Ladies and gentlemen, thank you for standing by, and welcome to the Altair Engineering Q4 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to introduce the conference call to Mr. Howard Morof, CFO. You may begin.

Thank you. Good afternoon. Welcome and thank you for attending Altair's earnings conference call for the fourth quarter 2019. I'm Howard Morof, Chief Financial Officer of Altair. And with me on the call is Jim Scapa, our Founder, Chairman and CEO. After market close today, we issued a press release with details regarding our fourth quarter performance and guidance for 2020, 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 our IR website following the conclusion of the 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 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 or may file 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.

Thank you Howard and welcome to everyone on the call. During the fourth quarter, we made significant progress in key areas of our business, including our product offerings, customer engagement and go-to-market activities. Altair's vision is to transform customer decision making by applying simulation, data analytics and optimization, all leveraging high-performance computing. We are excited to be at the center of a market converging around mathematics algorithms and programming automation for companies to gain insight and operate efficiently in a complicated and highly-connected world. First, let me discuss our financials. We are pleased to report stronger-than-expected total revenue of $123.9 million for the fourth quarter driven by an impressive 27% year-over-year increase in software product revenue. On a constant-currency basis, the software product revenue growth was 28% for the fourth quarter and 23% for the full year. Altair continues to grow software billings and revenue at a fast pace relative to the market. Our recurring software license rate was 87% of product revenue for the year, a 1% decline from the previous year primarily driven by perpetual revenues in the data analytics business. We expect the transition from perpetual to subscription for our data analytics software sales, which was substantial during 2019 to continue during 2020 toward our overall target recurring software license revenue percentage of close to 90%. Software-related services for the year declined approximately 6% to $35 million, while client engineering services grew around 2% to $49 million for the year. Altair remains focused on growing software product revenue and continues to leverage services strategically to drive higher gross margin software product revenue growth and expand our relationships with key clients. Overall, services were relatively flat for the year, while software product revenue grew robustly. Software product revenue grew to 82% of total revenue for the fourth quarter from 78% in the prior-year period and to 80% for the full year from 77% in 2018. Total billings for the quarter driven by software product momentum and adjusted for constant currency grew by 20% over the same period a year ago and 20% for the full year. Total revenue on a constant currency basis increased by 21% for the fourth quarter and 18% for the full year. We are pleased that usage of our solver portfolio grew by over 20% through 2019 compared to 2018. We believe Altair continues to gain market share across a broad range of physics, including structures, electromagnetics and computational fluid dynamics or CFD. Our momentum in CFD continues to be strong. We saw wins across a number of applications, including household appliances, batteries, electric motors, commercial pumps and gas turbine engines in the fourth quarter. Acceptance of ultraFluidX or uFX our solution for external aerodynamics in automotive continues to grow substantially. Several customers including two major automotive companies in Asia are increasing their investments in GPU hardware to run Ufx, as confidence around this next-gen solution matures. The latest release of uFX, includes an important new and more accurate wall model formulation, which expert users are very pleased with. We are excited that the recently-acquired EDEM Products for bulk material modeling, enhance our position in the heavy machinery, mining and processing markets and we believe the opportunities for growth are significant, especially when integrated in multi-physics simulation solutions. Electromagnetics continues to have strong momentum, especially our flux solutions for electric motor design and FEKO for antenna design and wave propagation simulation. In early January, we acquired newFASANT, which brings leading technology and computational and high-frequency electromagnetics to address a wide range of problems, such as antenna design and placement, radar cross-section analysis, automotive, vehicle-to-vehicle and ADAS and infrared and thermal signatures. We believe this transaction solidifies Altair's place as a world leader in high frequency electromagnetics, a critical technology to support advanced, digital communications including 5G for areas such as IoT, cellular networks, mobile phones and connected devices, V-to-V radar and radio. newFASANT is relevant in the aerospace, marine automotive, defense, communications, consumer electronics, energy and healthcare industry verticals. SIMSOLID usage grew dramatically and is beginning to drive meaningful revenue. Usage of our simulation-driven design portfolio under the Inspire brand grew well over 50% through 2019. SIMSOLID integrated within Inspire will release in early Q2. This combination delivers powerful geometry manipulation capabilities to product designers. We expect this will be very well received by a design-oriented market and that this can be impactful in the SMB market. Last month, NAFEMS, the National Association for the Engineering, Modeling and Simulation community, published an exciting benchmark study noting that there is a significant trend toward designer-oriented analysis tools. They write, we have started hearing a lot of noise about two new designer-oriented analysis tools, SIMSOLID from Altair and Discovery Live from ANSYS. The study showed very favorable results for SIMSOLID noting that, the correlation is surprisingly good considering that the time-consuming process of meshing has been removed. The software was easy to use and all of the benchmarks evaluated here took a matter of minutes to set up and analyze. We have deep respect for the independence and technical integrity of the NAFEMS organization and would like to thank them for their careful evaluation of SIMSOLID. We are especially pleased, this benchmark confirms publicly the game changing performance of SIMSOLID that many customers have discovered in often much more rigorous private benchmarks. Our confidence in Altair's portfolio of products for data analytics continues to grow and our platform vision for a fully-integrated cloud-native open and big data-ready solution for data preparation, data science and visualization is coming together nicely. We believe this will be important in enterprise-level accounts who look to manage enormous data sets, share data and work collaboratively across teams. As these organizations mature their data analytics capabilities, we anticipate the move toward leveraging large-scale cloud HPC resources will happen at a fast pace. In addition, our products address the need of expert data scientists as well as business analysts, who some in the market have begun to call citizen data scientists. We believe we have significantly expanded our total addressable market or TAM, since we went public in late 2017 and that our data analytics technologies acquired from Datawatch alone expand the potential within our manufacturing customer base and increase our overall TAM substantially. Altair's designer-oriented simulation solutions such as Inspire and SIMSOLID, expand our end user potential by adding designers and design engineers, including in small and mid-size enterprises, as we are able to bring fast, accurate and intuitive simulation to the masses. The many capabilities added to our solver portfolio, both organically developed and via acquisition, also grow our potential usage in many if not most accounts. Altair continues to invest for growth with organic investments in sales, marketing and technology. We will actively investigate acquisition opportunities in the engineering software and make prudent purchase decisions, considering technology, price and addressable market. We seek technology companies which bring important new features and functionality to our product portfolios and expertise to our technical population. There are also many interesting acquisition opportunities in the data analytics market and with our business model now deployed across our data analytics products, we believe we can quickly deliver acquired solutions and delight customers as we have done for years in the engineering simulation market. Altair's strong automotive market software product revenues continue to grow in 2019 at a more moderate pace of between 5% and 10%, while aerospace, high tech and electronics drove significantly higher growth rates. We expect these trends to continue in 2020. Specific to the automotive sector, we anticipate the overall sector slowdown is likely to persist in 2020, which will likely continue the trend to reduce services revenues. Software revenues in automotive will continue to grow at more modest rates than other verticals as we saw in 2019. As discussed earlier, we are winning new automotive applications, especially in noise reduction, computational fluid dynamics and electronics, significantly driven by the growth of electric vehicles. While we remain optimistic about continued growth for our software across all market verticals and geographies, we do see elevated risks in the economy related to some global market trends. We are therefore more conservative on 2020 guidance. The Coronavirus situation has kept many workers home, especially in China for extended periods during the beginning of the year and caused some loss of business including for Altair. Our team members in China did not work in the office for four weeks. Like everyone, we hope these global health challenges subside quickly and anticipate that business will generally recover to balance out 2020 performance. While we do see 2020 as a more subdued macro growth environment, we are very positive about Altair's product and sales delivery capabilities and confident in our prospects for long-term organic and inorganic growth toward being one of the more significant software companies in the enterprise space from a revenue, profitability and product impact point of view. Now I will turn the call over to Howard to provide more details on our financial performance and our guidance for the first quarter and full year 2020. Howard.

Thanks Jim. As a reminder, our reporting for 2019 and guidance for 2020 are under ASC 606 as are the comparative numbers from 2018. Our seasonal billings patterns coupled with the treatment of revenue under ASC 606 results in heightened seasonality and revenue with higher revenue recorded in our first and fourth quarters of any given year. For ease of reference, we have included a table reflecting summarized results for all four quarters of 2018 on an ASC 606 basis in our press release. In prior conference calls, we have noted that changes in certain currencies can have an impact on our revenue, expenses and cash flows especially when those changes occur over relatively shorter time periods or when currency changes are more pronounced over time. When we initiated guidance for 2019, we noted that currency shifts were expected to have an adverse impact of between $7 million and $10 million on revenue and between $2 million and $3 million on adjusted EBITDA for 2019 compared to 2018. As the year has now concluded, currencies did have a negative impact of $9.1 million on revenue and $1.9 million on adjusted EBITDA. In addition, currencies had a negative effect of $7.8 million on billings. Accordingly, we believe it is meaningful to measure aspects of our performance on a constant-currency basis. We exceeded our guidance for Q4 provided at the time we released our Q3 results. As mentioned at that time given the feedback from our field organization, we felt it would be appropriate to take a more conservative view of our potential growth expectations for the fourth quarter. Our fourth quarter results were driven by continuing solid demand for our software products. Software product revenue reached $101.2 million, an increase of 27% from a year ago, while total revenue equaled $123.9 million representing growth of 20% from the fourth quarter of 2018 both exceeding guidance. Even adjusting for the approximate $4 million of revenue that shifted to Q4 from Q3 due to 606 requirements mentioned last quarter, software product revenue growth would have exceeded 21% in the quarter. Software-related services declined by 11% in Q4 compared to a year ago, primarily impacted by the headwinds in our automotive customer base. Our strong 2019 results were primarily due to growth in demand for our software products. Software product revenue reached $366.7 million, an increase of 20% from a year ago, while total revenue equaled $458.9 million representing growth of 16% from 2018 both exceeding guidance provided last quarter. Software-related services declined by 6% for 2019 compared to a year ago, primarily impacted by the headwinds in our automotive customer base. This decline is also aligned with our anticipation that consulting revenue will continue to be relatively flat going forward as our growth strategies are focused on higher margin software product revenue. Adjusting for the adverse impact of currency fluctuations in Q4, 2019 software product revenue grew by an impressive 28% and total revenue grew by 21% compared to Q4, 2018. For the 12-month period on a constant currency basis, software product revenue grew by 23% and total revenue grew by 18% compared to 2018. As previously discussed, acquisition accounting requirements mandated an adjustment to historical Datawatch deferred revenue as of the date of acquisition. Upon acquisition, we adjusted deferred revenue down by $9 million which would have been recognized during the 2019 year. For 2019, we have included this as an adjustment for non-GAAP revenue and adjusted EBITDA which we referred to as modified adjusted EBITDA for this specific purpose. Going forward for comparative purposes, we will include this adjustment within the elements of how we present adjusted EBITDA. We do not anticipate including acquisition accounting-related adjustments for deferred revenues for the Polliwog, EDEM and newFASANT acquisitions as those adjustments would otherwise be insignificant in amount. Including the impact of the deferred revenue adjustment for Datawatch, our constant currency non-GAAP software product revenue growth exceeded 30% this quarter and 26% for the year. In the fourth quarter, software product revenue increased to over 82% of total revenue up over 400 basis points from 78% last year without any adjustment for currency or acquisition-related data points, continuing the important long-term trend of increasing mix of software product revenue, the key driver of expanding our operating margins in the future. For the full year, software product revenue represented 80% of our total revenue up from 77% for the prior year. We expect this favorable trend to continue into 2020. Note that for the year, software product revenue as a percent of our software segment eclipsed 91% of segment revenue up over 200 basis points compared to 2018. Our recurring software license rate that is the percentage of software revenue that is recurring continues to be strong and consistent with our past performance at over 87% a slight decline for the year. During 2019, we were able to substantially increase the percentage of revenue to recurring revenue streams we acquired from Datawatch. The slight reduction in our recurring software license rate for 2019 is solely due to the inclusion of the former Datawatch revenue streams into this metric. Fourth quarter billings were $130.4 million, an increase of 17% from a year ago indicative of the strong growth in our software product business. Currency shifts also impacted current period billings negatively by $3.1 million and on a constant currency basis billings increased by 20% for the quarter. For the year billings were $475.9 million, an increase of over 18% from a year ago driven by the strong growth in our software product business. Currency shifts impacted 2019 billings negatively by $7.8 million. On a constant currency basis, billings increased by over 20% for the year. We tend to view billings over longer time periods due to the impact variations in timing of renewals, expansions and new customer arrangements can have quarter-to-quarter. I would like to turn to the balance of the P&L results some of which are on a non-GAAP basis. A reconciliation of GAAP to non-GAAP measures has been provided in the press release we issued earlier today. Gross margin in the fourth quarter was 70.2% essentially flat relative to Q4 2018 primarily driven by increased hardware sales in Q4 2019 that contribute smaller gross margins and our revenue mix. On a full year basis gross margin improved to 71.1% compared to prior year gross margin of 70.7% driven by the positive shift in revenue mix to greater software product revenues. For the quarter, non-GAAP operating expenses, which exclude stock-based compensation, amortization of intangibles and other operating income were $76.8 million. Non-GAAP operating expenses have remained in a very tight range across our quarters this year with a minor uptick in Q4 as is typically expected coupled with incremental costs for Polliwog and DEM activities. Our modified adjusted EBITDA for the quarter equaled $15 million an increase of 16% from last year driven substantially by the increase in software product revenue above our guidance range. Our bottom-line results were only slightly impacted by a $200,000 negative impact from shifts in foreign currency during the quarter compared to last year. In Q4, we did pick-up some minor revenue and incurred expenses related to the acquisitions of Polliwog and DEM in excess of revenues realized. However, the magnitude of these inclusions did not significantly impact our results either on the top-line or bottom-line. Modified adjusted EBITDA exceeded our guidance for the year at $48.5 million compared to adjusted EBITDA of $50.2 million a year ago reflective of continuing investments focused on long-term growth opportunities along with the impact of the conversion of perpetual revenue streams to recurring revenues beneficial for long-term growth. Turning to our balance sheet, we ended the fourth quarter with $223 million in cash and cash equivalents and $150 million in undrawn capacity on our U.S. revolver. Moving to our cash flows, cash flow from operations in the fourth quarter was an inflow of $1.4 million compared to an outflow of $4.2 million for the fourth quarter of 2018. We generated cash flow from operations for the year of $31.4 million compared to $36.2 million for 2018. For the full year our free cash flow equaled $21.7 million compared to $29.6 million for the prior year. The decline in cash flow was primarily related to the timing of funding certain U.S. payrolls earlier in the year. Before I run through guidance expectations for 2020 I would like to offer just a few words on our performance in 2019. While challenging we have successfully integrated the Datawatch organization with great excitement about the team the technology and products and customer acceptance of our unit's licensing model. SIMSOLID continues to amaze. The breakthrough capability of the technology can be seen in substantial increase in usage, especially after customers appreciate the unparalleled combination of model complexity, speed and accuracy that can be realized upon this unique solver capability. Acquisitions of Polliwog, DEM and newFASANT continue to expand our technology offerings. Our outlook is based on entering 2020 positioned to deliver growth in revenue, particularly software product revenue coupled with maintaining a disciplined approach to our operating costs. As Jim mentioned we are entering 2020 with a more conservative view for growth expectations. As we have noted before, we believe that our best measures of growth are based on a longer-term view rather than extrapolating one quarter to another. Of course, we are all playing close attention to the coronavirus situation. However, it is hard to quantify what effects the outbreak may have on our markets or customers. We expect to continue to strategically invest in certain R&D and technical support areas and selectively expand our sales capacity. At the same time, we intend to maintain appropriate controls over other increases in spending with a continued focus on facilities, technology, travel, and consulting. For the 2020 year as a whole, we expect software product revenue of between $395 million and $399 million, representing growth of 8% to 9% from 2019 software product revenue and growth of 5% to 6% over non-GAAP software product revenue; total revenue of between $491 million and $495 million, representing growth of 7% to 8% from 2019 total revenue and growth of 5% to 6% over non-GAAP total revenue from 2019; adjusted EBITDA of between $49 million and $53 million, representing an increase of over 9% at the high end of the range from modified adjusted EBITDA from 2019. Free cash flow of between $25 million and $30 million. As to Q1 2020, our expectations are; software product revenue to be between $105 million and $107 million, representing growth of 2% to 4% from 2019 software product revenue and basically flat over non-GAAP software product revenue from 2019; total revenue to be between $129 million and $131 million, representing growth of 1% to 2% from 2019 and basically flat over non-GAAP total revenue from 2019; adjusted EBITDA of between $20 million and $22 million, representing a decrease of $4 million to $6 million compared to modified adjusted EBITDA from Q1 2019. Further detailed guidance tables have been provided in the press release issued after close of market today. Some comments as to our tax rate for 2020. We incur taxes in basically two components; taxes based on our earnings across our global footprint and taxes tied to certain remittances from non-U. S. jurisdictions back to the U.S. called tax withheld at source. Taxes withheld at source would ordinarily be available to offset our U.S. income taxes via foreign tax credits. Due to our valuation allowance position in the U.S. for taxes we are not able to reflect the potential offset of tax withheld at source. These taxes currently approximately $6 million annually and represent part of our cash tax obligations. In addition to these taxes which we expect to incur in 2020 regardless of our pretax income, the tax rate applied to our pre-tax income is expected to be about 30%. We believe that the investments we have made and the successes we have achieved so far provide a strong foundation to support long-term growth and thereby expanding operating margins as we look forward. With that, operator, can we now open the call to questions.

[Operator Instructions] Our first question comes from Rich Valera with Needham & Company.

Thank you. Just wanted to get a little more color on the auto weakness and what you think is driving that and from your perspective is it something you can address on the product or the sales side or is this purely macro? And then you know you said you think that's going to persist through this year. What's your sense of when that maybe turns? When do we maybe get back to some kind of normalized growth rate in auto? I know that's a tough one but I figure I'll ask.

Okay. So, hi Rich.

Hi Jim.

So, I think it's primarily macro. Automotive is a somewhat cyclical business as you know. Typically the cycle down is a year to 18 months and then it -- and then it starts to rise back up. You know, for us, we're still growing in automotive. I want to make that point here. It's just not growing as fast as the other verticals for us grew if you look are growing two, three, four times faster depending on the vertical you talk about and so primarily macro in my estimation. I know maybe some others are saying different, but the reality is the reality. Yeah. It's not product. We're rock solid on product.

Fair enough. You mentioned 20% solver usage growth I think and I want -- first I'm just curious, what time period was that for? Was that for 4Q or for the whole year? And then can you give us any clue on how that translates into revenue growth?

Yes. So, it's over 20% and it's over 2019 versus 2018 actually. There's a little bit of a lag. We've talked about it before. You know usage climbs for us and then we tend to see revenue coming as a follow-on to that. And we are seeing that actually. If you look -- I mean our organic growth last year was over was double-digit basically it was over 10%. Even into low teens. And we're actually feeling very, very positive about the momentum we have the products that we have and frankly the long-term prospects. Auto. I'm just saying it as it is actually which -- just frankly speaking that the auto industry is -- is in it -- in its lower moments here right now and probably will be for all of this year. We're still going to grow though. We're still seeing gains like I think I said in my prepared remarks, in CFD and electromagnetics. Just some solid stuff is taking off like a shot in automotive on the designer desktops, for example as well. So, there's been a lot of talk about legacy versus new. You know the vast majority of simulation spend is still what people are referring to as legacy. And it's all very, very healthy still. I mean these companies see the replacement of test with simulation as a future and really cost saving for them. But there is -- there is a reality about these cycles.

Got it. And one more if I could on Datawatch. Just wondering if you could quantify the headwind, the revenue headwind you just saw from the ratable transition in 2019 and what you expect on the ratable transition this year presumably less. And then, if you could give this kind of a state of the union for Datawatch, how you feel about that heading into this year, and you know if you expect growth from that business.

I can probably let Howard address the more specific question on the impact. We are going to see a little more this year, because we're -- we're continuing to try and move that needle. And that's all good. We're feeling very positive about products, about marketing. Sales definitely had its rough spot through the year last year. We've really made that transformation now, and we added a lot of sales capacity on the data side, especially through the last quarter. We come into this quarter with a very significant increase in capacity. Of course, a lot of those guys are still learning and ramping up. And that will continue. We're going to continue to hire this year. Actually our overall sales capacity last year grew almost 25%, but a lot of it came in that -- in that last part of the year and the ramp-up takes time. But again, we're feeling very, very positive about things.

So as to the revenue headwinds due to the conversion from perpetual to recurring, it's high-single-digit millions, so about $7 million or so. In terms of where we're entering 2020 having been more successful than we expected in terms of the conversion and the adoption of the recurring revenue model Rich. We're really not -- we're not talking about -- we won't be talking about revenue headwinds any further in terms of that particular revenue stream. I mean there's certainly still more work to do there, but it will not be anywhere near as significant to 2020 as it was to 2019.

So I don't want to disagree with my CFO, but we moved probably from under 60% recurring to maybe 75%. And our goal is to get closer to 90%. So we're probably halfway there.

It's a proportionate impact though.

That's fair enough, yeah.

Okay.

Just putting some perspective to it.

Got it. Thanks for taking my question gentlemen.

Thank you.

Our next question comes from Ken Wong with Guggenheim.

Hi. Great. Thanks for taking my question. So as we look at the outperformance in Q4, which good quarter on you guys' behalf and then compare that to again softness in Q1, can you guys maybe talk about maybe some of those dynamics? Was there any pull forward? And then as we think about Q1 typically, like you said, it's your kind of seasonally strongest quarter. I guess what gives you confidence that the rest of the year kind of picks up the slack when thinking about your full year guide?

So we did not pull anything forward actually. So that that's not what we've done here. Just was a strong quarter for us. We were pretty conservative going into Q4 quite frankly, and we're sort of learning a little bit how to be a public company. And we've decided to take a pretty conservative stance going forward. Why is Q1 light? Most of that has to do with timing. Actually the pipeline for the year is very, very solid for us. We're feeling good about the pipeline. And it -- it's mostly just the timing impact. Q1 is not our biggest growth quarter by the way. I'm not sure how you had that impression. Typically Q4 is the biggest. But year-by-year it does sometimes change and the timing of when we see deals coming in is a big part of why we're seeing things this way.

Got it. And then maybe a follow-up. You guys mentioned M&A being something that you guys are still going to be very focused on I guess, in light of the macro. I mean how should we think about the willingness to continue to pursue M&A? Is that dialed back in macro or do you guys view it as more opportunistic when things get a little shakier?

So, I think you'll notice that most of the M&A we're doing is tuck-ins and technology acquisitions. I do think that a little bit of a down market can create some opportunities, and we're just constantly -- we have a very, very good sense of the technologies that we're looking to add, the features and the functions that we're trying to bring into our technology. And that's how we're out -- how we're out operating. I did talk about the data analytics piece a little bit, because frankly speaking, it's a very, very large TAM when you look across the many, many features and functions. We really do a subset of those today with data preparation and prescriptive analytics and the visualization stuff that we do, especially the live stream stuff. But there's opportunities to bring in some other functions and features as well. But most of it for us is relatively small. And I do think that a little bit of a down environment can create some opportunities. So we're still going to keep looking, probably a little tougher in our negotiating.

Got it. And then maybe one last one just clarification. So you mentioned obviously Q4 very conservative heading in and you guys are still kind of finding how you guys are forecasting as a public company. Should we view kind of a similar approach to how you guys modeled out Fiscal 2020?

We certainly, we're guiding initially on the basis of what we think is appropriate and realistic considering, where we are in the cycle and some of the unknowns and such. So I would say yes, we're conservative in terms of our view of 2020.

It's a pretty – you know, there's a lot of uncertainties in our view coming into this year. On the macro side primarily and yeah. So we – we – we've tried to consider that as best we can.

Perfect. Appreciate it guys. I'll pass it to the next one.

Our next question comes from Jackson Ader with JPMorgan.

Thanks. Good evening, guys. Thanks for taking my questions. First one is actually on the expense side. So I mean, Howard last quarter you were kind of signaling 2020 or looking ahead there maybe some tightening of expenses. And you mentioned, it a little bit in your prepared remarks. But now that the fourth quarter shaped up a little bit better than obviously a lot better than maybe was expected, how should we think about expense growth and when you talk about targeting sales hiring or targeted sales hiring, I should say, where do you think you'll be targeting?

Our perspective on managing expenses going into 2020 is still one of being pretty tight and careful around where expenditures go or where growth would go or head count additions would go as we've been very clear, very specific targeted hiring and R&D. And continuing to add quota-carrying or sales capacity you know that continues. And we've identified some areas that we've spoken about, where we're going to continue to focus on being very thoughtful and careful. Not suggesting, we won't be spending a nickel more, but we're going to be very controlled in our view of expense growth as we navigate through 2020. We think that's absolutely prudent considering where we are and some of the uncertainties that we see out there.

We do think a lot of in our bigger investing is a little bit more behind us. And as we continue to scale the business over the next couple years, there's a lot of opportunity to grow these margins a lot.

Okay. Great. And then a follow-up on usage. So the 20% solver growth in usage year-over-year or greater than 20% that's great. How about the bread and butter the modeling and visualization? How is that usage year-over-year?

So I don't usually break it out, but it's – I'm going to be – I don't even know, if I should at this point. But it's – it's more moderate than – than that. It's still double digit actually. I'm going to say barely double-digit. But it's still very healthy for us. One of the big things you know is that our modeling and visualization solution has had a pretty big breakthrough over the last several years in the aerospace market. We've displaced another vendor in the major play – in the major players across the world. And they've been – we've been basically training and moving them off of the other vendor onto our solution. And that's really a big, big deal in our world because once we own the desktop we have the opportunity to move into other things as well. So most of that transition has occurred there's still probably another year or so of the transition. But those decisions were made a couple years ago now. And – and that's primarily modeling and visualization. So that's continuing to move forward pretty nicely for us.

That's great. Thank you for the transparency there. Its wonderful. Thank you.

Our next question comes from Brian Essex with Goldman Sachs.

Hi. Good afternoon and thank you for taking the question. I've got maybe one easy one and one hard one. Maybe for the easy one, on the Datawatch, I think you noted you successfully integrated that business. What are the next steps for that business and what's left on the integration side whether it's Polliwog or Discrete Element Method business that you've brought on that we might be able to expect? And both in terms of expenses and then scalability across your platform?

I'm not 100% sure I understood your question. Were you asking about Datawatch in particular? Because then you moved on --

Yeah. I guess – yeah. Let's – yeah. So let's just in general with the acquisition so Datawatch what's next? Are all the changes done? Is it now a point where you're scaling sales reps across that business? And then for the new acquisitions what's left to go?

Okay. Obviously Datawatch a whole different scale on every level for us. So what we're doing is we're focused on product. I talked a little bit about it in my prepared remarks. We are – we are basically investing significantly in this completely-integrated platform. Datawatch has a very, very strong offering in pure data preparation under the Monarch brand. A very strong prescriptive analytics a solution that basically lets you build models for machine learning called knowledge studio. And basically the best in the world, I don't think many would argue for real-time data streaming used by – mainly used on bank trading desks. Bringing all that together, most of those are desktop solutions. We're bringing all that together in a purely cloud native solution. They had already done some work on that before the acquisition was made but we've done some restructuring there. We put a lot more resources on that. And frankly speaking, we are – we have a lot more experience than they do at developing these types of enterprise applications where you really have to think about security and a lot of other elements. So that is really coming together in a nice way and we expect to be able to support in a much more open way the world – that world basically. So on the product side, we're feeling great about where we're going with product. We've had lots of discussions with customers and it makes a lot of sense. You have a whole lot of people who really want to continue to have a desktop solution but you have a whole class of large enterprise customers that are really looking for this cloud-native fully-integrated solution. So that's coming along well. You know on the sales and technical support side we've had to build out operations around the world. We – they had a lot of focus in the northeast frankly and Canada. And also in London, basically. And so we've put some effort into building that out. And I'm talking about their traditional markets you know banking financial services. So we've built that out in several other markets now. And continuing to get that going. And then of course we're beginning to sell both to the engineering as well as to the you know, the office finance in our existing customer accounts with some cross-selling and other. So you know I think for Datawatch we're – there's plenty of work to do. I don't mean to imply there isn't but it's a really, really big opportunity. The TAM – I hesitate to talk TAM. I was looking at what one of the other players in the space talks about for TAM and I noticed that they talk about $48 billion plus another $24 billion. You know I don't – I don't think you know it's that big honestly for the things that we specifically – and that company by the way also play in. But it's very significant. It's probably around the same size as the simulation and analytics market. So it's a big opportunity. To answer your Idem, where are we with Idem you know, that kind of acquisition for us – the Idem acquisition is – which happened what two months ago – is nearly integrated for us. It's already you know most of that integration is done. That's like we do that with our eyes closed because of – because of the experience that we have as an organization to do that. So that one's done. Poli is a little more complicated. They were based on Korea and so we'd have a little bit more work to do different reasons than Datawatch. But great products. But we have to – we have a little bit more work to do to bring some people on in some other regions and to get that really going. But we're very optimistic about where that's going to go. That's a big opportunity actually for us. Great technology.

Great, that's helpful. That's great detail. And maybe just quickly for Howard just to touch on the guidance. I guess, if you look at the macro and obviously, there are a lot of unknowns. But if we think about Coronavirus and how that might impact your business, what are the – and obviously, you can't quantify it. But I'm I guess looking more for what are the areas that you have your eyes open for where you might see it in your business? Is it uptick in utilization and customers that you might not be at their offices? Is it the pipeline as customers might throttle back on their budgets under the uncertainty? Are there – how did you approach the full-year guidance and what's – what's kind of underlying your assumptions?

So, Brian, we did not put a precise percent to I would say the Coronavirus question because there's just – obviously so many unknowns about the environment there. What we did is we – as we were looking at our pipeline and trying to assess from a conservative perspective what we broadly thought the impact could be. We took those considerations into effect. We have the benefit of understanding what happened during the period when I – you know nobody was working in our China office and so we've seen that a little bit. But it's hard to extrapolate that to the rest of the world. You know. So we've tried to set forth a conservative perspective and actually we like everybody else is watching literally day-by-day. And in terms of the events that are unfolding. That's the best that we can do.

If I could add to that I mean, if you're a long-term investor and I get that not everybody is but if you're a long-term investor in our company you know to me you know, it really shouldn't matter what goes on for you know two or three or whatever quarters. If the virus really has a big impact whatever. The prospects for our business long-term are extremely, extremely strong. We – you know you go out whatever five years from now and we're targeting to go over 1 billion in revenues and just a really significant company in the enterprise software space. And there's nothing really between us and that. Maybe there's a blip in here or there. I can't affect what a virus does. But just in general we tried to be conservative in [indiscernible] this year.

Okay. Fair enough. Thank you very much.

Thank you.

Our next question comes from Bhavan Suri with William Blair.

Hey, guys this is Dylan Decker [ph] on for Bhavan. I appreciate you guys taking our questions. Two quick ones from us I guess just real briefly. I mean we touched on electromagnetics, CFD, PCB kind of the ultraFluidX a lot of these early stage products in the portfolio. If you're looking at 2020. I mean are these – are we starting to see some meaningful impact. I think you mentioned on SIMSOLID start to see that. That contributing more to total revenues throughout the year, but as we look at kind of the opportunity in some of these other markets, do we continue to see that uptick and having a larger impact? Or is that still on the horizon?

So that I always get asked that question, is SIMSOLID contributing meaningfully to revenue? And that's why I -- I think, by the end of last year, we were starting to see that the answer is, yes. And I think when you look at the rate of growth there. I -- I hesitate to say, what the rate of growth is. It's that big. When you look at the rate of growth, it is going to contribute meaningfully. What does meaningfully mean? I'm not going to say. But it is starting to clearly contribute meaningfully to our business. And I think, that's just going to continue to grow through this year and the next several years probably. Customers love it. I mean it's -- it's that good. And the other products, I didn't pick up on which one. Like PollEx, I don't think PollEx will contribute that meaningfully yet. It'll contribute, I don't know what meaningful is. But it'll be less than 1% probably, in 2020, at this point. I don't know which other ones you were talking about there. They're all different, obviously.

No. That's great. I appreciate the additional color. And then, I guess, just kind of one last one too. I know a lot of the focus this year was on, the new sale that we talked on sales hiring, but additionally some initiatives kind of building around, processes for customer engagement kind of improving go-to-market, things like that. Could you kind of dig a little deeper, I guess on, how this has kind of been initially tracking? What steps are you putting in place? And then, how has this kind of trended versus your expectations? Thanks.

Yeah. I mean, I think, we've been doing a lot more training. I've talked about it before. We've been doing a lot more training, across our sales organization. We've invested a lot, in inside sales and business development and continuing to do that. I told you that we added like 25% capacity, in the last year. But, we will not continue at that pace. This year, we don't think we need to. It'll be substantially slowed down from that. But, over the long-term, I think, we said over five years when we IPO'ed, we're going to shoot around 15% a year, from a sales capacity point of view. And the other thing is, we're just trying to get a lot more efficient about, how we -- we use all of our resources. So we are turning the guns if you will on, operating efficiencies, both, how we support customers, all those things. And I think we have a lot of innovation. We're a pretty innovative company. And so we try and are be innovative, in everything that we do. Q - No. That's great. Thank you, guys. I appreciate it.

[Operator Instructions] Our next question comes from Andrew DeGasperi with Berenberg.

Yeah. So thanks for taking my question. Maybe, could you comment on, your EBITDA margin, for this year? And how that relates to your target? I guess that's three years out. I mean, do you still feel confident about that 20% number?

Yes. We do. When you take a look at the investments that we've made, the turning point that we're at, notwithstanding. I would say a conservative view heading into 2020, our abilities to support this business as a much larger business, from an overall G&A perspective. And some of the other leverage points, and Jim's comment about, focus on, operating efficiencies, in other areas as well. Coupled with, the unmistakable fact that, as software revenues grow, it's going off and if we take gross margin, we'll continue to generate lift there. We see a nice path towards, our long-term target, over the three years.

That's helpful. And then, maybe just a point of clarification Howard, in terms of the revenue guidance, you gave out. Was that, non-GAAP or GAAP? I wasn't clear on that, in those remarks.

So for 2020, there will be no difference between, GAAP or non-GAAP, because we will not have any acquisition accounting related deferred revenue adjustments.

Right, but, if you could give out 8% to 9%, is that right?

That we know about.

Pardon, I'm sorry?

Okay. I'm sorry, you said, 8% to 9% was the number for next year? For this year, I mean?

In terms of, revenue growth?

Yes.

Yes.

Okay, great. Thanks.

And I'm not showing any further questions, at this time. I'd like to turn the call back over to, management for closing remarks.

Okay. So, thank you very much. I appreciate everybody's, interest in Altair. And thank you very much.

Ladies and gentlemen, this does conclude, today's presentation. You may now disconnect. And have a wonderful day.