Altair Engineering Inc. (ALTR) Q1 2021 Earnings Call Transcript

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Altair Engineering Inc. (ALTR -0.39%)
Q1 2021 Earnings Call
May 7, 2021, 3:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and thank you for standing by. Welcome to Altair's First Quarter 2021 Earnings Conference Call. [Operator Instructions] After the speakers' presentation there'll be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Dave Simon, Chief Administration Officer. Please go ahead.

Dave Simon -- Chief Administrative Officer

Good afternoon. Welcome, and thank you for attending Altair's earnings conference call for the first quarter of 2021 ended March 31, 2021. I'm Dave Simon, Chief Administrative Officer of Altair, and with me on the call are Jim Scapa, Founder, Chairman and CEO; and Matt Brown, Chief Financial Officer.

After market close today, we issued a press release with details regarding our first quarter performance and guidance for the second quarter and the full year 2021, which can be accessed on the Investor Relations section of our website at investor.altair.com. This call is being recorded and a replay will be available on the IR section of our website following the conclusion of this call.

During today's call we will make statements related to our business that may be considered forward-looking under federal securities laws. These statements reflect our views only as of today and should not be considered representative of our views as of any subsequent date. We disclaim any obligation to update any forward-looking statements or outlook. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from our expectations. These risks are summarized in the press release that we issued earlier today. For a further discussion of the material risks and other important factors that could affect our actual results, please refer to those contained in our quarterly and annual reports filed with the SEC, as well as other documents that we have filed -- Form 8 filed from time to time.

During the course of today's call, we will refer to certain non-GAAP financial measures, a reconciliation of GAAP to non-GAAP measures is included in our press release. Finally at times in our prepared comments or responses to your questions, we may offer metrics that are incremental to our usual presentation to provide greater insight into the dynamics of our business or our quarterly results. Please be advised that we may or may not continue to provide this additional detail in the future.

With that let me turn the call over to Jim for his prepared remarks. Jim?

James R. Scapa -- Chairman and Chief Executive Officer

Thank you, Dave, and welcome to everyone on the call. Altair had an excellent first quarter 2021. Our vision of the convergence of simulation HPC and AI driving enterprise decisions is emerging as a clear imperative, embraced by customers. This technical direction which we identified early and have invested in significantly is important and manifest in all of the markets we serve. AI is becoming pervasive in our lives. Altair's integrating AI into all of our software applications, and we are rapidly evolving our solution platforms to allow customers to implement this technology to benefit from the latest knowledge and algorithms throughout their organizations.

We are pleased to report record quarterly results with total Q1 revenue of $150.2 million. Software product revenue for the quarter was $129.5 million versus $108.4 million in Q1 of 2020, reflecting year-on-year growth of 19.5%. Adjusted EBITDA was $37 million compared to $21.7 million in Q1 of 2020, an increase of more than 70% in the first quarter of 2020. All were well above our guidance ranges. Our business continues to shift toward a very high proportion of software versus services expanding our gross margins and strength to invest for the future.

Our modified Altair Units business model, along with a more structured go to market process is delivering better revenue for value in our major accounts and enhancing our ability to more effectively compete in the middle market. Software product revenue was 86.3% of total revenue for the first quarter compared to 82.5% in the prior year period. Our recurring software license rate was 94% for the first quarter of 2021 versus 93% in the first quarter of 2020. We are excited about our results from Q1 and we are looking forward to the balance of the year. While the coming months continue to hold some uncertainty related to the challenges with COVID-19 especially in India and other parts of APAC and EMEA, we are seeing many signs of a robust economy with customers investing to develop new products and looking to Altair experienced products and solutions to accelerate their innovation and help them be competitive.

Our results show continued strong momentum due in large measure to the strength of our constantly growing software portfolio. In 2020 we made enormous progress with broad multi-disciplinary product releases for simulation, HPC and data analytics. SimSolid, which we acquired two years ago is clearly emerging as the leading technology for structural simulation for designers. We had 10 major releases of SimSolid since the acquisition and the number of users and customers for this technology is growing daily. As the technology continues to mature, its performance and accuracy, especially when dealing with more complex structures and assemblies is unparalleled.

Many of the hundreds of customers using SimSolid have presented technical papers or otherwise spoken publicly about their use of SimSolid including from the automotive, heavy equipment, electronics, architecture, oil and gas and other industries. SimSolid now has a broad solution offering including statics, modal, dynamics, thermal, thermal stress, fatigue, linear super positional and linearized stress service. The code has been enhanced with an industry best design connections library including spot welds, laser welds, 3D seam welds, pushings, adhesives, joints and rivets. We've also improved the workflow integration of SimSolid notably notably within our Inspire design platform, but also by more seamlessly connecting to a number of third-party codes.

In the first quarter, we won a strategically important account for some solid in the aerospace and defense industry where we believe there is significant room for expansion both in this account and in the aerospace industry as a whole. We recently published case study from a General Motors division, their design teams desire to perform structural analysis to evaluate their own designs. The non-Altair's simulation software initially utilized, proved problematic. SimSolid provided them with an alternative which dramatically decreased modeling time and allow the designers to evaluate complex components and large assemblies, which was not possible with the previously used software.

For Modal analysis at the component level, team found a correlation factor of 97% SimSolid compared to traditional simulation methods. This was combined with a 75% reduction in time taken to complete the analysis. We believe the accuracy, time savings and workflow efficiencies of SimSolid combined with all of the capabilities added since the acquisition will help continue its momentum as the product with the fastest growing usage in our software portfolio. Altair has been a pioneer in engineering simulation and MCAD simulation driven design for more than 30 years.

More recently, we are bringing a simulation driven design philosophy to the electronics industry with an end-to-end solution, delivering electronics that the light consumers requires more than just linking the ECAD and MCAD worlds. That requires physics analysis at the speed of design and collaboration across disciplines throughout development. Altair PollEx offer solutions for printed circuit board design review verification, analysis and even rule based design for manufacturing, design for assembly and design for electrical. It introduces a simulation driven methodology for signal integrity, power integrity and thermal for printed circuit board design and importantly integrates with all major ECAD and simulation tools.

In an interconnected world most devices are wireless with several antennas. Altair's 5G simulation tools uniquely combine antenna design with radio coverage and planning analysis and provide the broadest set of scenarios for 5G applications. Using PollEx and Altair's electromagnetic tools combined with Altair's other physics based simulation tools and machine learning and to reduce modeling time helps users achieve improved connectivity and functionality. For smart product development, performance, performance optimization, sensors, actuators and motors also provide challenges for architecture integration. They often need to be miniaturized and integrated into the PCB without sacrificing reliability or adding to manufacturing costs.

Altair's model based development tools can help drive faster assessment of system performance by enabling flexible configuration of sensor systems and simulating the subsystems and control strategies for each function of the device. Circuit simulation plays a strategic role in the schematic capture phase of EDA workflows. Altair offers electronics, circuit simulation tools and an open integration platform for modeling, simulating and optimizing multidisciplinary systems of systems. Altair's enhanced proprietary version of space based on an open source industry standard with access to the library of digital component suppliers delivers a more interactive schematic and which easy changes of component values, tolerances, frequency response or time periods, enables an accurate verification of the electronics circuit performance.

And finally, to develop complex embedded systems like sensor and actuator controls, Vision Systems and IoT devices, design engineers needs software for model base firmware development. Altair's tools let you design analyze and simulate your embedded system using block diagrams and state charts and automatically generate compact and optimized code to run on an extensive selection of microcontrollers. The breadth and depth of technology Altair offering for modern simulation driven design of electronics is being embraced by our existing customers, especially in automotive, we believe this will lead to increased business opportunities for us.

The first quarter brought many new and expansion wins in the area of high frequency electromagnetics across industries including aerospace, defense, railway, 5G technology, automotive and others. Applications range from antenna placement and design to radio and radar coverage. Altair has a complete solution for electric drive systems coupling e-motor concept design, multi physics simulation, system integration and control design, and PCB verification and analysis.

We had two interesting wins in the first quarter that demonstrated our value toward electric drive system development. One was with a global manufacturer of industrial pumps and the other with the manufacturer of ventilation systems. In both cases, the ability of Altair software to simultaneously address electric motor, sensor control and power converter development was key to building the business. On the data analytics front, we are continuing to promote and the acceptance of the Altair Units model, especially at large enterprise customers. We launched in early access release of the SMARTworks platform to a limited customer base with strong positive initial responses.

SMARTworks continued -- combines capabilities necessary to develop apps and orchestrate edge devices for IoT and smart product development with end-to-end capabilities for data analytics from data ingestion to live system deployment. We are excited about the opportunities SMARTworks brings to Altair to serve a very large and growing addressable market. Matt Brown is fully on board as our CFO and doing a great job to help Altair grow into a substantially larger revenue and EBITDA profile company.

Our 2021 Investor Day is Thursday, May 27 and we look forward to sharing some insights around our technology, addressable markets and long-term outlook with you then. Now I will turn the call over to Matt to provide more details on our financial performance and our guidance for the second quarter and remainder of 2021. Matt?

Matthew Brown -- Chief Financial Officer

Thanks, Jim. We're thrilled with our first quarter 2021 results coming in above the high end of the range on every metric we guided to for the quarter. We delivered record software product revenue of $129.5 million, an increase of 19.5% compared to Q1 2020.

We also achieved record total revenue of $150.2 million, an increase of 14.2% compared to Q1 2020 and we had record high adjusted EBITDA of $37 million or 24.6% of total revenue, an increase of 70.5% compared to Q1 2020. Total billings for the quarter were $145.8 million, an increase of 14% compared to Q1 2020. Our results relative to prior year were primarily driven by strong software product billings, where we saw solid new and expansion results as well as healthy retention on our renewal base.

We saw a year-over-year increases balanced across all three geographic regions as well as across our product offering. Our recurring software license rate which is the percentage of software product revenue that is recurring continues to be strong at approximately 94% for the quarter as we continue to emphasize growth in our recurring revenue streams.

Relative to our expectations for the quarter, we saw some of our software transactions, which were originally expected to close in the second quarter close earlier than originally anticipated, driving some of the upside relative to the Q1 guidance and as anticipated, the year-over-year strength in software product billings was partially offset by declines in client engineering services and other billings. It's worth reminding you of the seasonal nature of our business where our first and fourth quarters have higher software billings in revenue and we expect that pattern to continue.

In addition, a significant portion of our billings and revenues are built in currencies other than the US dollar and are therefore impacted by changes in FX rates. Relative to Q1 2020 our billings and revenues were favorably impacted by changes in FX rate of approximately $5 million during the quarter. Non-GAAP gross margin, which excludes stock-based compensation and restructuring expense improved to 79% in the first quarter compared to 74% in Q1 2020, an increase of 500 basis points, primarily as a result of the favorable trend in our software revenue mix, which carries higher gross margin.

Software product revenue as a percentage of total revenue increased to 86.3% compared to 82.5% in the year ago period, an increase of 380 basis points. This increase in software related revenue mix was expected as we saw an increase in software product revenue combined with the expected year-over-year decline in our services and other revenue. We expect this mix shift toward software product revenue to continue. Non-GAAP operating expenses, which excludes stock-based compensation, amortization of intangible assets and restructuring charges were $82.6 million compared to $78.2 million in the year ago period.

Adjusted EBITDA was $37 million in the first quarter or 24.6% of total revenue in Q1 2021, an increase of 70.5% compared to Q1 2020. This increase compared to the prior year quarter as well as relative to our expectations, was driven by the increase in software revenue in the quarter combined with disciplined spending and accelerated employee related cost reduction.

Turning to our balance sheet, we ended the first quarter with $243 million in cash and cash equivalent, an increase of about $2 million from the prior quarter. The quarter-over-quarter increase reflects strong free cash flow during the quarter of approximately $33.5 million partially offset by repayment of the $30 million we had drawn on our revolver. Our free cash flow of $33.5 million in the quarter is an increase of $7.1 million or 27.1% compared to Q1 2020. As a reminder, Q1 is our seasonally low significant cash flow quarter due to collections on Q4 and Q1 billings.

Looking ahead to Q2 and full year 2021, we are looking to continue the great momentum we began the year with. We are expecting software product revenue for Q2 in the range of $92 million to $95 million or year-over-year growth of 12.4% to 16.1% and we are raising our full-year 2021 software product revenue range to $425 million to $433 million or year-over-year growth of 8.5% to 10.5%. We continue to expect services and other revenue to be approximately flat year-over-year, consistent with our previous guidance.

As a result, we are forecasting total revenue for Q2 '21 in the range of $111 million to $114 million or year-over-year growth of 12.6% to 15.7%, and we are raising our full-year 2021 total revenue guidance to a range of $504 million to $512 million or year-over-year growth of 7.3% to 9%, reflecting our increased software revenue guidance. Our $2 million increase on the full year revenue guidance reflects our overachievement in Q1, which as I mentioned a moment ago was partially impacted by the timing of some Q1 software transactions that were originally expected to close in Q2 along with the negative currency impact of $5 million relative to our prior quarter's full-year guidance.

From a cost perspective, we moved faster than expected in the first quarter on employee related reduction and realized some benefits in the quarter. As I mentioned in our last earnings call, these reductions are freeing up capacity to reinvest in product technology and sales capacity, which we are also moving forward with at a fast pace. In addition, and as I also mentioned in our last earnings call, we expect marketing costs, and travel and entertainment costs, which were significantly impacted by COVID-19 last year particularly in Q2 through Q4, we will return to higher levels as more normal activity returns. We're seeing some of that happening already.

So for Q2 '21, we expect adjusted EBITDA in the range of $2 million to $4 million or 1.8% to 3.5% of total revenue compared to $5.8 million or 5.8% of total revenue in the year ago period, again reflecting expectations of increased marketing and travel and entertainment spend as well as the impact of the temporary salary reductions that impacted Q2 and Q3 last year. For full year 2021, we are raising our adjusted EBITDA range to $59 million to $67 million or 11.7% to 13.1% of total revenue compared to $57.3 million or 12.2% of total revenue in 2020.

We are also raising our full-year 2021 free cash flow guidance to a range of $30 million to $38 million. As a reminder, our cash flow expectations are sensitive to billings and collection patterns, which fluctuates seasonally. We provided a detailed guidance tables in our earnings press release including reconciliations to comparable GAAP amounts, which was issued after close of market today.

In summary, we are pleased with our quarterly results in Q1, but even more excited about the products and technologies we're offering to our customers and driving forward in our mission to transform enterprise decision making.

With that, we'd be happy to take your questions. Operator?

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from Bhavan Suri with William Blair. Your line is open.

Bhavan Suri -- William Blair -- Analyst

Hey Jim. Thanks for taking my question and congrats. That was a fantastic set of numbers and results there. I guess I wanted to touch on the high level maybe Jim for you initially you commented on the adoption of data and AI tools, Rolls Royce was a great deep dive I think David Simon did with us, but as you think about the broader trends of end to end AI ML and then you see the sort of digitization industries things like 5G IoT EV, how do you view the current product set, being able to capture that market share. What do you think is more stuff you need to add sort of truly capitalize on those opportunities?

James R. Scapa -- Chairman and Chief Executive Officer

So first of all, Bhavan, thank you and nice talking to today. I'm call -- I'm speaking out of our hotel rooms. By the way, I have a new granddaughter. And we're in a visit. So it's been sort of a long week. It's a good question. I think that we obviously have a lot of work to do to bring these technologies to bear in all of these different places. And so we're working on. We're working in small ways every single product that we have has sort of under the covers elements of neural nets and the sort of technology embedded within at this point, much more so than you might realize.

And then we're also working on sort of generalize tools that customers can use on their own to be applying this sort of technology in their own work and as we go I think we're going to, we're going to keep learning and together with customers quite frankly and finding more and more applications where we can just accelerate the work that we're doing, not sure if I am answering your question, but that is the answer the way I think about it.

Bhavan Suri -- William Blair -- Analyst

No, that's helpful. And at least the component seem to be there, I guess, let's turn to the sales force because obviously you've had a great quarter. You saw some deals come in early but you and I have talked about restructuring efforts around sales to drive efficiencies in the past. I'd love to understand sort of what process we put in place, how are those efforts progressed to the interest sort of spike and done well spike in a positive fashion, but then you've also comment, Matt did I think in terms of hiring an increase in capacity. So how do you think about sort of the restructuring efforts, how has capacity played out into the, what does the hiring time look like? Thank you.

James R. Scapa -- Chairman and Chief Executive Officer

Sure. So what we're doing is we're organizing. First of all, huge amount of training is going on with our sales organization, lots of new methodologies have been brought in and brought across the team over the last two years we've also brought more tools in that sort of help us to mechanize and just be more, more process on track and all that is starting to pay dividends. At the same time we're, we're doing a better job of sort of dividing and conquering the market space.

So the direct sales force has much more clarity around which accounts we're going after. Where we see growth opportunities and they are typically the larger enterprise type accounts. We have a lot of focus on the indirect channels and that's really starting to come together for us and then we have a lot of mechanization between our marketing and all the marketing activities that we're doing for lead generation, moving that through the pipeline. A lot of inside sales activity that we've rolled out across the world. So I mean, I think you're beginning to see the results of all that mechanization and sort of creating the swim lanes that everybody knows to operate in.

Bhavan Suri -- William Blair -- Analyst

That's very helpful. Thanks, Jim. Congrats again. And I'll talk to you, soon. Thank you, guys.

James R. Scapa -- Chairman and Chief Executive Officer

Thank you. Appreciate it.

Operator

Thank you. Our next question comes from Jackson Ader with JPMorgan. Your line is open.

Jackson Ader -- JPMorgan -- Analyst

Great, thanks for taking my questions guys. Jim, really nice -- well, first of all, congratulations on the new granddaughter I can start off saying that I think. [Speech Overlap]

James R. Scapa -- Chairman and Chief Executive Officer

It's number five by the way.

Jackson Ader -- JPMorgan -- Analyst

Wow, excellent growing family. Yeah OK so deep dive on the one products that was great. I don't think we really dug into those in a while, maybe even since you guys acquired them a couple of years ago, but the question is how easy is it to sell across products into the semiconductor space. If you're, if you're selling something like these like PollEx that might be a little bit more like EDA, is it a completely different buyer or user who you're trying to then sell your electromagnetics solvers into it?

James R. Scapa -- Chairman and Chief Executive Officer

It is for sure it's different, it's different groups, different departments and these are departments that we've been sort of walking the halls making our way across to, we first got into all the electromagnetics just sort of one layer outside of what we did historically and we've been doing that for about 7 years now and we have pretty significant success coming into the groups that are designing in all the printed circuit boards and in electronic systems is in fact new departments and customers that we have quite a bit of credibility and sign off.

I mean when we go to one of the guys that we've been working with a long time in terms of trust us and so the introductions are getting made and I have to be honest, I wasn't sure how the customers would respond. And so what we're bringing in, but the response has been quite positive. And it's not the reality when you get into these departments is a lot of, there's just a whole. And that's why I laid it out a little bit. They're not just doing the printed circuit board, but there is the packaging there's thermal, there is CFD, there is electromagnetics, there is system, system modeling, system of systems and the embedded stuff and we, I think they've been quite surprised at the breadth and depth of our offering and so we're going to a good response there. So I'm really optimistic and it's a whole additional set of customers within our existing accounts.

Jackson Ader -- JPMorgan -- Analyst

Yes, that's great. That's really helpful color. Matt for just a modeling question how much was actually pulled forward. And you said some deals came in 1Q that you were expecting.

Matthew Brown -- Chief Financial Officer

Yeah, thanks Jackson for your question. Yeah. First of all, we were super happy with the way that this quarter worked out for us. Seen us come in high above the, that the high end of the range was nice to see and again records on revenue and profitability front. In terms of amounts that we saw closed in Q1 that originally were we're thinking was in Q2. It's in that few million dollar range, it's not, it's not the entire amount by any stretch. So we saw a nice healthy upside in Q1, above and beyond what was programmed. And one thing I would add too is yeah, it's an encouraging thing when we see some of those deals closed in early because it really speaks to the health of the pipeline there. So we were happy to see that as well.

Jackson Ader -- JPMorgan -- Analyst

Yeah. Okay, all right, thank you.

Operator

Thank you. Our next question comes from Ken Wong with Guggenheim. Your line is open. Ken Wong. Your line is open.

Ken Wong -- Guggenheim -- Analyst

Okay, sorry about that. Mute got me. Jim, I just wanted to check in on just some of the drivers of growth, it sounds like it's fairly broad based, but perhaps if we dive in a little just wondering what, what new activity look like versus expansion, what are you seeing on retention trends. Any color there kind of deal sizes, are those ticking up relative to internal expectations would be, it would be helpful.

James R. Scapa -- Chairman and Chief Executive Officer

Sure. So retention in the last year, retention there was a little more attrition last year than we're used to. This year, very, very little attrition. Actually it's, it's very clear. This is, this is a much more robust year even as good as we've ever seen. So a very, very strong, the retention side this year, and we weren't sure if that was going to be the case, but in fact it does appear that way. It is very broad based, it's coming across in all the verticals are actually very healthy in this year, all regions are growing very, very helpful as well. What was your last question, I forgot what you were asking me at the end there?

Ken Wong -- Guggenheim -- Analyst

Yeah. And then I guess just in terms of just new business activity. Are you finding that that top of funnel is kind of tracking to plan is it may be coming in a little better with opening up but just love a sense of kind of what that the net new run rate starting to look like.

James R. Scapa -- Chairman and Chief Executive Officer

Yeah, I mean it's, that's looking. I mean this, the macro picture I think this year is generally very, very positive as I said in my prepared remarks. You know there's still look at what's happening in India that's, that's a bit crazy, you do have this chip shortage that is happening in the market and it affects a number of our customers. But thus far that does not seem to be having neither one of those seems to be having much impact for us. So in general, pipelines are very healthy, and we feel we very positive about this year.

Ken Wong -- Guggenheim -- Analyst

Got it. Super helpful and then Matt for you just got a bit of a follow-up on what Jackson was asking, but maybe looking at it from a full year basis. Just wanted to make sure I heard you correctly, it sounds like so this quarter, you had a $5 million tailwind. And is it for the full year? It sounds like it's potentially reversing to be $5 million headwind. One, I want to clarify that. And then in terms of just how we think about like the guidance upwards, it sounds like a few million be a few million pull forward in the quarter but kind of net-net, if we factor in all the FX stuff, it feels like it's still kind of a mid-single digit rate, is that the rough math that I should be thinking?

Matthew Brown -- Chief Financial Officer

Yeah. Not quite. So the FX picture is understandably confusing, but the $5 million tailwind that we realized in Q1 of this year is relative to last year. Not relative to the guide. Right. So you have to separate those two, those two concepts. The $5 million full year FX headwind is relative to prior quarters guide a full year right. So that makes sense.

Ken Wong -- Guggenheim -- Analyst

Yes, it does.

Matthew Brown -- Chief Financial Officer

Okay, perfect. So in terms of the full year guide. Yeah. We're feeling really, really good about the year and we took. So we took full year revenue guide up by $2 million that is inclusive of that $5 million headwind. And so sort of when I think about our guidance relative to the full year guide that we gave last quarter we're up $7 million when you exclude that FX difference and so yes, I mean we continue to feel good about Q2 through Q4. We're excited about the opportunities that we have and pipeline looks good and healthy and as Jim just mentioned a moment ago that's macroeconomic trends seem to be holding of course, we've got our eye on the types of things that are happening in India and elsewhere, but generally feel, I feel really good about the year.

Ken Wong -- Guggenheim -- Analyst

Got it. And a quick clarification on first quarter, I guess, was there any meaningful headwind tailwind relative to what you guys were thinking from an FX perspective at the start of the quarter.

Matthew Brown -- Chief Financial Officer

No. Yes so important clarification there but not a meaningful FX impact. So when we think about the over performance in Q1 relative to the guide that we gave in Q1, there is that in a couple of few million dollars that we originally thought was going to close in Q -- that ultimately closed in Q1, everything else is just true upside to the quarter and no meaningful FX impact relative to the guide. So just a really solid quarter we were hitting on all cylinders.

Ken Wong -- Guggenheim -- Analyst

Great, thanks for the clarification.

Operator

Thank you. Our next question comes from Gal Munda with Berenberg. Your line is open.

Gal Munda -- Berenberg -- Analyst

Hi, thank you for taking my questions and congrats on the results. The first one is just a little bit verification of the guidance. Obviously, especially on the software side, I'm thinking if I think about the outperformance that you delivered in Q1 balancing that with a little bit of worsening FX outlook for the rest of the year and a few million of pull forward and there is still a big chunk kind of left there based on what you raised. Is that just feeling a little bit more conservative especially because, as Jim mentioned, we're still in very uncertain environment, and we don't know how it's going to be like or any other factors that I'm going to not aware of that you the potentially may see a little bit more cautious for the rest.

Matthew Brown -- Chief Financial Officer

No. So we can make sure that the math is coming in across clearly but our outlook for the rest of the year is still very positive. And when we take in there is a lot of different factors that you just mentioned there, but you can sort of sum them up like this. FX-neutral and as you get to a $7 million increase relative to the prior guide. We came in over the top end of the guide on revenue by about $10 million so you're left with $3 million and essentially that's kind of what I signaled that the. And so, so we basically have a situation where we're guiding based on the over performance in Q1 and we're still really feeling very good about the rest of the year. So I think amount but it works out pretty well.

James R. Scapa -- Chairman and Chief Executive Officer

Gal, I'd just add, I think you did sum it up correctly that that balance is just a little bit of conservatism around some of the things that are happening and some of the uncertainty. So for the most part, I think what Matt saying is we went up by more than $2 million because of the FX piece, but we didn't go all the way to the $10 million and there is a little bit of conservatism there.

Gal Munda -- Berenberg -- Analyst

Got you. That's really helpful. And then just as a follow-up, Jim, last year pretty much in the same time last year you talked a little bit about the end market weakness. The fact that people are still focused on the old programs and kind of all that they're working on today. It was a market different the way you talked about all the new use cases. I'm wondering this acceleration in growth, how much of it has to do with the fact that there is activity happening R&D activity on the new stuff like electric vehicles and things like that and that really has helped to increase the usage and is now generating that growth that you're seeing versus kind of just doing more, more of the same what happened over the last decade or so.

James R. Scapa -- Chairman and Chief Executive Officer

Yeah. And I mean I think there is a lot of activity in the in the R&D world in general. I mean we're coming off of COVID obviously and sort of a weird year. But in general in all the customers are hiring, people are designing much more complex connected devices, lots of activity in the automotive industry because it's so competitive. Lots of, there is lots of new aircraft companies. I don't know if you've been paying attention, and there's a lot of really interesting and in [Speech Overlap] Yeah, I mean it's, it's a fun time and I think we have the right tools for the right moment.

I did want to my prepared remarks, when a little deeper into the electronics offering because I think that sometimes the community may not recognize that we've been investing for almost 10 years to build. Basically the solution portfolio, we're not doing integrated circuit design. But we are very focused on these electronic systems and that's just a perfect fit with everything that we do as an organization, it's sort of that next layer out and the breadth of the offering that we have and we've poured investment into it in the last three years, especially we feel great about.

Gal Munda -- Berenberg -- Analyst

It's very helpful, thank you so much and congrats again.

James R. Scapa -- Chairman and Chief Executive Officer

Thank you.

Operator

Our next question comes from Matt Hedberg with RBC Capital Markets. Your line is open. Yeah, hi, it's Dan Bergstrom for Matt Hedberg. Thanks for taking our questions. Jimmy just, you just mentioned chip shortages in the Q&A here. Not much impact and then maybe to connect that with the last question, you've also talked about headwinds in the automotive industry for most of last year. Recently in the news here we're hearing stories about automotive makers seeing some disruption due to trouble sourcing chips. I guess the question is are you seeing that at all with automotive customers and does it even impact you or is that just part of the headwinds, you're seeing in that sector overall?

James R. Scapa -- Chairman and Chief Executive Officer

So we are, we are actually not seeing headwinds related to that. I. I will be honest that I have some concerns how would that affect us. But I've done a lot of pulse checking and it doesn't seem to be affecting us at all. So it is certainly impacting our customers, but from what we see, it's just not having impact on the design side of things.

Dan Bergstrom -- RBC Capital Markets -- Analyst

Great, very helpful. And then maybe a question on return to work and what you're seeing. You touched on that in the prepared remarks, you kind of talk to a hybrid work model for yourself. Just curious what you're hearing from customers on the topic. It sounds like, it sounds like you're expecting some increased travel here based on the prepared remarks.

James R. Scapa -- Chairman and Chief Executive Officer

I think we're going to see a little bit of increased travel it depends region by region. Some of the APAC regions rely even more heavily than other regions on sort of face to face contact a little more in certain other markets like Germany, I'm not seeing huge international travel coming back this year I think it will start to come back next year mainly because there is such a difference in terms of where -- Israel is completely vaccinated. The US has been doing really well. But starting to slow down and other markets. It's very, very hard to get a vaccine at this point. India is just really in dire straights, so I don't see a lot of international travel.

I think that you you're seeing like banking or Jamie Dimon is saying, everyone is going to come back to the office. I think it's a little bit old school. I think that most of the automotive companies are aerospace companies, I think are going to have some level of hybrid for their engineering but they'll come back a lot more certain activities have to be done on site. I think eventually again, but I think it's going to be relatively hybrid, not a big impact for us if anything, it just pushes more and more into the virtual world, which is good for us.

Dan Bergstrom -- RBC Capital Markets -- Analyst

Great, thank you.

James R. Scapa -- Chairman and Chief Executive Officer

Yeah.

Operator

Thank you. Our next question comes from Brian Essex with Goldman Sachs. Your line is open. Great, thank you for taking the question and congratulations on the results. Great quarter. Jim, maybe, maybe for you. I mean the sales motion that you, that you walked through in a previous question seem very familiar where you're penetrating a division or you're penetrating a business unit and the question I have is as you improve your channel presence, do you see or do you anticipate seeing that sales penetration point changing where maybe you can come in at a different level. Maybe the C level or slightly below that, where you sell the vision of the Altair platform and more efficient consumption across the platform. I'm just wondering if that might really accelerate the sales efficiency on that front.

James R. Scapa -- Chairman and Chief Executive Officer

We do need to sell at higher levels. And we are selling at higher levels for sure than we used to and I'm sure you've heard this before you have to sell top down and bottom up to be successful. I think just going top down a lot of companies are very top down sellers. But if the products aren't really performing if you will eventually the rank and file are going to throw it out or is just going to sit on the shelf and not get used. So we historically, if you go way back, we're very much bottom up sellers through the year as we've been getting better and better at selling at more senior levels and I think we're getting more and more proficient at it now. Yes.

Brian Essex -- Goldman Sachs -- Analyst

Got it and then maybe for Matt to beat you over the head with the guidance again. On the profitability side. So you beat the EBITDA I think over $10 million you're raising the full year guide by about $1 million, but you also talked about investment initiatives. So maybe if you could point us in the direction of where you might be investing, how much you might be reinvesting and how much cushion might be in that number given that obviously you can control where you spend more then perhaps you can control what your customers buy. So maybe a little bit more certainty there.

Matthew Brown -- Chief Financial Officer

Yeah, I mean, so when we think about the profitability and how that play out in Q1, obviously super happy with the results. Much of that the overachieve in the form of revenue makes its way down to EBITDA and the, our expense expectations were slightly better than expected based on just the speed with which we moved the restructuring activities that we began about midway through the quarter. So real happy about the results there. And really the way that that we're thinking about it is we're now looking at raising the full-year revenue guide by $2 million, raising the full-year EBITDA guide by $1 million and what that really means the sort of the outlook from an expense picture has not changed much based on our prior guide.

There is some timing movement between reinvestments and the restructuring activities that we are, that we're undertaking. But big picture where we're really just saying we had roughly 12.3% adjusted EBITDA margin at the midpoint in our last guide, we're taking that up now to 12.4% at the midpoint. And so, in other words not seen a big change in the form of our expense picture versus what we had guided to last quarter.

Brian Essex -- Goldman Sachs -- Analyst

Got it. That's helpful. Thank you very much.

Matthew Brown -- Chief Financial Officer

Yeah.

Operator

Thank you. [Operator Instructions] Our next question comes from Mark Schappel with Benchmark. Your line is open.

Mark Schappel -- Benchmark -- Analyst

Hi, thank you for taking my questions and congratulations on the quarter. And Jim, congratulations on your new grand daughter, but so, Jim question for you, it was good to hear the positive commentary around SimSolid in your prepared remarks and the idea of introducing engineering simulation in the upfront design process has been something that's been talked about for decades now. But really has been followed through with, it sounds like that's changing and according to your comments it sounds like SimSolid is a good part of that change. I was wondering if you just talk a little bit about, more about what you're seeing with organizations product development organizations upfront design are you seeing it more in certain industries and others. And well, look, I'll just let you can talk about that.

James R. Scapa -- Chairman and Chief Executive Officer

Okay, thanks for the thing for the congratulations. All the way around. Yeah, so you are right. So you've obviously been around this industry because people have talked about simulation upfront for a long time and people have tried to do it for a long time. I think there is a great desire for simulation to be part of the design groups. And I think SimSolid is actually kind of a catalyst because you don't have to do all this complex modeling in order to do this work as it handles assemblies amazingly and it's very accurate and it's just blazing fast, but it's not just fast, but there's other things that do things fast, but you get junky results here, you're getting very, very accurate results.

And so it's sort of transformative and we have a lot of large, large customer organizations who are intending to really roll this across their design teams in a way that I've not seen before. So, and this is part of why we decided to put that in my traffic today. I think we are, we are beginning to see something in our movement, if you will. I mean so that's exciting.

Mark Schappel -- Benchmark -- Analyst

Great, thank you. That's all from me.

James R. Scapa -- Chairman and Chief Executive Officer

Yeah. Thank you.

Operator

Thank you. And there's no other questions in the queue, I'd like to turn the call back to Jim Scapa for any closing remarks. That's all the questions we have. I'd like to turn the call back to Jim Scapa for closing remarks.

Matthew Brown -- Chief Financial Officer

Okay. Well, thanks everybody for joining the call. Really, really appreciate it. And look forward to speaking with you all soon.

Operator

[Operator Closing Remarks]

Duration: 55 minutes

Call participants:

Dave Simon -- Chief Administrative Officer

James R. Scapa -- Chairman and Chief Executive Officer

Matthew Brown -- Chief Financial Officer

Bhavan Suri -- William Blair -- Analyst

Jackson Ader -- JPMorgan -- Analyst

Ken Wong -- Guggenheim -- Analyst

Gal Munda -- Berenberg -- Analyst

Dan Bergstrom -- RBC Capital Markets -- Analyst

Brian Essex -- Goldman Sachs -- Analyst

Mark Schappel -- Benchmark -- Analyst

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