR since IPO at about 14.4%. So starting at $245 million, ending 2017, up to $550 million, ending 2023. From a segment perspective, sorry, from a verticals perspective, we've also been diversifying. So still heavily concentrated in auto, but much less so. A little more than 30% now concentrated in auto. Aerospace and defense, still a meaningful vertical for us, but we've also expanded meaningfully into a couple of other verticals, notably, BFSI, which is banking, financial services, and insurance companies. And we've expanded our technology offerings as well. So pretty different dynamic in just a short time here. This is representing our growth from 2020, just really strong financial execution over the last several years. Not only have we been growing revenue, but we've been expanding margins. So back in 2020, we had EBITDA margins that were 12.2%. That's now expanded to 21.1%, ending in 2023, and where we expect to land at the midpoint in 2024 of 21.6%. So seeing nice margin expansion and growth there. Not shown on this slide, but worth pointing out, our free cash flow is growing commensurate with this growth in adjusted EBITDA, where free cash flow represents roughly 90% of adjusted EBITDA. So we're seeing really nice conversion from adjusted EBITDA to free cash flow. So profitable, and growing. Here's just a snapshot of some of the customers that we address, and you can see it's really the who's who of customers within each of these verticals. Very broad-based set of solutions that can address these customers' needs. And you know, the way that we are selling into these customers is with annual lease subscriptions of our software. So a very stable base from a customer perspective, nice exposure across many verticals, and a recurring set of revenue. So really, this is our vision. Our vision is to bring computational intelligence to drive innovation for our customers, for a more connected, safe, and sustainable future. I'm gonna jump into a couple of different ways in which we're bringing that computational intelligence to our customers. We like to say data science plus rocket science. We're bringing these together. And this really represents this convergence of what we're seeing in simulation solutions with data analytics solutions, and facilitated by high-performance computing solutions. We bring all of these to our customers, and we bring those forward under Altair One, which is our unified cloud gateway. So what are some of the drivers for our business in the near term? We've got quite a bit of optimism in terms of how the future is looking for us. And one of those bright spots is in simulation-driven design.... We have solutions that take you from geometry all the way to manufacturing. You start with a sketch, build that geometry, and you can import the existing CAD for analysis. It gives you some advanced simulation capabilities within design, which we think makes for a better design, and has helped bringing that simulation upstream into the designer community. We can do structures, we can do fluid, motion, all of those insights are available up front and make for a better design process. We also have generative design tools available, which can help solve for specific manufacturing and performance constraints, sort of backward solve into the optimum design. And those are tools that we're bringing into our Inspire suite. And that helps give our customers manufacturing confidence, so reducing scrap and reducing time to market. Another nice tailwind that we expect to see in the near term is electronic simulation. So, we're really seeing this convergence of electronic simulation with mechanical. And this is true at a chip level, so where you can streamline the design process with silicon debugging and 3D IC multiphysics. This is also true at the board level, and so we can catch errors early on, make sure that we're optimizing the performance with simulations. And it's also true at subsystems and systems level, where we can create realistic digital twins through the use of our software as well as sensor data. And that can help everything from better informing a better design, to helping with preventive maintenance, and manufacturing. And lastly, another helpful tailwind for us is AI powered engineering. So bringing in artificial intelligence into the simulation and design process. A couple of really important ways that we're doing this, we have AI-enabled design, AI-embedded engineering, and then AI-augmented manufacturing. One really powerful example for us is our AI, PhysicsAI module that's embedded within our design tools. You know, it used to be that you could run a few simulations in 24 hours. Simulations are very time-consuming and compute-intensive. But through the use of PhysicsAI, we're able to leverage those tools to be able to have the machine learning capture prior simulation runs, and then the user can toggle various constraints, and parameters within their design, and PhysicsAI is able to predict what the ultimate physics simulation will be. That designer can then make adjustments accordingly, and then finally pass on the final design to run a simulation run. So you can move from doing a few simulations in 24 hours to thousands of simulations in the same period of time. And it's much more compute efficient. So just wanted to set the stage with a brief presentation there. I've got a quick video, and then we can just jump into some Q&A. So I'll queue up the video now. Imagine the possibilities, all of them. Now test them. Improve them. Make them real. Impossible? Not at Altair. That's because we're in the possibility business. Since 1985, we've been quietly creating the tools that enable visionaries to transform impossible into reality at market-defining speed. Best-in-class design and simulation, enterprise-grade data analytics and AI, turnkey high-performance computing. Now, as the only company bringing these technologies together, seamlessly merging data science with rocket science, we're setting the pace for a bold new standard of innovation. This is the science of possibility, where we can envision a better, smarter world and then bring it to life faster than ever imagined possible. Okay, that's great. Maybe just to begin, talking about your growth profile, you mentioned the track record is 14. At your recent Investor Day, you discussed maintaining low double digits. Do you think in terms of price, users, compute, more product, kind of a build-up to get to low double-digit growth? Yeah. So for us, it really starts with usage. The method in which we sell is Altair Units, which we can touch on now and really helps with the growth and helps drive usage. What we do is we sell capacity. We sell capacity to our customers for a broad set of products within our portfolio, and that capacity can be used across the organization, so within teams or across the organization in multiple teams. And the idea being that as we can be more useful to our customers, they will expand their usage. That means they need to expand their capacity that they're buying, and that eventually then translates to revenue. For us, when we think about those growth drivers on top line, it really starts with usage and making sure that, you know, we really can be as helpful to our customers as possible and offering them the broadest set of technologies that we can. When you think about that model, and the unique thing about Altair is it's a portfolio of great brands. You know, I first ran into Altair with OptiStruct. So if you talk to an automotive engineer, a structural engineer, you know, that could be their go-to solution. And so it's a portfolio of different solvers, but they each have a very unique purpose. How do you bring that together into a platform concept, where then it does become conducive to an enterprise license? Yeah. So what we've done is we've brought those solutions under our Altair HyperWorks set of product suites, and then we offer suites depending on the type of user or the type of team. So we've got about seven different Altair Units suites that range from a designer-oriented suite, all the way up to an enterprise suite, where they have access to all of the products within our portfolio, including access to our partner alliance, which has 150 or so participating companies, where they have access to that technology as well. And so understanding what the customer's needs are is important in getting them into the right suite. We feel like by separating into those suites, then you have the ability to target pricing, where it's competitive from a customer perspective, but we're also able to get value, and particularly at the high end, when they're using and leveraging the entire depth and breadth of the technology we have. You showed a chart on your end market exposure. Is there a way to frame exposure by those suites, just a rough sense of what's more influential at a product level? Yeah, we don't break down the suites and sort of disclose that externally. But in most of our high-end, most strategic enterprise-level accounts, they are in our enterprise suite. And the idea there is, you know, we live in a pretty fragmented market. It's very common for our customers to use Altair technology, while at the same time using some of our peer company technologies. At Altair, we have teams of people that are dedicated to ensuring that our technology plays nicely with that technology of our peers. But one of the things we're able to do is build that relationship with the customer, prove that we have the best technology available, and then allow those customers to use some modules that maybe they haven't used before. And they already have access, because they're part of the Altair Units. They likely don't need to purchase any additional capacity. It's ready for them to use right away. And then, as that usage catches on, then we can negotiate some additional capacity and increase that usage and renewal over time. Great. Let's talk about the macro for a moment- Sure ... and more current events. So Altair had a strong start to the year, above guidance growth. Growth is set to pick up from here, and that's a very different message, I would say, than what a lot in enterprise software are now coming out and talking about. What do you think drives the difference? Is it purely you're exposed to R&D that's gonna be the stickiest of budgets? It's got to be something else, 'cause you're accelerating your growth. And then, I'd be curious if there's maybe particular end markets that stand out as driving your forecasts. Yeah, great question. I think there's a couple of things to sort of unpack there. Number one, we are tied to R&D budgets in a sense that those do tend to be a bit stickier. We're selling products to our customers that are being used to develop products that may not see the market for years, right? And most of our customers realize that innovating and investing in product development now is the way to win in the future. And so those budgets tend to be sort of the last place that you cut, right? So that's helpful. The other thing that's helpful is, and I mentioned some of these in the presentation, is we do have some secular tailwinds that I think are working in our favor. Electrification is a big deal, so we're seeing the electronic simulation and mechanical simulation come together in a real meaningful way. And customers are now requiring tool sets that can do both, so I think that that's helping. Design-oriented tools and simulation, that's sort of opening simulation tools to a broader market, I think that's really important. And then leveraging some AI to make those tools easier to use and more effective, I think is helping also. So a lot of that is providing sort of this helpful benefit. And yeah, I think it also helps that we are just so diversified, right, across verticals and geographies. You know, a vertical that comes to mind, that sticks out as a bright spot for us this year is aerospace and defense. That's been really, really strong this year. There's just a lot of innovation happening there, particularly in aerospace, just new use cases. We've got you know, autonomous and electric aerospace companies now, so a lot going on there. That's great. You brought it up, so let's talk about design-oriented solutions, and the funny thing of how product orgs are set up is most of the spend and the seats are for the designers. But then when the engineers get hold of the design, I mean, they're really more important in terms of product life cycle costs. If the engineers screw up, the costs are huge, massive. Mm-hmm. But we don't spend as much money for them, so there, therein is kind of the opportunity. Where is the relative balance? I guess, what's the TAM you see as you move earlier into design? And then I wanted to talk about SimSolid, which is how you're doing this, and where you've started to see traction. Yeah, so you're right. Most of the spend and our tools are used at the high-end engineer level. That's true today and has been historically. There are something like 10 times as many designers as there are high-end engineers and analysts, and so we do believe that that represents a market opportunity. Our Inspire suite of tools addresses that market, as does SimSolid. So SimSolid is really a breakthrough technology that is a meshless technology, and if you're familiar with the process of simulation, the meshing tends to be some of the most time-consuming pieces of that process. So SimSolid is faster, it's somewhat easier to use. It does not have all the functionality, by the way, that our other simulation tools do. But geared towards the right audience, it's a very, very powerful tool, and we're seeing a huge amount of growth there in terms of usage and are encouraged by that. Okay. One of your slides was on ECAD or what's happening in electronics design. So I guess we'll veer into a big event this year, Ansys getting acquired by Synopsys. Ansys, a competitor; Synopsys, probably a close partner, the way your joint customers use you two. How do you think about what that means for Altair? Yeah, so I think, Synopsys, and Sassine in particular, has done a really good job of articulating, the need for, for these chip design companies to go incorporate mechanical simulation. So the idea that electronic simulation and mechanical simulation are coming together, something that we've been talking about for a long time and something that they recognize as well. You're dealing now with real physical constraints on chip design around, you know, heat and three-dimensional design that really needs to be solved with mechanical simulation. So we agree. We're developing solutions that address that and have solutions that address that as well. And I think if nothing else, it shines a spotlight on the space, and probably there are some folks that maybe have sit up and realized, "Oh, okay, this is pretty important stuff." The technology is critical, and we're happy to be playing in that space. Yeah. Altair has been a pretty frequent acquirer. I think you're pretty close to the different markets you serve, so with your ear to the ground, I mean, you get these great sets of IP that are maybe a bit under the radar. A lot of the deals can be small, but then you grow them over time. There's a spotlight on simulation right now, so not just Ansys, but you've seen, you know, ESI, Cadence, everyone is kinda trying to figure out how to participate more. Does that start to starve the acquisition pipeline because the valuations are getting out of hand as you look at it? I think that that dynamic has probably been going on for some time now. Okay. Actually, consolidation has been happening in our space for a while. Altair has always done a good job of finding those companies that are a bit under the radar, that... You know, our typical acquisition profile is finding a piece of technology that we think fits within our product roadmap, one in which we think can accelerate development time, or can get us there cheaper, so it ends up being sort of a buy versus make, decision. Typically, these companies are not coming with a significant amount of revenue, but they do come with a, an acceleration on development time and, and cost effectiveness. There's still some things out there. We closed a couple of acquisitions in the last quarter. Cambridge Semantics is one actually in the data analytics space, which deals with graph databases. Research in Flight was another nice one in the simulation space, is dealing in the aerospace vertical. Those are really nice pieces of technology that we think augment our current offerings in a way that can be meaningful out into the future. But you're right. I mean, consolidation is happening, and I think we have to - we're out there looking and trying to find the right opportunities. Wanted to talk about your AI strategy. Of course, everyone now has an AI strategy, but in the world of the technical applications, I think AI really means optimization or reinforcement learning. You know, and the market, I think, is in a lot of ways more interested in gen AI and- Mm-hmm ... large language models, so different flavors of AI, but Altair has it all. Yeah. And so how did you get—it's not new, you've been thinking this way for a while. Maybe we can talk about, like, RapidMiner as, as, a starting point for your platform approach, and we can go from there. Yeah, so people mean lots of different things when they talk about AI. And when we think about AI, we think about, well, how can we leverage AI internally to be operationally more effective? And we are doing that, and I think there's absolutely some opportunity there. And then we also think about, okay, well, how do we monetize AI? And on the product side, for us, that's something that we've been doing for quite a while now. Within our RapidMiner set of products, we have AI tools with our data science platform that allows customers to import data, do automatic anomaly detection, and a whole variety of true data science capabilities, both on a low-code and no-code basis that is a really effective platform, as a standalone data science platform, but also to help augment and cross-sell in our simulation customers to go capture simulation data. So you can now get simulation data that you can ideally marry up with physical real-world data through the use of sensors, and now we're sort of getting into the digital twin- Mm-hmm ... area. And so lots of, lots of opportunities there, for better design, but also for preventive maintenance and, and preventive downtime. So that's a really important piece of AI, technology. The other piece, though, is, is the type of AI technology that we're just building into our simulation products. So I touched on one, PhysicsAI is an important one, and we have another AI module called ShapeAI. This again, makes the simulation process more effective because ShapeAI can recognize a shape that you may have attributed certain specifications to in the past, and ShapeAI has the ability to recognize, "Oh, that's a bolt. I know what that bolt looks like." You've imported the specifications for that in the past, and now they're just sort of automatically there. Those are the types of AI capabilities that are really pretty. They're not evident to the user, right? You just have a tool that's operating more effectively. So, the tool is just faster, it's more efficient, it has a better result. It is powered by AI, but it's not necessarily sort of in the user's face. Okay. Yeah. You mentioned at the start, so financial services has gone from not an area of interest to one of your major concentrations. I guess the question you probably get more frequently is: What's the overlapping logic for Altair as kind of an industrial software company to suddenly participate in those markets? Yeah, so we jumped into the BFSI vertical with with a couple of acquisitions, and those acquisitions are super meaningful for our for the whole idea of convergence of these technologies, and how these technologies will ultimately serve our engineering customers, and they are currently. But we're in those markets now on a standalone basis as well, and those tools are very important to banks and you know, insurance companies and other financial services companies. And so it's a real proving ground, right? I mean, you have to be the best in order to go have the top banks and insurance companies as your data analytics customer. So you can take that knowledge and expertise, you can bring that over to the engineering customers, and it gives you a ton of credibility, and makes the products much more effective and better. Time for one more question. Maybe on profitability. Oh, I should check the iPad. But I'll ask a question on profitability. So you've shared an outlook to go from low 20s-high 20s in EBITDA margin. You know, we've talked about M&A. I would imagine that typically starts dilutive. We've talked about AI. You know, there's so much compute costs associated with that. The question is, what happens to margins there? And yet you've probably baked all that in, and you're still gonna grow. What would be the main things to focus on for Altair delivering that margin expansion? Yeah, I mean, the way that we get to our adjusted EBITDA margin expansion, for us, really starts with software revenue growth. We've got standalone software margins that are 90% plus. So as that grows as a percentage of our total, that mix shift continues towards software, our overall blended gross margin is increasing meaningfully, and that makes its way down to adjusted EBITDA. We think roughly half, in the near term, half of that growth in adjusted EBITDA is gonna come from gross margin, and then the other half is gonna come from OpEx efficiencies. You know, we had to establish quite a bit of infrastructure to become a public company in the form of, you know, finance and accounting, and legal, and procurement, and HR, and so on. That back office administration is now at a level that that does not need to grow at pace with the growth in revenue. So we're gonna continue to get some more efficiencies in the OpEx line, mostly in G&A, and then we'll get a little bit more in sales and marketing and, and R&D, even though we're gonna be investing, and those lines are gonna be growing in absolute dollar terms. That's great. We're out of time, but please join me in thanking Matt. Yeah. Thank you.