Press Release

Apptio Announces Results for the Third Quarter of 2016

 

BELLEVUE, Wash.Nov. 2, 2016 /PRNewswire/ — Apptio, Inc. (NASDAQ: APTI), the leading provider of cloud-based Technology Business Management (TBM) software, today announced results for the third quarter ended September 30, 2016.

“The momentum continues to build for Apptio and the TBM category. This quarter, we generated record quarterly revenues of over $40 million and significantly improved operating margins while acquiring new customers across the Global 10,000″ said Sunny Gupta, co-founder and CEO, Apptio. “The global trends of digitalization and cloud migration are a tailwind for our large and growing market.  In the third quarter, we successfully completed our IPO, continued to innovate across our product portfolio and extended our market leadership.”Third Quarter Financial Summary

  • Subscription revenue was $33.3 million, an increase of 30% from the third quarter of 2015, and comprised 82% of total revenue. Services revenue was $7.3 million, an increase of 10% from the third quarter of 2015.  Total revenues were $40.6 million, an increase of 26% from the third quarter of 2015.
  • GAAP gross margins grew to 66% as compared to 60% in the third quarter of 2015.  Non-GAAP gross margins grew to 67%, as compared to 61% in the third quarter of 2015.
  • GAAP operating loss was $7.0 million, an improvement from an operating loss of $9.4 million in the third quarter of 2015. Non-GAAP operating loss was $4.5 million, compared to a Non-GAAP operating loss of $7.4 million in the third quarter of 2015.
  • GAAP net loss per basic and diluted share was $0.63 based on 13.9 million weighted average shares outstanding, compared to a GAAP net loss per basic and diluted share of $0.77 based on 12.8 million weighted average shares outstanding in the third quarter of 2015.
  • Non-GAAP net loss per basic and diluted share was $0.45 based on 13.9 million weighted average shares outstanding, compared to a non-GAAP net loss per basic and diluted share of $0.61 based on 12.8 million weighted average shares outstanding in the third quarter of 2015.
  • For the nine months ended September 30, 2016, net cash used in operating activities was $2.2 million as compared to $8.8 million in the comparable period last year.  Free cash flow was negative $5.7 million, as compared to negative $15.4 million in the nine months ended September 30, 2015.
  • Cash, cash equivalents and marketable securities were approximately $122.5 million as of September 30, 2016.  As of September 30, 2016 there was no outstanding bank debt.

Recent Business Highlights

  • Completed our initial public offering and began trading on the NASDAQ on September 23, 2016. Net proceeds from the IPO were approximately $99.1 million, after underwriting discounts and commissions and other offering expenses.
  • Experienced continued success selling additional applications to existing accounts and expanding customers’ spend managed through Apptio.
  • Released significant enhancements to our SaaS platform and Cost Transparency application to increase user productivity, improve our visual cost modeling and data management capabilities, and continue lowering deployment times.
  • Released our new Apptio Vendor Insights product, which provides IT leaders with a single location for all vendor spend and contract details.
  • Experienced a significant increase in the adoption of cloud Infrastructure as a Service functionality across both our new and existing customers. With our cloud solution, customers can see an integrated view across all IT spend, including cloud.

Financial Outlook
Apptio provides guidance based on current market conditions and expectations and actual results may differ materially. Please refer to the company’s comments below regarding Forward Looking Statements. Apptio is initiating guidance for the fourth quarter ending December 31, 2016 and for the full year 2016 as follows:

Fourth quarter of 2016:

  • Total revenue is expected to be in the range of $41.5 to $42.5 million
  • Non-GAAP operating loss between $8.0 and $9.0 million

Full year 2016:

  • Total revenue is expected to be in the range of $157.7 and $158.7 million
  • Non-GAAP operating loss between $21.9 and $22.9 million

All forward-looking non-GAAP financial measures contained in this section titled “Financial Outlook” exclude the effects of stock-based compensation expense.

Conference Call Information
Apptio plans to host a conference call today to review its third quarter financial results and to discuss its financial outlook. The call is scheduled to begin at 2:00 p.m. PT5:00 p.m. ET and can be accessed by dialing 844-233-0116 (passcode: 98784993), or if outside North America, by dialing 574-990-1011 (passcode: 98784993). Individuals may also access the live teleconference from the investor relations section of the Apptio website at investors.apptio.com. A replay will be available following completion of the live broadcast.

About Apptio
Apptio (NASDAQ: APTI) is the CIO’s business management system. We build advanced data and analytics applications that help IT leaders make informed decisions about their technology investments, capitalize on the cloud transformation and drive innovation within their organizations. We call it Technology Business Management. Our applications help companies align technology spending to business outcomes and automate IT processes like cost transparency, benchmarking, charge-back and planning. Hundreds of customers, including more than 40 percent of the Fortune 100, use Apptio as their business system of record for IT. For more information, please visit www.Apptio.com.

Forward-Looking Statements 
This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding our strategy, prospects, customer demand, application adoption and our financial outlook for the fourth quarter of, and full year, 2016.  Forward-looking statements are subject to known and unknown risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward-looking statements. Actual results may differ materially from the results predicted, and reported results should not be considered as an indication of future performance. The potential risks and uncertainties that could cause actual results to differ from the results predicted include, among others, those risks and uncertainties included under the caption “Risk Factors” and elsewhere in our filings with the U.S. Securities and Exchange Commission, including, without limitation, the prospectus filed pursuant to Rule 424(b) under the Securities Act of 1993 with the SEC on September 23, 2016.  All information provided in this release and in the attachments is as of the date hereof, and we undertake no duty to update this information unless required by law.

Non-GAAP Financial Measures 
To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with Generally Accepted Accounting Principles in the United States of America (GAAP), we use the following non-GAAP financial measures: non-GAAP gross margin, non-GAAP operating loss and free cash flow. In computing non-GAAP operating loss and non-GAAP gross margin, we exclude the effects of stock-based compensation expense.  We define free cash flow as net cash used in operating activities, less the purchases of property and equipment. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP, and our non-GAAP measures may be different from non-GAAP measures used by other companies.

We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses and expenditures that may not be indicative of our ongoing core business operating results. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when analyzing historical performance and liquidity and planning, forecasting, and analyzing future periods.

For a reconciliation of these non-GAAP financial measures to GAAP measures, please see the tables captioned “Results of Operations GAAP to Non-GAAP Reconciliation” included at the end of this release. We have not reconciled guidance for non-GAAP metrics to their most directly comparable GAAP measures because such items that impact these measures are not within our control or cannot be reasonably predicted.

 

 

Apptio, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2016

2015

2016

2015

Revenue

Subscription

$

33,314

$

25,594

$

94,995

$

72,836

Professional services

7,313

6,660

21,254

21,573

Total revenue

40,627

32,254

116,249

94,409

Cost of revenue

Subscription

6,921

6,173

19,960

17,315

Professional services

7,068

6,684

19,780

19,720

Total cost of revenue

13,989

12,857

39,740

37,035

Gross profit

26,638

19,397

76,509

57,374

Operating expenses

Research and development

9,015

7,928

26,072

22,602

Sales and marketing

18,300

15,855

54,256

49,129

General and administrative

6,285

5,023

16,969

12,721

Total operating expenses

33,600

28,806

97,297

84,452

Loss from operations

(6,962)

(9,409)

(20,788)

(27,078)

Other income (expense)

Interest (expense) income and other, net

(1,312)

(18)

(1,746)

1

Foreign exchange loss

(367)

(351)

(774)

(958)

Loss before provision for income taxes

(8,641)

(9,778)

(23,308)

(28,035)

Provision for income taxes

(114)

(87)

(328)

(236)

  Net loss

$

(8,755)

$

(9,865)

$

(23,636)

$

(28,271)

Net loss per share attributable to common stockholders, basic and diluted

$

(0.63)

$

(0.77)

$

(1.78)

$

(2.25)

Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted

13,884

12,754

13,307

12,575

 

 

Apptio, Inc.

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

September 30,

December 31,

2016

2015

Assets

Current assets

Cash and cash equivalents

$

111,712

$

17,256

Short-term investments

10,818

6,260

Accounts receivable, net of allowance for doubtful accounts

 of $215 and $289

42,585

52,887

Prepaid expenses and other current assets

5,249

3,990

Total current assets

170,364

80,393

Long-term assets

Property and equipment, net

13,058

13,487

Restricted cash

2,500

Deferred initial public offering costs

1,973

Other long-term assets, net

616

798

Total assets

$

184,038

$

99,151

Liabilities, Convertible Preferred Stock and Stockholders Equity (Deficit)

Current liabilities

Accounts payable

$

6,375

$

3,462

Accrued payroll and other expenses

12,456

14,732

Deferred revenue

81,415

82,422

Deferred rent

784

613

Capital leases

42

42

Total current liabilities

101,072

101,271

Long-term liabilities

Deferred revenue, net of current portion

2,346

803

Deferred rent, net of current portion

4,540

4,810

Capital leases, net of current portion

62

95

Preferred stock warrant liability

414

Asset retirement obligation

184

210

Total liabilities

108,204

107,603

Convertible preferred stock

133,809

Stockholders’ equity (deficit)

Class A and Class B Common stock

4

1

Additional paid-in capital

268,240

26,509

Accumulated other comprehensive loss

(3)

Accumulated deficit

(192,407)

(168,771)

Total stockholders’ equity (deficit)

75,834

(142,261)

Total liabilities, convertible preferred stock and stockholders’ equity (deficit)

$

184,038

$

99,151

 

Apptio, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2016

2015

2016

2015

Cash flows from operating activities

Net loss

$

(8,755)

$

(9,865)

$

(23,636)

$

(28,271)

Adjustments to reconcile net loss to net cash used in operating activities

  Depreciation and amortization

1,502

1,728

4,487

4,916

  Amortization of premiums on investments

5

23

20

67

  Loss (gain) on disposal of property and equipment

1

26

(12)

  Stock-based compensation

2,487

2,022

6,902

5,877

  Accretion of expense on line of credit fees

55

27

127

39

  Loss on extinguishment of debt

722

722

  Remeasurement of preferred stock warrant liability

210

10

202

57

  Change in operating assets and liabilities

Accounts receivable

1,759

(1,075)

10,302

14,689

Prepaid expenses and other assets

101

(651)

(660)

(2,167)

Accounts payable

173

2,193

1,648

812

Accrued expenses

(500)

(2,020)

(2,442)

(2,199)

Deferred revenue

1,576

2,105

535

(2,959)

Deferred rent

(115)

55

(421)

391

Net cash used in operating activities

(779)

(5,448)

(2,188)

(8,760)

Cash flows from investing activities

Purchases of property and equipment

(1,198)

(1,877)

(3,518)

(6,636)

Proceeds from maturities of investments

2,200

6,245

13,309

Purchases of investments

(10,826)

(10,826)

(2,017)

(Payment) return of security deposits

9

7

(43)

157

Return of restricted cash

2,500

85

Net cash (used in) provided by investing activities

(12,015)

330

(5,642)

4,898

Cash flows from financing activities

Proceeds from initial public offering, net of underwriting discounts

102,672

102,672

Payment of deferred initial public offering costs

(356)

(418)

(574)

(418)

Proceeds from long-term debt

20,000

Principal payments on long-term debt

(20,000)

(20,000)

Payment of debt prepayment fees

(200)

(200)

Proceeds from exercise of common stock options

489

613

1,000

2,335

Principal payments on capital lease obligations

(10)

(9)

(33)

(36)

Payment of capitalized loan fees

(12)

(9)

(248)

(78)

Net cash provided by financing activities

82,583

177

102,617

1,803

Foreign currency effect on cash and cash equivalents

(129)

(26)

(331)

(77)

Net increase (decrease) in cash and cash equivalents

69,660

(4,967)

94,456

(2,136)

Cash and cash equivalents

Beginning of year

42,052

22,517

17,256

19,686

End of year

$

111,712

$

17,550

$

111,712

$

17,550

Supplemental disclosures

Purchases under capital lease obligations

$

$

$

$

102

Property and furniture additions in accounts payable and accrued expenses

419

37

419

37

Leasehold improvements paid directly by lessor

356

356

Non-cash debt issuance costs

285

90

Deferred initial public offering cost accruals

794

1,163

1,004

1,163

Non-cash preferred stock warrant exercise

616

616

 

Apptio, Inc.

Results of Operations GAAP to Non-GAAP Reconciliation

(In thousands, except per share data)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2016

2015

2016

2015

 Revenue

 Subscription

$

33,314

$

25,594

$

94,995

$

72,836

 Professional services

7,313

6,660

21,254

21,573

   Total revenue

40,627

32,254

116,249

94,409

 Cost of revenue reconciliation:

 GAAP Subscription

6,921

6,173

19,960

17,315

 Non-GAAP adjustment:

   Stock-based compensation

(232)

(145)

(564)

(341)

   Non-GAAP subscription cost of revenue

6,689

6,028

19,396

16,974

 GAAP Professional services

7,068

6,684

19,780

19,720

 Non-GAAP adjustment:

   Stock-based compensation

(190)

(179)

(557)

(574)

   Non-GAAP professional services cost of revenue

$

6,878

$

6,505

$

19,223

$

19,146

 Gross profit and gross margin reconciliation:

 GAAP Subscription gross profit

$

26,393

$

19,421

$

75,035

$

55,521

 Non-GAAP adjustment:

   Stock-based compensation

232

145

564

341

   Non-GAAP Subscription gross profit

26,625

19,566

75,599

55,862

   GAAP Subscription gross margin

79.2%

75.9%

79.0%

76.2%

   Non-GAAP Subscription gross margin

79.9%

76.4%

79.6%

76.7%

 GAAP Professional services gross profit

245

(24)

1,474

1,853

 Non-GAAP adjustment:

   Stock-based compensation

190

179

557

574

   Non-GAAP Professional services gross profit

435

155

2,031

2,427

   GAAP Professional services gross margin

3.4%

(0.4%)

6.9%

8.6%

   Non-GAAP Professional services gross margin

5.9%

2.3%

9.6%

11.3%

 GAAP gross profit

26,638

19,397

76,509

57,374

 Non-GAAP adjustment:

   Stock-based compensation

422

324

1,121

915

   Non-GAAP gross profit

$

27,060

$

19,721

$

77,630

$

58,289

   GAAP  gross margin

65.6%

60.1%

65.8%

60.8%

   Non-GAAP gross margin

66.6%

61.1%

66.8%

61.7%

 Operating expenses reconciliation:

 GAAP Research and development

$

9,015

$

7,928

$

26,072

$

22,602

 Non-GAAP adjustment:

   Stock-based compensation

(698)

(577)

(1,965)

(1,737)

   Non-GAAP research and development

8,317

7,351

24,107

20,865

   As a % of total revenue, non-GAAP

20.5%

22.8%

20.7%

22.1%

 GAAP Sales and marketing

18,300

15,855

54,256

49,129

 Non-GAAP adjustment:

   Stock-based compensation

(735)

(623)

(2,176)

(1,833)

   Non-GAAP sales and marketing

17,565

15,232

52,080

47,296

   As a % of total revenue, non-GAAP

43.2%

47.2%

44.8%

50.1%

 GAAP General and administrative

6,285

5,023

16,969

12,721

 Non-GAAP adjustment:

   Stock-based compensation

(632)

(498)

(1,640)

(1,392)

   Non-GAAP General and administrative

5,653

4,525

15,329

11,329

   As a % of total revenue, non-GAAP

13.9%

14.0%

13.2%

12.0%

 Loss from operations reconciliation:

 GAAP loss from operations

(6,962)

(9,409)

(20,788)

(27,078)

 Non-GAAP adjustment:

   Stock-based compensation

2,487

2,022

6,902

5,877

   Non-GAAP loss from operations

$

(4,475)

$

(7,387)

$

(13,886)

$

(21,201)

 Loss from operations as a percentage of revenue:

   GAAP loss from operations

(17.1%)

(29.2%)

(17.9%)

(28.7%)

   Non-GAAP loss from operations

(11.0%)

(22.9%)

(11.9%)

(22.5%)

 Net loss reconciliation:

 GAAP

$

(8,755)

$

(9,865)

$

(23,636)

$

(28,271)

 Non-GAAP adjustment:

   Stock-based compensation

2,487

2,022

6,902

5,877

   Non-GAAP Net loss

$

(6,268)

$

(7,843)

$

(16,734)

$

(22,394)

 Basic and diluted net loss per share

 reconciliation:

 GAAP

$

(0.63)

$

(0.77)

$

(1.78)

$

(2.25)

 Non-GAAP

$

(0.45)

$

(0.61)

$

(1.26)

$

(1.78)

Shares used to compute basic and diluted GAAP and Non-GAAP net loss per share

13,884

12,754

13,307

12,575

 

Apptio, Inc.

Free Cash Flow Non-GAAP Reconciliation

(In thousands)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2016

2015

2016

2015

 Net cash used in operating activities

$

(779)

$

(5,448)

$

(2,188)

$

(8,760)

 Less: purchases of property and equipment

(1,198)

(1,877)

(3,518)

(6,636)

 Free cash flow

$

(1,977)

$

(7,325)

$

(5,706)

$

(15,396)

© 2016. Apptio, Inc. All rights reserved. Apptio and the Apptio logo are registered trademarks of Apptio, Inc. All other brand and product names are trademarks or registered trademarks of their respective holders.