Altair Engineering Inc. (ALTR) Earnings Call Transcript & Summary

[Presentation] Good morning, and thank you for joining us for Altair's Investor Day. This is Amy Messano, Chief Marketing Officer. Today, our leadership will share important updates in our future vision. To get started, please welcome Dave Simon, Chief Administrative Officer.

I'm Dave Simon, Altair's Chief Administrative Officer. And at any time, today, you have any problems with the meeting, feel free to text me directly on my cell phone or e-mail, both are shown on the screen. Many of you are long-time investors and analysts. Others are newer to our story. We believe today will be useful to both groups. Here's today's lineup. You will be able to submit questions privately through the chat box on the right side of your screen. I'll be on the other end, confirm your receipt and may be asking for some clarifications. Feel free to submit questions throughout the program. We have 30 minutes reserved for Q&A at the end. Today's agenda includes a discussion around our vision toward the convergence of simulation, high-performance computing and AI, followed by the technology enabling that vision, what we believe are the resultant changes to our TAM and a discussion of how we intend to scale Altair's revenue and EBITDA. We will be making some forward-looking statements today and consider this event to be under our safe harbor provisions currently shown on your screen. And now it is my very distinct honor to introduce and turn the meeting over to our founder, Chairman and CEO, Jim Scapa.

Dave, thank you for the introduction. Today, I will present an overview of Altair, our products and our vision for the future. Altair has 3 Chief technology officers, Uwe Schramm for solvers; Brett Chouinard from modeling, visualization and design; and Sam Mahalingam for high-performance computing, cloud, data management and data analytics. They will present the history and capabilities of our product portfolio, including what we are working on today and what we are most excited about for the future. Nelson Dias, our Chief Revenue Officer; and Amy Messano, our Chief Marketing Officer, will talk about our go-to-market strategy and some customer success stories. And Gilma Saravia, our Chief People Officer, will talk about our culture and our approach to recruiting, retention and career development. Stephanie Buckner, our Senior VP for Corporate Development and Customer Engagement, will review our strategy around mergers and acquisitions and some customer engagements. Finally, Matt Brown, Altair's Chief Financial Officer, will discuss our financial outlook. During my talk, I will present our vision for the business and how we think about the addressable markets we compete in. Altair's vision is to transform enterprise decision-making by leveraging the convergence of simulation, high-performance computing and artificial intelligence. We see a global evolution towards smart connected everything, where electronics, mechanical functions, communications and control intelligence are all-natural elements of every design. Going forward, simulation and AI-driven models will empower design and operational decisions, resulting in the massive exploration of ideas and the need for significantly more high-performance computing. In listening to C-suite executives of customers, they are clearly asking for solutions, which are cloud-native and run on hybrid computing environments, on-prem, in the cloud and at the edge. Customers want end-to-end low-code or no-code platforms with automated, explainable modeling, usable by both business analysts and sophisticated scientists and developers to accelerate their time to insights. They want to easily move workloads between different cloud providers to prevent vendor lock-in and to better control their expenses. Open source models and languages are essential for the future to leverage new technology quickly and remain flexible. Users require integrations to all data sources to allow for collaboration in best-of-breed tools environments. And while all data is not big data, clients will increasingly require support of cloud big data engines. And finally, clients desire to move away from traditional business models with expensive named user licensing, seeking modern models, which float licenses and control simultaneous usage. Even the current trend to pay for usage can become burdensome when tied to named users. Altair is delivering on all these requirements with our newest solutions, including Altair One and our newest platform, SmartWorks, which delivers an end-to-end solution from data ingestion to live system deployment, integrating IoT, edge orchestration and app development with data science and MLOps. Altair's culture is core to our company's success, and we continue to promote 4 key values over the last 35 years. We envision the future and make decisions in the context of this future. We communicate honestly and broadly with customers and our people. We actively seek new technologies and new business ideas everywhere, and we embrace diversity and risk taking, which brings new perspectives into the company and fosters experimentation. Altair was founded in 1985, and we've grown steadily through the years. We were originally a consulting company and quickly developed some disruptive products, which began the evolution to being a software company. In the 1990s, we released technology innovations in areas such as graphics, optimization and generative design. In 2000, we introduced the units-based licensing model, which transformed our business and helped us achieve more scale. In the 2010s, we began investing in simulation-driven design and innovation with products like Inspire, and later when we introduced SIMSOLID. SIMSOLID is clearly driving change in the market, especially as more designers look to leverage simulation. We IPO-ed the company in November of 2017. And in December of 2018, we acquired a small publicly traded company named Datawatch, which was focused on data analytics and visualization. This move was strategic toward our vision of the convergence of simulation, HPC, data and AI. Datawatch was founded in 1989 and IPO-ed in 1992. Through the years, the company released a number of innovative products and technologies used by thousands of customers, primarily in banking and financial services. In the 1990s, they introduced Monarch and Knowledge Studio for data preparation and data science. In the 2000s, Panopticon was released focusing on real-time data analytics and visualization. Going forward, we are excited about creating solutions, which deliver on our vision of convergence toward the data-driven enterprise. In 2020, Altair continued to thrive despite the pandemic. Our total revenues were $470 million, with 83% coming from software products versus 70% at the time of our IPO. Our software recurring revenues were 93%, with revenue balanced equally between the Americas, EMEA and APAC. Altair has over 11,000 customers. Most major enterprises in manufacturing, engineering, banking, life sciences, earth sciences, energy and technology are our customers. Altair solutions and products have users across organizations, including industrial designers, mechatronics engineers, software developers, manufacturing engineers, data analysts and data scientists, finance, marketing and IT. There are 4 key elements, which differentiate Altair from our competition. First, we are a technology and product-driven company. Second is our strategy around the convergence of simulation, HPC and AI. Customers appreciate our solutions, the deep expertise we bring and our consultative style as opposed to others, who are more sales-driven. Altair has invested significantly to aggregate the technologies, expertise and experience relevant to this vision through acquisitions and with internal experimentation. Third, we invest in open architectures. Our products operate in multiproduct environments required by most complex enterprises. And last is our powerful Altair units business model, which we recently updated. Altair's business model delivers several benefits to its customers. All users in an enterprise have access to all Altair and third-party software applications. The units in our model determine the number of concurrent users permitted across the enterprise in all locations and allow users to run applications on premises and in the cloud. Our model encourages more usage of several products within each customer, driving incremental revenue and frictionless expansion in an account. In our recent model update, we implemented personas in the form of suites to ensure revenue for value across all types of customers from large enterprises to small ones and provides customers with added flexibility to license the products, features and services they require. In my next section, I will discuss how we think about and calculate our addressable market to inform our investments and capital allocation strategy. We are bullish on the opportunities we see in front of us. Economies around the world are gradually opening and digital transformation continues the acceleration started during the pandemic. This includes primary and university education, corporate training, work from home and business travel. Software, semiconductors and electronics are clearly driving growth and Altair is well positioned to benefit from this trend. The automotive and aerospace markets have pent-up demand and should grow strongly. There is a lot of energy to develop next-generation electric drive ground and air vehicle transportation solutions, which drive the need for more sophisticated design and simulation technology. China will continue to overtake the U.S. as the leading economy, and we are investing there as well. We also see growth accelerating in Europe. Finally, how our go-to-market strategy around focused, large account direct sales, coupled with large investments in inside and indirect sales channel management is clearly working. We are beginning to see more new customers coming from these secondary channels than from our powerful direct sales force, albeit with smaller revenue for now.

To kick off our technology segment, please welcome Uwe Schramm, Chief Technology Officer for Solvers.

Good morning. My name is Uwe Schramm. I'm one of the CTOs at Altair. I'm responsible for the development of Solvers and Optimization. I joined Altair 25 years ago. In my university research, I worked on structural optimization. At the time Altair started commercializing the topology optimization software, OptiStruct. Right from its beginnings, this technology drew the interest of designers and engineers because OptiStruct could develop interesting and useful new structural concepts for design. These concepts were very interesting for lightweight design, saving millions of dollars and cost. We took topology optimization to a level to make design decisions. So there's always a discussion about calling a topology optimization or generative design. I would say, topology optimization is physics and form generative design. Our software proposals are designed using the underlying loadings and operating conditions to derive valid design proposals, and we are continuing this innovation. Over the years, our software has been used to develop major products in airplane design, automotive design, architecture and consumer products. Our Altair technology, we introduced the C123 concept process for developing complex structural concepts. The recent emergence of e-mobility has made lightweighting possibly an even bigger design issue in product development. The intense focus on additive manufacturing some years ago really gave a boost to topology optimization and generative design. Now some of these interesting concepts could be manufactured. Of course, we were addressing early on manufacturability of design concepts within the software. 3D printing only gave us more freedom to explore. Today, we keep on innovating the technology. We are looking at including multiple physics like thermal fluid flow and electromagnetics considerations. So the innovators keep on innovating. You see if you want to optimize the design to all its environments, you need to take a look at multi-physics. You need to integrate all the physics into our solution offering. This is a major driver in our solver development to invest more into solvers than just structural solving. Our portfolio now includes system simulation, CFD, crash, electromagnetics, electronics, manufacturing process simulation and thermo-simulation. Over time, we built up this portfolio through development and acquisition of talented teams of computational scientists and engineers. Everything is interlinked as optimization to bring simulation into decision-making. One important aspect is the physics formulation, the computing resources executing those simulations are as important. In CFD, for example, we are often solving billions of equations. We want the simulation results to arrive in time for decision making, not after. Therefore, a tight link to HPC is of interest. Also for the solvers, we are working on superior scalability by employing excellent parallelization. We are building CFD solvers that are based on native GPU implementations that employ massive parallelization and hence allow for tremendous throughput. These HPC capabilities makes the technology more accessible and turnaround times for optimization decision-making becomes acceptable. All solvers are built on a foundation rooted in computational science and engineering that has been maturing for decades. We added a lot of innovation to that. But then occasionally this gem comes along. For us, this was SIMSOLID. We saw the transformative nature of this technology. SIMSOLID has a potential of driving innovation and simulation and how simulation is being integrated into decision-making. It is a unique approach that cannot be copied right now by anybody else. We are intending to harvest the potential of the methodology and to expand it into different domains. Since the acquisition, we multiplied its investment. The server has gotten 10x faster and not to speak about the immense compression of workflow versus traditional technology. Simulation at the assembly level is much easier this way. It is simply mind-boggling. A lot of our customers have accepted SIMSOLID and the changes the way simulation influences decision-making. The next step will be adding more physics, integrators, other technologies, utilizing synergies to allow universal access to simulation. So SIMSOLID is growing in capability and gaining market share. We are always integrating solvers with optimization to support decision-making. This is quite a unique focus by Altair. We are not seeing simulation as virtual testing alone. If needed, we can build our physics into a model and solve and determine design direction. However, if we continue this is it always necessary to build the most complexity into a simulation model? If you just look around an airplane cabin, how many rivets, bolts and details make up that product. Is it necessary to include everything into one simulation model? Of course, not. For every design decision, we must bring a meaningful model to the decision process. Sometimes, a back of the envelope calculation is helping an informed decision. Oftentimes, we do not even have the data available to make a complex simulation. Altair provides the entire tool set from 0D to 3D. We can build mixed fidelity models where one portion is 1D model and other portions are 3D. Complexity is not necessary for decision making, it's often an hindrance to get a clear picture. Engineers want to have a straight answer to a straight question. And if that can be captured in one equation, that's the best quick answer. Now with the data-driven approaches with machine learning and AI, we have additional tools to assess the problem and to make informed decisions. We are merging AI and simulation into one tool set. One of the greatest latest inventions is to replace a machine in simulation with a neural network. The approach is called physics-informed neural networks. We have been working on this for CFD and have good results. We are converging simulation and AI. Sometimes, it is appropriate to use data, sometimes a physics-based model, sometimes look up on other sources, gives the answer. Engineers and designers need all these tools and Altair is bringing them together. We are working on setting up proper interoperability between the tools. Meaningful model at the right time brings the physics together, integrate with HPC and optimization for rapid decision-making. One area in which multi-physics is obvious is electronic system design. Altair has been strategic and coming for some time since electromagnetics acquisitions of Feko and Flux. And of course, our system simulation with Activate and Embed have a lot of application in electronics. We are now focusing more on this domain because industry and consumer trends point to a tighter integration of mechanical and electronic design. E-mobility, 5G, ADAS, mechatronic sensors and IoT, all these are domains where we can support decision-making with simulation. According to some of our customers, 90% of the auto industry innovation will be in software. So a car is becoming more an electronic appliance than a mechanical device. Our customer base in transportation, aerospace and consumer products are faced with these challenges of merging electronics and mechanical design. With products, we are creating a platform for electronic system design starting from PCB simulation. We will integrate all technologies around it, including electromagnetics controls, circuit simulation, thermal and mechanical simulation. Of course, we have already an embedded coding platform and electronic design automation with HPC workload management. In summary, we foster innovation, expanding our solution portfolio while maintaining tight integration with HPC as well as driving the convergence with AI. Thank you.

To continue on the technology topic, please welcome Brett Chouinard, Chief Technology Officer, for modeling, visualization and design.

My name is Brett Chouinard. I'm the CTO of Altair's Modeling and Visualization Technology. I started at Altair 27 years ago after having spent 5 years in the aerospace industry as a structural engineer for GE Aircraft Engines. Together with Uwe and Sam, we are responsible for developing Altair software technology. Jim spoke earlier of disruptive technologies. Altair's original disruptive software technology was HyperMesh, specifically in the area of graphics performance that was 30x faster than current industry leaders. HyperMesh was soon followed by OptiStruct, which is the original and still the leading generative design solution today. Of course, we have since expanded the capabilities of Altair software and added disruptive technologies through acquisition with products like SimLab and SIMSOLID. Today, our focus is on creating solutions that integrate workflows, multiple physics, high-performance computing and AI and ML. The automotive industry is not only developing electric vehicles. Through electrification, they are reinventing every aspect of automotive design, body structures, chassis structures, interior, electronics controls, powertrain and safety. Every major system is being impacted. Altair is helping them achieve this reinvention with solutions, such as Concept 123, multidisciplinary optimization director, e-Motor director and Squeak and Rattle Director. Manufacturability is a key aspect of product design. Performance, manufacturability and material selection go hand-in-hand. Inspire includes an entire suite of manufacturability solutions that give immediate and relevant results to designers and engineers in 3D printing, casting, plastic injection molding, sheet metal forming, metal and polymer extrusion and urethane foaming. Our customers are executing more programs in creating vastly more variants, which need to be effectively managed. We are also creating simulation, data and configuration management solutions that can be automated and synchronized within the PLM environment. Altair has always been an artificial intelligence company. Artificial intelligence and machine learning is an extension of optimization where Altair has been a leader for many years with technologies like OptiStruct and HyperStudy. The big difference between optimization and artificial intelligence and machine learning is learning. It is this aspect of learning that makes this technology very useful in modeling. One application that may appear very mundane is part recognition, classification and identification, but this can be an extremely time-consuming and costly activity with some customers seeing 90% time-saving using our AI shape identification technology. And after we have used AI to identify parts, we can further automate processes, such as remeshing, morphing and replacement. In addition to saving time, this also improves quality and consistency. Expert augmentation is another application of artificial intelligence and machine learning. This application combines an expert's knowledge and experience with machine learning algorithms to suggest solutions to complex problems. And finally, we can use artificial intelligence and machine learning to create very sophisticated reduced order models of large-scale transient simulations as inputs to systems models, which are necessary for effective digital twins. We have talked a lot about disruptive technologies, but a lot of our efforts are towards creating a unified, integrated suite of tools that have a common look and feel that can share data seamlessly. We achieved many benefits from this effort, such as faster customer adoption of new technology, reduced training efforts and improved development efficiency. In addition, many of our efforts to develop our unified integrated suite are also important for cloud enablement. Component type tools, common data models and shared infrastructure are all necessary to create services that can be accessed through the cloud. Currently, Altair Inspire and Altair Compose run on Altair One, where users can collaborate and share models with the same user experience as the desktop. In addition, we are introducing Altair DesignAI and other tools. Thank you.

And now please welcome Sam Mahalingam, Chief Technology Officer, for HPC, Cloud, data management and analytics.

This is Sam Mahalingam, CTO Enterprise Solutions. I joined Altair in 1994 and contributed to Altair in various capacities, right from being a developer, to an architect, to being a CTO. Through my journey at Altair, I've helped Altair in shaping the enterprise vision. The technologies that I closely follow are simulation life cycle management, high-performance computing, artificial intelligence and data analytics, Internet of Things and cloud. Like Brett mentioned, we embarked on the journey towards cloud a few years ago, and I'm proud to unveil Altair One. Altair's cloud gateway, that is a true convergence of simulation, HPC and AI. Altair One empowers innovation at scale by providing easy access to software, including simulation software, high-performance computer sources and data from anywhere and everywhere. It is also a visual collaborative environment to accelerate innovations and decision-making in the post-pandemic world to support the digital workplace. A modern single source of truth, highly scalable data management service, minimizing the transfer of data and reducing network congestion. Also, it provides an environment to digitally trade models all the way from 0D to 3D, to ETL, to AI, to operational models throughout the product life cycle. AI is at the core of Altair One, automatically deriving new meaning and insights from the ever-expanding collection of digitized data. We also provide self-service provisioning of high-performance computing resources that scale as dynamically as modern workloads to eliminating IT complexity and to maximize the product development time. Some of the future innovations of Altair One is to expose a low-code platform for developing cloud-native engineering applications. And the marketplace to publish these applications leveraging Altair's unique and differentiated unit-based business model. Altair material data center and design AI are the first Altair One cloud-native applications built using this low-code platform, and our motivation is to expose the same power to our partners. All the augmented AI models that Brett mentioned during his embedded in the engineering tools were generated leveraging the design AI application. Altair One is built on top of the world's leading workload and workflow management platform, PBS Works. Altair knows HPC and over the last 30-plus years, our customers have complete trust in our high-performance computing solutions. PBS Works is the world-leading HPC workload management solution today, managing workload on several of the top 500 supercomputers and large on-premises HPC clusters in several different industry verticals. Altair envision the need to augment HPC for solving complex simulation problems, to accelerate product design and validation and to reduce time to market. PBS was spun out of NASA Ames and in the early 2000s, Altair strategically acquired it to transform the simulation market. Altair poured in a lot of investment and matured the PBS technology for scalability and performance. Today, PBS is exascale ready, and it is slated to run on Aurora. We have also introduced a hierarchical scheduler with support for mixed workloads that is highly parallel, high throughput and containerized to support use cases from many different industry verticals. Over the years, we have democratized and simplified HPC by providing easy access, configuration, control and monitoring tools to engineers, scientists and HPC admins. These tools are available in all flavors, that is mobile, desktop and web. We have enabled our customers to seamlessly manage HPC workloads across the cloud implementation models, that is private, hybrid or public cloud in a very neutral fashion. Our aggressive partnership strategy with the hardware vendors and leading cloud providers had led to this neutral and equally capable support. Some of the ongoing and future innovations are rapid scaling for the EDA workloads; seamless scaling and performance through federation of servers so that we can horizontally scale; multidimensional scheduling of CPU, memory, GPU; software licensing; storage and IO; and cloud cost allocations. Most of these current and future innovations were and are being fueled by the integration of home grown and acquired technologies from Runtime, Univa and Ellexus. Today, I can emphatically say PBS Works provides the most comprehensive set of tools to effectively manage HPC life cycle, both on premises and on the cloud. HPC is essential as we are moving into the world of autonomous things. Artificial intelligence, along with automation is leading to the maturity of autonomy in things. Altair being a highly algorithmic company with optimization codes, physics-based solvers and with the acquisition of Datawatch, we now have 30-plus years of innovation in providing comprehensive AI and data analytics tools. Continuing with the theme of self-service and making it easy, Monarch since its inception has pioneered in the self-service data preparation, supporting both semi-structured and structured data. In the financial services space, Excel reports are very prevalent, allowing users to templatize these reports and automate the extraction of data to store into tables for downstream machine learning activities reducing the need for human in the loop. As more and more of automation is kicking in to augment AI in all walks of life, interpretability and explainability of AI is critical to build trust. The unique implementation of decision/strategy trees and its patented visualization is highly differentiated in the market and provides unparalleled and easy to comprehend AI interpretability. Also, the open box implementation approach of AutoML allows the data scientist to explore and interpret automated ML flow further building trust in the models produced by AutoML. The only way to build compelling value added analytical applications is to bring historical near real time and real time data together to derive meaningful insights. Panopticon our cloud native visualization technology is the only technology that enables threading of data at various frequencies to provide BI dashboards, real time dashboards and control panels. We are moving into a world of smart connected everything with high volume and high velocity telemetry data coming from the autonomous things. This data needs to be processed for immediate insights at the edge and further leveraged for providing other value-added services. We are proud to unveil SmartWorks, our next-generation clout-native platform that empowers everyone in the enterprise to make augmented data-driven decision. It is a highly open and extensible architecture to extend the functionality of the platform, front of the glass and use best-in-breed tools for task at hand, both open or commercial. AI is at the core of the platform primarily used for data discovery, feature engineering and automated mission learning and then edge compute and orchestration is made easy because more and more AI is being deployed at the near and far edge for immediate insights. SmartWorks is going to disrupt the way AI is going to be built and operationalized. My final thoughts. Altair is building the digital platform of the future and is well positioned to lead the convergence of simulation, AI and HPC.

We will now hear from Nelson Dias, Chief Revenue Officer, to share our go-to-market strategy and opportunities.

Good morning. I'm Nelson Dias, joined Altair 19 years ago. Prior to that, I was with Siemens PLM and have 30-plus years of experience in engineering software. I joined Altair as country manager in India and then ran Asia Pacific operations for about 12 years. In 2018, moved to my current role as Chief Revenue Officer. Today, I'll talk about driving growth to be $1 billion revenue enterprise. We help our customers to accelerate innovation and bring their products to market faster by leveraging our technology and domain expertise. This drives additional demand for our products. Having 11,000 plus customers provides us a great platform to expand usage, which drives revenue growth. Our customers span many verticals and range from small businesses to Fortune 500 companies. Anyone that anything can benefit from using our products. And we facilitate usage of our products through our Altair Units model. Let's take a brief look at what is Altair Units. [Presentation]

The Units model helps us grow usage and revenue within new departments of existing customers as well as new verticals, from designers to engineers, to data analysts and enterprise users. Our Units encrypt the customers with the solutions they need to be successful under a single value-based license. They can maximize their software dollars to the flexibility of choice offered by the breadth of our portfolio. I would like to -- let's say this with examples of customer success. Altair has traditionally focused on specialist CAE groups within the automotive industry. Now they're adopting SIMSOLID in the design groups. SIMSOLID's workflow enables GM to explore, analyze and evaluate more design iterations and complex assemblies. This is a 75% reduction in time compared to the earlier process. Another simpler an example from Renault, where designers have started using SIMSOLID and required no expertise in analysis. This is what we mean when we talk about democratization of our simulation technology. It's putting our products in the hands of more users by making the technology more powerful, easier to use and more access. Today, high-performance computing and computing in the cloud is mainstream. Our technology address the chip to chiller and cloud enablement strategy. Annapurna Labs in Israel part of Amazon Web Services, have adopted our Runtime technology to do high throughput, scheduling and license management for rapid chip design in the cloud. Keeping up with climate change and understanding the actions we must take to preserve our plan and its diversity of life requires powerful sophisticated computing resources. NCAR has state-of-the-art facilities to predict the behavior of weather systems and climate methods. PBS Professional manages their complex and mission-critical compute infrastructure. Australia's National Computational Infrastructure or NCI chose PBS Works to manage workload for one of the largest better scale supercomputers in Australia. Our HPC and cloud solution manage 10 million plus CPU cores with headroom to grow in the areas of high-performance data analytics, cloud computing and exascale, yotascale supercomputing. Skidmore, Owings & Merrill or SOM is known for some of the world's most technically and environmentally advanced buildings. The structural design specialists and SOM use OptiStruct to generate an idle project plan that considers sustainable regulations and manufacturing constraints. Altair's software provided Zaha Hadid designers with structural feedback needed to meet their challenging engineering criteria, but also exceptional creative freedom within those constraints. Baker Hughes incorporated HyperWorks simulation to capitalize on many benefits in the product development cycle, optimizing the performance and growing reliability of the design. Pfizer uses EDEM simulation to provide improvements in understanding of how to configure tablet coatings as the means of marketing for different tablet shapes conflict with the ease of production of consistently high-quality end products. Samsung SDI uses PollEx for PCB design review. DFM to detect manufacturing faults and DFE to detect electrical failures earlier in the design process. Switching gears to data analytics. Mastercard improves customer experience through self-service data prep. They can now perform reconciliations faster and provide support for ad hoc analysis for customer service queries. Ford uses the machine learning predictive power of Knowledge Studio to be 90% accurate and successful in largely automated staffing process selection and increase the first time through or FTT rates. We are excited about the opportunity to grow our business. There are lots of companies adopting simulation on a wide scale for the first time. Altair has established synergies across multiple technologies, simulation, AI, HPC and cloud to help companies in their digital transformation journey. Digital transformation is all about making smarter decisions in terms of saving costs, reducing waste, accelerating time to market, improving business performance while evolving a data-driven culture. Building the next generation of Altair technology users is essential to our growth. Academic ambassadors help universities and students acquire real world engineering skills and provide knowledge transfer in the areas of data analytics, simulation and high-performance computing. Altair is planting seeds at universities all over the world. The strategy is to strengthen the 3-way bond between Altair, academia and the industry through comprehensive self-learning courses, certifications and student competitions. We are present in 1,350 plus universities in 100-plus countries. Partnering start-ups through the Altair start-up program helps early-stage companies gain access to technology and expertise from the garage to successful product launch. The start-up can take advantage of a full range of Altair technology, including HPC, IoT, data analytics solutions. Here are some of the success stories. Gulplug in Grenoble, France is a spinoff of Schneider Electric, has set out to revolutionize plug and charging technologies used in today's electric vehicle. Autobahn based out of Munich uses Inspire for motion simulation, structural analysis and topology optimization. Another start-up, Philomec is using our technology for biomechanic stimulation in orthopedics. We are very well positioned with our portfolio to address the emerging opportunities in data-driven design, digital twin, real time analytics, simulation-driven design, modern-based system engineering, IOT, electronic system design, including electromagnetics, computational fluid dynamics, data analytics and AI in manufacturing. Organizations are adopting Altair's appliances, both physical and virtual to do design exploration on-premise and the cloud. Both our appliances come with unique, unlimited solver licensing model. Growing adoption by our customer brings in huge opportunities for the future. Our channel partner business is core to our long-term strength, and we are significantly investing in this area. Our high-level objectives include doubling of channel partner revenue in the next few years. We have a fair representation of 200-plus partner organizations globally. The goal is to increase our data analytics partner coverage in all geographies. It is true that travel restrictions have impacted our business operations, but our sales and support teams continue to stay productive and focused in closing contracts. With all of these opportunities in so many different markets, how does our sales force focus on the right priorities and opportunities to drive growth? We continue to add people in the inside sales function. We have a strong opportunity qualification process using merit and template-based large account management to increase our share of wallet in our top growth accounts. With the same strategy, we allow customers to test drive all our products and solutions before we put that option in a production environment. As we move forward, we are evolving our customer segmentation. We have segmented our sales force into strategic accounts, territory accounts and channel accounts. By focusing our direct organization on our largest opportunities, we will accelerate our software growth. Our territory team is focused on our 4,000-plus mid-market accounts, which will then become the next set of strategic customers with significant future growth potential. Our channel partners and inside sales team handles 7,000 plus small and medium business accounts. This successful enablement of sales is largely driven by the aggressive demand generation and brand building by market. And now for more, our Chief Marketing Officer, Amy Messano, on Altair's marketing impact, positioning and approach.

I joined Altair 2 years ago after a career at several technology companies, including both enterprise software companies like Microsoft and electronics companies like Aptiv. I immediately saw the power and potential of Altair's culture and technology, but I also recognize I had some work to do to tell the story of this remarkable place. Now the key to impactful marketing and communicating is storytelling and Altair has an incredibly powerful story. It's the story of a company that has grown for 35 years on a rock-solid cultural foundation that has put people and technology first and is willing to take big, bold risks that result in some of the best software in the world. But the problem was, we had too many product brands fighting for attention. We are essentially cannibalizing our own brand. So we embarked on a brand refresh to move from a house of brands to a branded house, and we elevated the Altair brand above all. Now every good story has heroes. And ours come in the shape of visionary leaders, who make extraordinary products that have helped keep the world safer, smarter and more connected. So we've been strategically elevating the personas of our key people and products through all of our marketing channels, owned, earned and paid. And we've landed in Tier 1 media outlets like the Wall Street Journal, Forbes, ZDnet and even AdAge. So we have plot twists through our investments in R&D and the many acquisitions that have kept the pace of innovation blistering. And our story is unique because we can offer a script like no other, the combination of simulation, HPC and AI. And it's incredible to think about the possibilities. In fact, the possibilities of what our customers can achieve is limitless. We've been establishing platforms for our customers to showcase their use cases. We've had more than 130 speakers at global events, and we have hundreds of case studies and testimonials. And we've installed powerful tools to help us engage new and existing customers and convert those leads into sales. We have generated more than 275,000 new leads and 25,000 marketing qualified leads. We use powerful data analytics and software tools to constantly monitor our campaigns, so we can put more gas on what's working and put the breaks on what's not. And we've been doing a super job of telling the Altair story. We launched a very successful brand refresh in the middle of a pandemic. Who does that? We do that because that's who we are. We take calculated risks. We created a new logo, a new brand, look and feel, new digital channels, including our website, social channels and digital marketing. And we've amped up our demand generation with a dedicated strategy to lead our customers on every step of their Altair journey, wherever they are in the world. And along the way, we've shattered a few records. Within our 2 focus areas of brand awareness and demand generation, we've had almost a 60% increase on altair.com. We've had a 156% increase in engagement on our paid and a 60% increase in Altair inclusion in media coverage, but the story isn't over yet. So we'll continue to build our marketing engine for scale and growth. We will continue to focus to build our brand and increase demand generation around the world. We'll fine-tune our data analytics and the science behind our efforts, so that our story lands in the right place, at the right time and on the right channels. Thank you. And now our Chief People Officer, Gilma Saravia, will share more about our culture, approach to recruiting, retention and career development.

Hello. My name is Gilma Saravia, and I serve as Altair's Chief People Officer. I joined Altair 1 year ago 2 weeks prior to COVID-19 impacting the world. Difficult time to join any company, especially in an HR role, but a solid decision made. After a career in consulting, helping global companies transform their HR service delivery modeling capabilities and various industry HR roles, I was ready for a change. I wanted to work for a technology company that was shaping the future. My criteria was simple, but hard to find. It focused on 3 elements. Culture, I wanted to work for a culture that was not good but great. I wanted to work for a company that put people first. People and talent strategy and truly believe that people were a key lever to the success of the company's strategy. A vision, a vision I believed in that went far and fast. So let me share with you my Ys. Our culture. We have 4 values, simple but powerful. They are the behaviors we embrace, we live and core to our DNA. First, we envision the future. We seek technology and business first. We communicate honestly and broadly, and we embrace diversity and risk taking. These 4 values propel our thought leadership, our collaboration, our innovation and our ability to execute for our customers. We have a strong global presence of 3,000-plus innovators, engineers and thought leaders. We are located in 25 countries across 86 locations ready to help our customers. Just in our headquarters alone, we speak 75-plus native languages. So our diverse makeup is broad, and it's not just based on experiences, cross-industry experience, education, but it's also our competitive capabilities and skills that are best-in-class. My goal is to continue to strengthen our core through recruitment, university, professional, hiring, but also branding. As Amy said, we have to bring our innovators and our stories to life into our customers and to the world. So again, attracting and retaining top talent is a key recipe for now and for future success. Our vision, I wanted to work for a company whose vision goes far and fast. As our CTOs mentioned, we have the top technologies in key core areas: simulation, HPC, data analytics. We're also fueling the innovative culture that gives Altairians the opportunity to experiment and make bold moves. We take risk, and we learn, pass or fail. Again, we envision the future and take risk and our vision goes far and fast. So my choice was easy. I'm here and proud to serve as Altair's CPO, a company with a great culture, focus on attracting and retaining top talent globally and with a strong vision that goes far and fast. Thank you.

And now please welcome back to the stage, Altair's Founder, Chairman and CEO, Jim Scapa, to advise on total addressable market or TAM.

For this next section, I will go through the principal components of our addressable market and how we consider this in the context of investments and capital allocation. We think about 4 overarching macro trends, which inform our view of the market and our potential to grow. Electrification is everywhere. 5G, electric drive and storage technology and electric systems and printed circuits are at the core of most new products coming to market. Simulation and AI-driven design and innovation is an enormous trend where mechanical and electronic designers need to leverage simulation upfront with fast and easy-to-use tools. The move to the cloud is a key objective for most modern CIOs as part of their strategy to compete in the future. And finally, all enterprises are becoming data-driven enterprises, where decisions are informed by or automatically made by machine learning algorithms. Altair's addressable market is comprised of elements of the larger PLM, HPC and data analytics markets. Our strategy for growth entails a mix of both sustaining and disruptive innovations, depending on whether we are responding to customer requirements or delighting them with new technology they could not themselves imagine. We leverage both internal development and an acquisition strategy to deliver this innovation. The first table from SIM data shows the simulation domain and where we compete. This next table is from Hyperion Research and shows the overall HPC and cloud market comprising both hardware and software. We primarily compete in middleware software, though we have the potential to expand into adjacencies if we choose to invest there. The final chart is from Gartner and illustrates the data analytics market. We compete in analytic applications, data science platforms and modern BI solutions. Taken together, these markets represent approximately $24 billion in 2020 and are expected to grow to $38 billion by 2024 with a compound annual growth rate of 12.3%, where simulation is growing just under 9%, and HPC and cloud and data analytics and AI are both growing approximately 12.5% and 13.5%, respectively. Altair's total addressable market is extremely large, yet still has a healthy compound annual growth rate, and we compete across a broad array of verticals with many opportunities to cross-sell and upsell. It is important to note that certain domains or vertical markets require product enhancements to compete. For example, we are currently developing some required features in our HPC solutions necessary to compete more effectively in the banking sector. We think about these markets using Geoffrey Moore's paradigm of 3 horizons, where horizon 1 generates today's cash flow. We refer to this as high revenue. Horizon 2 generates today's revenue growth and tomorrow's cash flow, and we refer to this as high growth. And horizon 3 is options on future growth potential, and we refer to this as high potential. The 3 horizons overlap as there is grayness between them in determining where different product technologies and markets are on this continuum. Here is how we are allocating solutions today for this exercise. In horizon 1, high revenue, we include mechanical simulation for the simulation analyst. This includes modeling and visualization and primarily structural analysis. We have HPC in manufacturing, government and weather, where we are the clear dominant player. Next, data preparation and automation, fraud detection and streamed analytics and banking and financial services and capital markets groups. In horizon 2, which is high growth, we include simulation-driven design, including Inspire and SIMSOLID, computational fluid dynamics and electronics, which are exciting areas of opportunity, especially external aerodynamics and printed circuit board simulation. We have HPC and technology for EDA, life sciences and pharma, where we believe our technology is best-in-class for high speed, high throughput workflows, especially in EDA. In horizon 3, which is high potential, we include high-performance computing in banking and financial services, where the same technology we employ for EDA applications will be modified to support finance use cases. And the world of connected devices, sensors, hybrid clouds and far edge computing bring a huge opportunity for end-to-end platforms for IoT, digital twins and data science and AI. By cross-allocating the domains of simulation, HPC and data analytics into the horizons factoring in our thinking around the opportunities, we find the high revenue horizon will grow at a compound annual growth rate of 9.6% to $11.4 billion in 2024, while the high-growth and high-potential horizons will each grow around 13.5% to $9.5 billion and $17 billion, respectively. And what we see is that horizon 1 is comprised of a mix of simulation and data. Horizon 2 is more balanced with a mix of simulation, HPC and data, and horizon 3 is primarily data. Seen differently, simulation is a mix of horizons 1 and 2. HPC is balanced between all 3 horizons. And data is balanced between all 3, but much more heavily in horizon 3. All of which makes sense and why we need to be investing in all 3 horizons as we envision the future.

Please welcome Stephanie Buckner, Senior Vice President, Customer Engagement and Corporate Development to review our strategy around acquisitions and customer engagement.

My name is Stephanie Buckner. I joined Altair 10 years ago after a brief period at Cisco. During my time at Altair, I've held varied roles across the organization. When I joined, I led an innovation start-up project as well as the Altair Partner Alliance almost from its inception until today. Later, I took responsibility for all partnerships and corporate development. Beginning this year, I also assumed responsibility for what we call customer engagement. This includes pre and post sales support in our services organization. Today, I'm going to provide some insight into Altair's, mergers and acquisitions, vision and strategy. When we're thinking about M&A, we are thinking about aligning it with our view of the horizons which Jim spoke about earlier. Historically, we have primarily focused on acquiring smaller companies that are very technology and talent centric, essentially acquihires. While we need to continue to find best-in-class technology, we're also beginning to think more about larger acquisitions that will help us scale more quickly. Finally, there has been a consolidation in the simulation and high-performance computing market over the last few years. With the extension we made to move into the data analytics space, our market opportunity has dramatically increased. It's important for us to stay focused on investing in technology that has access to a larger TAM. Our acquisitions continue to map to our 3 horizons: strengthening our core, expanding our market reach and bringing us into new adjacencies. We put a heavy emphasis on horizon 2 and 3 for acquisitions since we believe these technologies will shape the future and have the largest opportunity for growth. You can see some recent focus areas for us have been electronic system design with acquisitions like ElectroFlo, newFASANT, WRAP and PollEx. Data analytics and IoT with Datawatch, Carriots and CANDI and high-performance computing and cloud with Univa and Ellexus. As we acquire more strategic companies, Altair will continue to grow into a much more capable organization and evermore diverse realms. Over the past several years, we've done M&A in a variety of sizes, some small, some large. But importantly, these have been some of our most significant technologies up today. SimLab, for example, has become part of our foundation; PBS, a core competency; and even recent acquisitions like Datawatch, have successfully positioned us for the convergence we are seeing now. Throughout Altair's history, we have continuously pushed into new adjacencies, beginning with structures and more recently, broadening our offering to include data analytics and electronic system design. We now have a strong portfolio of technology, including 32 organically developed products and 41 acquired products. As we think about our M&A strategy, we are constantly considering whether to make or buy. Altair is uniquely capable of building amazing technology, which provides us the flexibility on acquisition decisions. Even in our early days, we've always been an acquisitive company. However, since our IPO, our appetite has increased and our ability to integrate these organizations has become seamless. Our experience in integrating more than 30 external organizations into our company means we can move faster post acquisition and are better able to capitalize on the technology and experience from the new organizations. This has given us confidence to acquire smaller and larger acquisitions alike. We see an inflection point coming in our traditional markets and at our customers. The lines between roles and personas are blurring at our customers and the tools they use increasingly overlap. Designers are simulating manufacturability before handing CAD off to engineers. Engineers are creating geometry in their refinements. Everyone from products to finance, to operations and logistics are using AI to make faster, more informed decisions. And everything is running on high-performance computers where every minute costs money. These worlds are converging, and Altair is well positioned with our current tools and with our future M&A strategy to meet our customers' needs. Each simulation, HPC and AI, alone represent growing an already large total addressable markets, but the combination truly presents a unique and enormous opportunity for Altair. We are already seeing success, bringing our newest segment, data analytics to our customer base. Our powerful units-based business model is a disruptive force when we acquire new technologies. It enables our global customer base to access newly available technology without the upfront cost, which gives us the ability to accelerate our future growth. Expanding our footprint and data analytics with new acquisitions gives us even more presence in a large total addressable market. This extension into data analytics goes beyond our M&A strategy in to our broader partner ecosystem as well. We have over 150 partners with more than 50 strategic partners participating in the Altair Partner Alliance. This program allows for these third-party products to be accessed as part of our customers' license. The Altair Partner Alliance has gained tremendous success in our historical segments. But with the expansion into the data analytics market, we have now launched our first partner, Amdosoft, an RPA company. We anticipate many more data analytics partners being launched through the Altair Partner Alliance very soon. We continue to believe partnering with our customers allows for us to push the boundaries of our products and deliver stronger solutions. Rolls-Royce Germany is a great example where we are collaborating, bringing AI to their engineering, testing and design of aerospace engines. Forward-thinking organizations like Rolls-Royce, Germany, are undergoing groundbreaking digital transformations and have identified engineering as a key area. Altair is uniquely positioned as a pioneer of the convergence of data analytics and simulation, and we will continue to drive similar engagements with our larger engineering customer base. Last year, we established a long-term strategic partnership with General Electric Aviation, whereas part of this, Altair acquired flow simulator, an integrated flow and heat transfer and combustion design software. This acquisition provides Altair with a product developed for real-world use cases and workflows that we will continue to expand and even take into new industries. Thank you.

Finally, to wrap up, please welcome Matt Brown, Chief Financial Officer.

My name is Matt Brown, Altair's Chief Financial Officer. I'm really excited we've been able to share some of the latest things happening here at Altair. I hope this has been useful information so far. Some of it may have been a review for the folks that are already familiar with our story, but we've also shared some new information. First, just a reminder of what we discussed in announcing our strong Q1 '21 results a few weeks back. We had a great quarter. We had record high software revenue, record high total revenue and record high adjusted EBITDA. This was driven by strong renewal business as well as new and expansion in software. Overall, a really strong quarter, and we're extremely pleased with the momentum we have starting 2021. So today, we are reiterating the updated guidance we gave just a few weeks back for Q2 and full year 2021. So no changes to what we reported just a few weeks ago. We continue to be cautiously optimistic as we move beyond COVID, led primarily by our software revenue growth. So far today, you've heard a lot about our technology and how that technology is resonating and adding real value for our customers. We believe we're delivering on our mission to transform enterprise decision-making. And you've also heard about the convergence of simulation, HPC and AI and how that's driving an opportunity that Altair is uniquely positioned to capture. Our credibility and deep technical strength in each of these markets means we have the expertise to help our customers while this convergence is taking shape. Our topology optimization technology, which has been developed over 30 years, pushes simulation earlier in the design process. And today, with machine learning, we're enabling our customers to apply fast, accurate and high fidelity models earlier than ever before. One advancement, in particular, is SIMSOLID, which is a truly transformative technology. Our approach in driving simulation earlier in the design process is being applied to a number of different areas, including electronics, mechanical, thermal, mechatronics, circuit and code. And this advancement in our solver technology is really resonating with our customers. Paired with this solver technology is our modeling and visualization technology, which drives optimization in design. We've incorporated AI and machine learning in our modeling and visualization technology, saving our customers time and materials and ultimately driving huge performance improvements in product design. That goes for anything from an automobile to an espresso machine and everything in between. We're also offering HPC solutions that help our customers efficiently run these models ensuring they're making the best use of compute power and saving money as they go. And finally, we're offering our AI and data analytics solutions to help make sense of the data they've gathered. This is a very powerful combination. And this is a combination that Altair has built over years of hard work based on the principles of innovation and and a vision in the future, all while investing heavily in R&D, which allows us to offer our customers one of the most comprehensive product suites in the market. We have over 11,000 happy customers where our products are adding real value. We're spread out across the globe, operating in over 25 countries, and we offer more than 150 Altair and partner products allowing our customers to access the full depth and breadth of our technology. And the great thing about our Altair Units model is that it drives subscription usage making more than 90% of our software revenue recurring in nature, and I expect it to remain at that level. So I'd like to revisit some of which you've already heard from Jim regarding our total addressable market and importantly, what we think that means for us in terms of top line revenue growth. We believe the simulation and analysis software market will grow at an almost 9% CAGR between now and 2024 from about $6.5 billion in 2020 to over $9 billion in 2024. We believe the HPC market in which we play will grow at about a 12.5% CAGR between now and 2024 from $1.5 billion in 2020 to almost $2.4 billion in 2024. And finally, we believe the data analytics and AI market in which we play will grow at about a 13.6% CAGR between now and 2024 from almost $16 billion in 2020 to over $26 billion in 2024. Together, this represents a TAM that we believe can grow at a CAGR of over 12% between now and 2024 from almost $24 billion in 2020 to almost $38 billion in 2024. This is an incredible opportunity that we believe we are very well positioned to capitalize on. So what does this all mean for top line revenue growth? Our top line revenue growth is accelerating as we exit COVID and approach a return to normal. As you can see in the chart here, we've got 2019 actual through 2021 guided total revenue represented. From 2019 to 2020, we had year-over-year revenue growth of 2.4%, which was impacted by COVID, particularly on the services side, and we're expecting year-over-year revenue growth of about 8% at the midpoint of the guide for 2021, which again is impacted by our expectations of flat year-over-year services revenue. When we think about our midterm expectations on revenue growth, which we think of as being in the next 2 to 3 years, we believe we can grow total revenue annually in the 10% range, driven by low double-digit software growth and a return to modest mid-single-digit growth in services revenue. Returning to the discussion of TAMs. The bulk of our software revenue continues to come from the simulation market, which we expect to grow at a CAGR of almost 9% from now through 2024. However, we have an increasing proportion of our revenue coming from the HPC market, which we expect to grow at a CAGR of approximately 12.5% and data analytics and AI, which we expect to grow at a CAGR of approximately 13.6%. Hopefully, one of the things you've been able to take away from our discussion today is that the lines between these markets are becoming blurred. We think of our product horizon spanning across these markets with the convergence of these technologies driving customer usage, and our Altair units model facilitates that usage, allowing users within an organization to try our products without requiring a stop through procurement and legal for a new PO. We encourage usage with revenue to follow. We are a very customer-friendly organization. Given our expectations on convergence and the growth of these markets on a stand-alone basis, over the next several years, we believe this supports our top line revenue growth expectations without making overly aggressive assumptions about taking additional market share. And although we do expect services revenue to return to mid-single-digit growth in our mid-term outlook, it's important to point out that software revenue continues to outpace the services growth rate and will make up a larger proportion of our total revenue. When the company IPO-ed back in 2017, software revenue made up about 3/4 of total revenues, but it has been steadily increasing ever since. As you can see represented in the chart, software revenue made up 80% of total revenue in 2019, 83% of total revenue in 2020, and we expect it to represent 84% in 2021. We expect this trend to continue in our midterm outlook, with software revenue increasing to in excess of 85% of total. And again, important to remember that 90% plus of our software revenue is recurring in nature. So what does this all mean in terms of profitability? Well, that expanding proportion of software revenue is helping to drive our gross margins up. With software margins in the mid-80s, we're seeing our overall gross margins expanding as that proportion of software revenue grows. When we IPO-ed back in 2017, our gross margins were below 70% as software revenue represented a smaller proportion of total revenue. As you can see here on this chart, we had gross margins of 71.4% in 2019, 74.8% in 2020, and we are expecting in excess of 75% in 2021. So you can see that upward trajectory in gross margins, again starting below 70% just a few years ago and progressing through the mid-70s in 2021, and we expect that to continue to increase in our midterm outlook. This is consistent with that increase in software revenue as a proportion of the total. At the same time, as gross margins are increasing, we're being very disciplined in our approach to spending and OpEx, although our operating expenses will continue to increase, particularly in R&D and sales and marketing, which we believe is critical to driving top line revenue growth. The increases in expenses will be at a lower rate than our increase in gross profit, thereby expanding adjusted EBITDA margins. We will continue to invest our R&D dollars in technology that's important to our customers with an eye toward the future. That means continuing to maintain our horizon 1 products, while investing most heavily in our horizon 2 and 3 products, which we believe will drive the most growth opportunity in coming years. From a sales and marketing perspective, we will continue to invest in quota-carrying sales reps to expand our sales capacity and also leverage use of the indirect channel, which we believe will help keep costs in line for offerings targeted to small and medium-sized businesses. And as you heard from Amy earlier, we have the ability to monitor what's working and what's not from a marketing perspective, pouring gas onto what's working and putting the brakes on what's not. With our disciplined approach to spending, we will see our adjusted EBITDA margins expand. We had adjusted EBITDA margin of 8.6% in 2019, 12.2% in 2020, and we're expecting adjusted EBITDA margins in the 12% to 13% range in 2021. In our midterm outlook, we think we can continue to add around 300 basis points of adjusted EBITDA margin growth per year by continuing to drive top line revenue growth of at least 10%, while maintaining disciplined spending, which we expect will result in annualized adjusted EBITDA margin of about 20% exiting 2023. Beyond this, in our longer midterm view, I believe this approach puts us on a path to adjusted EBITDA margins in the mid-20s, and we can continue to grow beyond that. We have a lot of work to do in order to get there, and we expect this will be done by scaling into our revenue growth, which, again, we expect to be in the 10% range in future years. Though not presented separately here, we expect free cash flow to increase in line with the increase in EBITDA. We know you've seen and heard a lot today and especially a lot of numbers in this last section. So I'm happy now to turn it over to you, and we can answer any questions that you may have.

Thank you for your attention. We'll take a short 5-minute break. And when we return, we'll have our Q&A session. [Operator Instructions] Thank you. [Break]

Welcome back. We will now start our Q&A session. I'll turn it over to the team.

Okay. So I want to say thank you to everyone in our audience today. We had a lot of people join for the presentations that we made. And here, we're moving on to the Q&A section. And there's a number of questions that have been sent to us, and I'm going to read the questions and try and distribute the questions to different people here. So here with me is my team, Matt sitting next to me, and Amy, and Stephanie, and Gilma, Uwe, Sam and Brett are here. First question is from Gal Munda of Berenberg. He's saying that CFD is a more mature market, but very important strategically. We've had some success but there are strong incumbents, which is true. Is yesterday's announcement of bringing all the CFD products under a single license important as a driver of growth in the future of CFD? And first of all, the answer to that is that we didn't bring it under a single license, but rather, we're bringing it under a single branding, so Altair CFD. I think what's more important is sort of the clarity of the message, that Altair has a much deeper and broader solution offering for CFD, all the way from general purpose CFD solution, the external aerodynamics, the Lattice Boltzmann technology, the internal oiling simulation with our SPH code. We have a discrete element modeling and all the technology there, the system modeling solution for CFD as well in thermal that came from GE. And just the breadth of that offering at CFD is pretty much unmatched. I don't know if Uwe would like to add something about our CFD offering.

Sure. CFD is a really broad field and has a lot of room for growth. So in CFD, we see a lot of challenges in HPC for reduced-order modeling. So our vision of the convergence is really -- manifest itself best in CFD actually because we want to really reduce computation times by tightly integrating with HPC. Our GPU solvers are really well positioned there. So I think there's going to be a lot of innovation in the future possible that will contribute to growth.

And there's a lot of multidisciplinary simulation that we do with our CFD solvers together with other solvers in the motion or structures area. So we really are deep and broad in CFD, and I think it's frankly unmatched, in my opinion. The next question is from Matt Hedberg of RBC. Could we talk about any initial trends we're seeing in terms of expansion or contraction when customers move from HyperWorks units to Altair units. And let me allow Matt to answer that question a bit first, and then I might add something.

Yes. I think the initial trends that we're seeing are positive in that our customers are taking to that transition very well. So we've seen over 40% of our customers have now converted already from HyperWorks units into our Altair units. And that's been a very smooth transition for them. The way that we like to think of it is, in the initial year, we look at that as being a mostly neutral transition period. And it really sets us up for an opportunity in future years to then go target our customers that we may not have been competitive in formerly under the HyperWorks units model, offering those customers more choice now in additional suites, particularly in the SMB area. But it also allows us to get the value that we really think that we bring at the highest level. And so we expect to see that expansion as we move forward. And I think right now, all indicators are pointing towards a very smooth transition there.

Yes. It's going well. We weren't sure, and there was a lot of trepidation. But actually, it's extremely well received by the customers and by our sales force who were very excited about the ability to penetrate some new markets with this technology, also the indirect channels as well, but also getting that revenue for value. It's not just getting the value, but getting the revenue per value in these upper enterprise customers. So next question is from Dylan Becker, talked -- we talked apparently about growing to $1 billion enterprise, also focused on potentially larger acquisitions. How do we think of potential organic or inorganic mix here as we think about a 10% growth target? Most of our growth is going to be organic. I would expect it always has been. Most of the M&A work that we've done has been tuck-ins, just great technology. We're really focused on the technology that we see in the future being really essential for our customers and for ourselves. We develop a lot of our own technology, of course, as well. We will do some larger acquisitions. And so that's probably going to contribute maybe even on top of that 10% organic if we do anything really large. So that would be my answer to that question. Yes, I think that's good enough. So Mark Schappel writes, a few quarters ago, Altair released its Inspire Mold solution for modeling and simulating plastics and injection molding. Could we speak to the customer interest and demand that we're seeing for this solution? I'll give a quick answer, and then I'll try and pass that over to Brett. But from my vantage point, all of the manufacturing suite is getting a lot of traction. Not everyone understands, but when you're designing, you really have to design for manufacturing, and it's just something that Altair understood early on, particularly as we went out with these conceptual design tools. Customers were feeding back to me that we need to understand the manufacturing element of that, and that's when I really began to develop and acquire this sort of technology. Brett, anything you want to add there?

Yes, Jim. Sure. So basically, the first question you answered was absolutely right. All the manufacturing solutions are getting a lot of attention. And I'll qualify that. They're manufacturability solutions at Inspire, which is not to say that the molding simulation for plastics and injection molding are all of the deep process. It is more manufacturability, which is a much larger audience actually, a much larger market. And so we're seeing quite a lot of uptake in that product and the others that are attached to Inspire for manufacturability.

Yes. These are huge, huge markets. And Brett is right, this is sort of in line with the simulation-driven design. Simulation-driven design for manufacturing is really a part of that. So yes, very, very important and a big differentiator for Altair. None of our competitors really have the breadth of offering that we have there. And in fact, that's beginning to come even on the electronics side. We have some really great solutions on the manufacturability on the electronics for printed circuit boards as well. So next question here is from Ken Wong. Jim and Stephanie, how should investors think about the impact of a more aggressive philosophy on mergers and acquisitions, on the ability to hit the long-term EBITDA margin of 20%? So in general, I don't think it's going to affect that at all. Historically, of course, we've done relatively small transactions, a lot of R&D comes in typically with those, and we have a little bit of synergy. But Stephanie, maybe you want to talk about the larger acquisitions that we see on the horizon.

Yes, absolutely. So when we look to the larger acquisitions, I think it actually positions us in a better place to be able to find more synergies. And so there's the opportunity for our EBITDA to grow and continue to grow with some of those larger acquisitions.