Press Release

Apptio Announces Results for the First Quarter 2018

BELLEVUE, Wash., April 30, 2018 /PRNewswire/ — Apptio, Inc. (NASDAQ: APTI), the business management system of record for hybrid IT, today announced results for the fiscal first quarter ended March 31, 2018.

“Our first quarter subscription revenue growth accelerated to 26%, year over year, and we reached break-even Non-GAAP operating income,” said Sunny Gupta, co-founder and CEO, Apptio. “The quarter was driven by large strategic deals, continued momentum in the enterprise segment, solid renewals and upsells, and a strong contribution from the Digital Fuel business.”

First Quarter Financial Summary

  • Subscription revenue was $45.5 million, an increase of 26% from the first quarter of 2017, and comprised 84% of total revenue. Services revenue was $8.6 million, an increase of 11% from the first quarter of 2017. Total revenue was $54.1 million, an increase of 23% from the first quarter of 2017.
  • GAAP gross margin was 68%, a significant improvement from the first quarter of 2017 GAAP gross margin of 65%.  Non-GAAP gross margin improved to 70%, as compared to non-GAAP gross margin of 66% in the first quarter of 2017.
  • GAAP operating margin was negative 15%, improving from GAAP operating margin of negative 17% in the first quarter of 2017. Non-GAAP operating margin improved to 0%, as compared to non-GAAP operating margin of negative 8% in the first quarter of 2017.
  • GAAP net loss per basic and diluted share was $0.19 based on 42.8 million weighted average shares outstanding, compared to GAAP net loss per basic and diluted share of $0.19 based on 38.4 million weighted average shares outstanding in the first quarter of 2017.
  • Non-GAAP net loss per basic and diluted share was $0.00 based on 42.8 million weighted average shares outstanding, compared to non-GAAP net loss per basic and diluted share of $0.09 based on 38.4 million weighted average shares outstanding in the first quarter of 2017.
  • Cash, cash equivalents and marketable securities were approximately $253.4 million as of March 31, 2018.

Business Highlights

  • Saw continued strength in both our Strategic and Enterprise segments in the quarter
  • Received certification in the Federal Risk and Authorization Management Program (FedRAMP), perpetuating our momentum at the Federal Government level
  • Completed successful acquisition and initial integration of Digital Fuel
  • Completed $143.75 million Convertible Notes Offering

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 providing guidance for the second quarter ending June 30, 2018 and for the full year 2018 as follows:

Second quarter of 2018:

  • Total revenue is expected to be in the range of $55.0 to $56.0 million
  • Non-GAAP operating loss between $0.5 and $1.0 million

Full year 2018:

  • Total revenue is expected to be in the range of $225 and $230 million
  • Positive Non-GAAP operating income

All forward-looking non-GAAP financial measures contained in this section titled “Financial Outlook” exclude the effects of stock-based compensation expense, acquisition-related expenses, and amortization of acquisition related intangible assets. Guidance reflects the February 2, 2018 contribution from Digital Fuel and the impact of the full retrospective adoption of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) on January 1, 2018.

Conference Call Information
Apptio plans to host a conference call today to discuss the results. The call is scheduled to begin at 2:00 p.m. PT/ 5:00 p.m. ET and can be accessed by dialing 844-233-0116 (passcode: 2126329), or if outside North America, by dialing 574-990-1011 (passcode: 2126329). 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 business management system of record for hybrid IT. We transform the way IT runs its business and makes decisions. With our cloud-based applications, IT leaders manage, plan and optimize their technology investments across on-premises and cloud. With Apptio, IT leaders become strategic partners to the business by demonstrating the value of IT investments, accelerate innovation and shift their technology investments from running the business to digital innovation. Hundreds of customers choose Apptio as their business system of record for hybrid 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 second quarter of, and full year, 2018. 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 Form 10-K filed with the SEC on February 21, 2018.  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, non-GAAP net loss per basic and diluted share, and free cash flow. In computing these measures, with the exception of free cash flow, we exclude the effects of stock-based compensation expense, acquisition-related expenses, and amortization of acquisition-related intangible assets. 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

March 31,

2018

2017

*As Adjusted

Revenue

Subscription

$

45,471

$

36,187

Professional services

8,599

7,744

   Total revenue

54,070

43,931

Cost of revenue

Subscription

8,949

7,850

Professional services

8,465

7,569

   Total cost of revenue

17,414

15,419

   Gross profit

36,656

28,512

Operating expenses

Research and development

11,897

9,658

Sales and marketing

22,678

19,617

General and administrative

10,154

6,534

   Total operating expenses

44,729

35,809

   Loss from operations

(8,073)

(7,297)

Other income (expense)

Interest income and other, net

128

236

Foreign exchange gain (loss)

114

(53)

   Loss before provision for income taxes

(7,831)

(7,114)

Provision for income taxes

(268)

(25)

   Net loss

$

(8,099)

$

(7,139)

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

$

(0.19)

$

(0.19)

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

42,762

38,407

 *As adjusted for the three months ended March 31, 2017 to reflect the adoption of Accounting Standards Update, ASU, No. 2014-09, Revenue from Contracts with Customers (Topic 606).

 

Apptio, Inc.

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

March 31,

December 31,

2018

2017

*As Adjusted

Assets

Current assets

Cash and cash equivalents

$

190,066

$

55,069

Short-term investments

55,394

93,901

Accounts receivable, net of allowance for doubtful accounts of $317 and $413

56,022

68,782

Deferred costs

14,906

11,898

Prepaid expenses and other current assets

4,786

5,079

Total current assets

321,174

234,729

Long-term assets

Property and equipment, net of accumulated depreciation of $23,161 and $21,924

9,876

10,437

Long-term investments

7,979

Deferred costs, net of current portion

15,792

17,182

Acquisition-related intangible assets, net

19,517

Goodwill

30,572

Other long-term assets

1,036

983

Total assets

$

405,946

$

263,331

Liabilities and Stockholders Equity

Current liabilities

Accounts payable

$

8,100

$

5,598

Accrued payroll and other expenses

21,450

16,481

Deferred revenue

116,610

116,831

Deferred rent

919

892

Capital leases

24

21

Total current liabilities

147,103

139,823

Long-term liabilities

Convertible senior notes, net

106,574

Deferred revenue, net of current portion

6,834

2,470

Deferred rent, net of current portion

3,237

3,483

Capital leases, net of current portion

117

26

Asset retirement obligation

205

199

Total liabilities

264,070

146,001

Stockholders’ equity

Class A and Class B Common stock

5

4

Additional paid-in capital

346,888

314,301

Accumulated other comprehensive loss

(53)

(110)

Accumulated deficit

(204,964)

(196,865)

Total stockholders’ equity

141,876

117,330

Total liabilities and stockholders’ equity

$

405,946

$

263,331

 * As adjusted for the year ended December 31, 2017 to reflect the adoption of Accounting Standards Update, ASU, No. 2014-09, Revenue from Contracts with Customers (Topic 606).

 

Apptio, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Three Months Ended

March 31,

2018

2017

*As Adjusted

Cash flows from operating activities

Net loss

$

(8,099)

$

(7,139)

Adjustments to reconcile net loss to net cash provided by operating activities

   Depreciation and amortization

1,376

1,530

   (Accretion of discounts)/amortization of premiums on investments

(42)

23

   Amortization of acquisition-related intangible assets

583

   Amortization of deferred costs

3,936

3,268

   Amortization of debt discount and issuance costs

176

   Loss (gain) on disposal of property and equipment

47

(7)

   Stock-based compensation

4,952

3,625

   Impairment of acquired assets

573

   Accretion of capitalized loan fees

9

   Foreign exchange gain

(114)

(174)

   Change in operating assets and liabilities

Accounts receivable

19,015

20,098

Prepaid expenses and other assets

1,747

290

Deferred costs

(2,908)

(2,672)

Accounts payable

2,263

1,795

Accrued expenses

(2,792)

(958)

Deferred revenue

(10,713)

(7,570)

Deferred rent

(224)

(200)

Net cash provided by operating activities

9,776

11,918

Cash flows from investing activities

Business combinations, net of cash acquired

(34,569)

Purchases of property and equipment

(680)

(1,545)

Proceeds from sale of equipment

9

Proceeds from maturities of investments

49,400

6,800

Purchases of investments

(18,793)

(21,445)

Payments for security deposits

(31)

(9)

Net cash used in investing activities

(4,673)

(16,190)

Cash flows from financing activities

Proceeds from borrowings on convertible notes, net of issuance costs

139,438

Purchase of capped call

(17,092)

Proceeds from exercises of common stock options

7,515

558

Payment of initial public offering costs

(243)

Principal payments on capital lease obligations

(6)

(11)

Net cash provided by financing activities

129,855

304

Foreign currency effect on cash, cash equivalents and restricted cash

39

(135)

Net increase (decrease) in cash, cash equivalents and restricted cash

134,997

(4,103)

Cash, cash equivalents and restricted cash

Beginning of period

55,069

42,007

End of period

$

190,066

$

37,904

 *As adjusted for the three months ended March 31, 2017 to reflect the adoption of Accounting Standards Update, ASU, No. 2014-09, Revenue from Contracts with Customers (Topic 606).

 

Apptio, Inc.

Results of Operations GAAP to Non-GAAP Reconciliation

(In thousands, except per share data)

(Unaudited)

Three Months Ended

March 31,

2018

2017

*As Adjusted

 Revenue

 Subscription

$

45,471

$

36,187

 Professional services

8,599

7,744

    Total revenue

54,070

43,931

 Cost of revenue reconciliation:

 GAAP subscription

8,949

7,850

 Non-GAAP adjustment:

    Stock-based compensation

(319)

(358)

    Amortization of acquisition-related intangible assets

(583)

    Non-GAAP subscription cost of revenue

8,047

7,492

 GAAP professional services

8,465

7,569

 Non-GAAP adjustment:

    Stock-based compensation

(328)

(318)

    Non-GAAP professional services cost of revenue

$

8,137

$

7,251

 Gross profit and gross margin reconciliation:

 GAAP subscription gross profit

$

36,522

$

28,337

 Non-GAAP adjustment:

    Stock-based compensation

319

358

    Amortization of acquisition-related intangible assets

583

    Non-GAAP subscription gross profit

37,424

28,695

    GAAP subscription gross margin

80.3

%

78.3

%

    Non-GAAP subscription gross margin

82.3

%

79.3

%

 GAAP professional services gross profit

134

175

 Non-GAAP adjustment:

    Stock-based compensation

328

318

    Non-GAAP professional services gross profit

462

493

    GAAP professional services gross margin

1.6

%

2.3

%

    Non-GAAP professional services gross margin

5.4

%

6.4

%

 GAAP gross profit

36,656

28,512

 Non-GAAP adjustment:

    Stock-based compensation

647

676

    Amortization of acquisition-related intangible assets

583

    Non-GAAP gross profit

$

37,886

$

29,188

    GAAP gross margin

67.8

%

64.9

%

    Non-GAAP gross margin

70.1

%

66.4

%

 Operating expenses reconciliation:

 GAAP research and development

$

11,897

$

9,658

 Non-GAAP adjustment:

    Stock-based compensation

(1,393)

(1,041)

    Non-GAAP research and development

10,504

8,617

    As a % of total revenue, non-GAAP

19.4

%

19.6

%

 GAAP sales and marketing

22,678

19,617

 Non-GAAP adjustment:

    Stock-based compensation

(1,430)

(999)

    Non-GAAP sales and marketing

21,248

18,618

    As a % of total revenue, non-GAAP

39.3

%

42.4

%

 GAAP General and administrative

10,154

6,534

 Non-GAAP adjustment:

    Stock-based compensation

(1,482)

(909)

    Acquisition costs and impairment of acquired assets

(2,539)

    Non-GAAP general and administrative

6,133

5,625

    As a % of total revenue, non-GAAP

11.3

%

12.8

%

 Loss from operations reconciliation:

 GAAP loss from operations

(8,073)

(7,297)

 Non-GAAP adjustment:

    Stock-based compensation

4,952

3,625

    Acquisition costs and impairment of acquired assets

2,539

    Amortization of acquisition-related intangible assets

583

    Non-GAAP income (loss) from operations

$

1

$

(3,672)

 Loss from operations as a percentage of revenue:

    GAAP loss from operations

(14.9%)

(16.6%)

    Non-GAAP income (loss) from operations

0.0

%

(8.4%)

 Net loss reconciliation:

 GAAP

$

(8,099)

$

(7,139)

 Non-GAAP adjustment:

    Stock-based compensation

4,952

3,625

    Acquisition costs and impairment of acquired assets

2,539

    Amortization of acquisition-related intangible assets

583

    Non-GAAP Net loss

$

(25)

$

(3,514)

 Basic and diluted net loss per share

 reconciliation:

 GAAP

$

(0.19)

$

(0.19)

    Non-GAAP adjustment:

       Stock-based compensation

0.12

0.10

       Acquisition costs and impairment of acquired assets

0.06

0.00

       Amortization of acquisition-related intangible assets

0.01

0.00

   Non-GAAP

$

0.00

$

(0.09)

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

42,762

38,407

 *As adjusted for the three months ended March 31, 2017 to reflect the adoption of Accounting Standards Update, ASU, No. 2014-09, Revenue from Contracts with Customers (Topic 606).

 

Apptio, Inc.

Free Cash Flow Non-GAAP Reconciliation

(In thousands)

(Unaudited)

Three Months Ended

March 31,

2018

2017

*As Adjusted

 Net cash provided by operating activities

$

9,776

$

11,918

 Less: purchases of property and equipment

(680)

(1,545)

 Free cash flow

$

9,096

$

10,373

 *As adjusted for the three months ended March 31, 2017 to reflect the adoption of Accounting Standards Update, ASU, No. 2014-09, Revenue from Contracts with Customers (Topic 606).

© 2018 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.

Investor Contact:
Susanna Morgan
(425) 279-6101
ir@apptio.com

Media Contact:
Sarah Vreugdenhil
(425) 279-6097
pr@apptio.com