Press Release

Apptio Announces Results for the Fiscal Fourth Quarter and Full Year 2017

Reported Q4 revenue of $52.4 million and positive cash flow for the fiscal year

Bellevue, WA (February 5, 2018) – Apptio, Inc. (NASDAQ: APTI), the business management system of record for hybrid IT, today announced results for the fiscal fourth quarter and full year ended December 31, 2017.

“In the fourth quarter, we achieved record revenue of $52.4 million and we also exceeded our cash flow goals for the year,” said Sunny Gupta, co-founder and CEO, Apptio. “As we look into 2018, we aim to continue driving broader customer adoption as we capitalize on shifts in the IT landscape across hybrid IT, digitization and agile.”

Fourth Quarter Financial Summary

  • Subscription revenue was $42.6 million, an increase of 21% from the fourth quarter of 2016, and comprised 81% of total revenue. Services revenue was $9.8 million, an increase of 6% from the fourth quarter of 2016. Total revenue was $52.4 million, an increase of 18% from the fourth quarter of 2016.
  • GAAP gross margin was 72%, a significant improvement from the fourth quarter of 2016 GAAP gross margin of 67%.  Non-GAAP gross margin improved to 73%, as compared to non-GAAP gross margin of 69% in the fourth quarter of 2016.
  • GAAP operating margin was negative 14%, improving from GAAP operating margin of negative 17% in the fourth quarter of 2016. Non-GAAP operating margin improved to negative 5%, as compared to non-GAAP operating margin of negative 9% in the fourth quarter of 2016.
  • GAAP net loss per basic and diluted share was $0.17 based on 41.3 million weighted average shares outstanding, compared to GAAP net loss per basic and diluted share of $0.21 based on 38.3 million weighted average shares outstanding in the fourth quarter of 2016.
  • Non-GAAP net loss per basic and diluted share was $0.06 based on 41.3 million weighted average shares outstanding, compared to non-GAAP net loss per basic and diluted share of $0.11 based on 38.3 million weighted average shares outstanding in the fourth quarter of 2016.
  • For the three months ended December 31, 2017, net cash used in operating activities was $1.5 million as compared to net cash used in operating activities of $1.8 million in the comparable period last year. Free cash flow was negative $2.3 million, as compared to negative $3.7 million in the three months ended December 31, 2016.
  • Cash, cash equivalents and marketable securities were approximately $149.0 million as of December 31, 2017.

Fiscal Year 2017 Financial Summary

  • Subscription revenue was $155.4 million, an increase of 19% from fiscal year 2016, and comprised 82% of total revenue. Services revenue was $33.1 million, an increase of 9% from fiscal year 2016. Total revenue was $188.5 million, an increase of 17% from fiscal year 2016.
  • GAAP gross margin was 69% an improvement from fiscal year 2016 GAAP gross margin of 66%.  Non-GAAP gross margin improved to 70%, as compared to non-GAAP gross margin of 67% for fiscal year 2016.
  • GAAP operating margin was negative 14%, improving from GAAP operating margin of negative 18% for fiscal year 2016. Non-GAAP operating margin improved to negative 5%, as compared to non-GAAP operating margin of negative 11% for fiscal year 2016.
  • GAAP net loss per basic and diluted share was $0.64 based on 39.8 million weighted average shares outstanding, compared to GAAP net loss per basic and diluted share of $1.61 based on 19.6 million weighted average shares outstanding for fiscal year 2016.
  • Non-GAAP net loss per basic and diluted share was $0.24 based on 39.8 million weighted average shares outstanding, compared to non-GAAP net loss per basic and diluted share of $1.08 based on 19.6 million weighted average shares outstanding for fiscal year 2016.
  • For fiscal year ended December 31, 2017, net cash provided by operating activities was $9.4 million as compared to net cash used in operating activities of $4.0 million in the comparable period last year. Free cash flow was $5.8 million, as compared to negative $9.4 million in the fiscal year ended December 31, 2016.

Business Highlights

  • Improved our trailing twelve months subscription net dollar retention to approximately 102%.
  • Saw continued momentum with our new product packages, including IT Financial Management Foundation and Cloud Cost Management.
  • Added the most new customers in company history during 2017, and ended the year with approximately 440 total customers.
  • Completed the acquisition of Digital Fuel on February 2, 2018 to further extend our leadership in the Technology Business Management market.

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 first quarter ending March 31, 2018 and for the full year 2018 as follows:

First quarter of 2018:

  • Total revenue is expected to be in the range of $51.0 to $52.0 million
  • Non-GAAP operating loss between $2.5 and $3.0 million

Full year 2018:

  • Total revenue is expected to be in the range of $220 and $225 million
  • Approximately break-even 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. Guidance reflects the February 2, 2018 acquisition of Digital Fuel and the adoption of ASC 606 on January 1, 2018. Non-GAAP operating income guidance excludes transaction expenses related to the acquisition of Digital Fuel.

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: 4795737), or if outside North America, by dialing 574-990-1011 (passcode: 4795737). 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 first 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-Q filed with the SEC on October 31, 2017.  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. 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

 

 

Year Ended

 
   

December 31,

 

 

December 31,

 
 

 

2017

 

 

2016

 

 

2017

 

 

2016

 
   

 

 
Revenue                                
Subscription   $

42,557

    $

35,066

    $

155,417

    $

130,061

 
Professional services    

9,810

     

9,254

     

33,102

     

30,508

 
Total revenue    

52,367

     

44,320

     

188,519

     

160,569

 
Cost of revenue                                
Subscription    

7,381

     

7,338

     

29,650

     

27,298

 
Professional services    

7,304

     

7,082

     

28,903

     

26,862

 
Total cost of revenue    

14,685

     

14,420

     

58,553

     

54,160

 
Gross profit    

37,682

     

29,900

     

129,966

     

106,409

 
Operating expenses                                
Research and development    

10,490

     

9,403

     

40,550

     

35,475

 
Sales and marketing    

26,966

     

21,600

     

87,949

     

75,856

 
General and administrative    

7,364

     

6,260

     

27,706

     

23,229

 
Total operating expenses    

44,820

     

37,263

     

156,205

     

134,560

 
Loss from operations    

(7,138

)    

(7,363

)    

(26,239

)    

(28,151

)
Other income (expense)                                
Interest income (expense) and other, net    

393

     

213

     

1,204

     

(1,533

)
Foreign exchange loss    

(198

)    

(643

)    

(25

)    

(1,417

)
Loss before provision for income taxes    

(6,943

)    

(7,793

)    

(25,060

)    

(31,101

)
Income tax benefit (provision)    

53

     

(124

)    

(561

)    

(452

)
Net loss   $

(6,890

)   $

(7,917

)   $

(25,621

)   $

(31,553

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

(0.17

)   $

(0.21

)   $

(0.64

)   $

(1.61

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

41,276

     

38,323

     

39,754

     

19,595

 
                                 

 

 

Apptio, Inc.

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

 

   

December 31,

 

 

December 31,

 

 

 

2017

 

 

2016

 
Assets                
Current assets                
Cash and cash equivalents   $

55,069

    $

42,007

 
Short-term investments    

93,901

     

36,741

 
Accounts receivable, net of allowance for doubtful accounts                
 of $413 and $122    

68,782

     

58,587

 
Prepaid expenses and other current assets    

5,079

     

5,440

 
Total current assets    

222,831

     

142,775

 
Long-term assets                
Property and equipment, net of accumulated depreciation                
of $21,924 and $17,091    

10,437

     

12,827

 
Long-term investments    

     

38,446

 
Other long-term assets    

983

     

734

 
Total assets   $

234,251

    $

194,782

 
Liabilities and Stockholders Equity                
Current liabilities                
Accounts payable   $

5,598

    $

3,574

 
Accrued payroll and other expenses    

16,481

     

14,073

 
Deferred revenue    

116,831

     

97,885

 
Deferred rent    

892

     

799

 
Capital leases    

21

     

43

 
Total current liabilities    

139,823

     

116,374

 
Long-term liabilities                
Deferred revenue, net of current portion    

2,470

     

2,254

 
Deferred rent, net of current portion    

3,483

     

4,360

 
Capital leases, net of current portion    

26

     

51

 
Asset retirement obligation    

199

     

175

 
Total liabilities    

146,001

     

123,214

 
                 
Stockholders’ equity                
Class A and Class B Common stock    

4

     

4

 
Additional paid-in capital    

314,301

     

271,982

 
Accumulated other comprehensive loss    

(110

)    

(94

)
Accumulated deficit    

(225,945

)    

(200,324

)
Total stockholders’ equity    

88,250

     

71,568

 
Total liabilities and stockholders’ equity   $

234,251

    $

194,782

 
                 

Apptio, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

   

Three Months Ended

   

Year Ended

 
   

December 31,

   

December 31,

 
   

2017

 

 

2016

   

2017

 

 

2016

 
Cash flows from operating activities                                
Net loss   $

(6,890

)   $

(7,917

)   $

(25,621

)   $

(31,553

)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities                                
Depreciation and amortization    

1,444

     

1,501

     

6,101

     

5,988

 
Amortization of premiums on investments    

(24

)    

18

     

35

     

38

 
Loss (gain) on disposal of property and equipment    

(11

)    

(1

)    

(4

)    

25

 
Stock-based compensation    

4,403

     

3,557

     

16,070

     

10,459

 
Accretion of expense on line of credit fees    

     

9

     

18

     

136

 
Loss on extinguishment of debt    

     

     

     

722

 
Remeasurement of preferred stock warrant liability    

     

     

     

202

 
Foreign exchange loss    

198

     

412

     

25

     

412

 
Change in operating assets and liabilities                                
Accounts receivable    

(22,810

)    

(16,067

)    

(10,784

)    

(5,765

)
Prepaid expenses and other assets    

78

     

(2,946

)    

3,338

     

(3,606

)
Accounts payable    

1,607

     

(1,370

)    

2,242

     

278

 
Accrued expenses    

1,597

     

4,068

     

(428

)    

1,626

 
Deferred revenue    

19,091

     

16,373

     

19,163

     

16,908

 
Deferred rent    

(203

)    

557

     

(799

)    

136

 
Net cash (used in) provided by operating activities    

(1,520

)    

(1,806

)    

9,356

     

(3,994

)
Cash flows from investing activities                                
Purchases of property and equipment    

(766

)    

(1,884

)    

(3,603

)    

(5,402

)
Proceeds from sale of equipment    

13

     

     

24

     

 
Proceeds from maturities of investments    

15,382

     

     

50,457

     

6,245

 
Purchases of investments    

(3,026

)    

(64,477

)    

(69,222

)    

(75,303

)
Payment of security deposits    

(39

)    

(141

)    

(62

)    

(184

)
Net cash provided by (used in) investing activities    

11,564

     

(66,502

)    

(22,406

)    

(74,644

)
Cash flows from financing activities                                
Proceeds from exercise of common stock options    

12,920

     

333

     

21,868

     

1,333

 
Proceeds from purchases of stock under employee stock purchase plan    

2,130

     

     

4,381

     

 
Proceeds from initial public offering    

     

     

     

102,672

 
Payment of initial public offering costs    

     

(1,788

)    

(243

)    

(2,362

)
Proceeds from long-term debt    

     

     

     

20,000

 
Principal payments on long-term debt    

     

     

     

(20,000

)
Payment of debt prepayment fees    

     

     

     

(200

)
Principal payments on capital lease obligations    

(11

)    

(10

)    

(43

)    

(43

)
Payment of capitalized loan fees    

     

     

     

(248

)
Net cash  provided by (used in) financing activities    

15,039

     

(1,465

)    

25,963

     

101,152

 
Foreign currency effect on cash, cash equivalents and restricted cash    

707

     

68

     

149

     

(263

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

25,790

     

(69,705

)    

13,062

     

22,251

 
Cash, cash equivalents and restricted cash                                
Beginning of period    

29,279

     

111,712

     

42,007

     

19,756

 
End of period   $

55,069

    $

42,007

    $

55,069

    $

42,007

 

 

Apptio, Inc.

Results of Operations GAAP to Non-GAAP Reconciliation

(In thousands, except per share data)

(Unaudited)

 

  

Three Months Ended

 

 

Year Ended

 
 

December 31,

 

 

December 31,

 
 

2017

 

 

2016

 

 

2017

 

 

2016

 
 Revenue                              
 Subscription $

42,557

    $

35,066

    $

155,417

    $

130,061

 
 Professional services  

9,810

     

9,254

     

33,102

     

30,508

 
 Total revenue  

52,367

     

44,320

     

188,519

     

160,569

 
                               
 Cost of revenue reconciliation:                              
 GAAP subscription  

7,381

     

7,338

     

29,650

     

27,298

 
 Non-GAAP adjustment:                              
 Stock-based compensation  

(291

)    

(327

)    

(1,218

)    

(891

)
 Non-GAAP subscription cost of revenue  

7,090

     

7,011

     

28,432

     

26,407

 
                               
 GAAP professional services  

7,304

     

7,082

     

28,903

     

26,862

 
 Non-GAAP adjustment:                              
 Stock-based compensation  

(289

)    

(263

)    

(1,131

)    

(820

)
 Non-GAAP professional services cost of revenue $

7,015

    $

6,819

    $

27,772

    $

26,042

 
                               
 Gross profit and gross margin reconciliation:                              
 GAAP subscription gross profit $

35,176

    $

27,728

    $

125,767

    $

102,763

 
 Non-GAAP adjustment:                              
 Stock-based compensation  

291

     

327

     

1,218

     

891

 
 Non-GAAP subscription gross profit  

35,467

     

28,055

     

126,985

     

103,654

 
 GAAP subscription gross margin  

82.7

%    

79.1

%    

80.9

%    

79.0

%
 Non-GAAP subscription gross margin  

83.3

%    

80.0

%    

81.7

%    

79.7

%
                               
 GAAP professional services gross profit  

2,506

     

2,172

     

4,199

     

3,646

 
 Non-GAAP adjustment:                              
 Stock-based compensation  

289

     

263

     

1,131

     

820

 
 Non-GAAP professional services gross profit  

2,795

     

2,435

     

5,330

     

4,466

 
 GAAP professional services gross margin  

25.5

%    

23.5

%    

12.7

%    

12.0

%
 Non-GAAP professional services gross margin  

28.5

%    

26.3

%    

16.1

%    

14.6

%
                               
 GAAP gross profit  

37,682

     

29,900

     

129,966

     

106,409

 
 Non-GAAP adjustment:                              
 Stock-based compensation  

580

     

590

     

2,349

     

1,711

 
 Non-GAAP gross profit $

38,262

    $

30,490

    $

132,315

    $

108,120

 
 GAAP  gross margin  

72.0

%    

67.5

%    

68.9

%    

66.3

%
 Non-GAAP gross margin  

73.1

%    

68.8

%    

70.2

%    

67.3

%
                               
 Operating expenses reconciliation:                              
 GAAP research and development $

10,490

    $

9,403

    $

40,550

    $

35,475

 
 Non-GAAP adjustment:                              
 Stock-based compensation  

(1,159

)    

(1,012

)    

(4,491

)    

(2,977

)
 Non-GAAP research and development  

9,331

     

8,391

     

36,059

     

32,498

 
 As a % of total revenue, non-GAAP  

17.8

%    

18.9

%    

19.1

%    

20.2

%
                               
 GAAP sales and marketing  

26,966

     

21,600

     

87,949

     

75,856

 
 Non-GAAP adjustment:                              
 Stock-based compensation  

(1,298

)    

(956

)    

(4,614

)    

(3,132

)
 Non-GAAP sales and marketing  

25,668

     

20,644

     

83,335

     

72,724

 
 As a % of total revenue, non-GAAP  

49.0

%    

46.6

%    

44.2

%    

45.3

%
                               
 GAAP General and administrative  

7,364

     

6,260

     

27,706

     

23,229

 
 Non-GAAP adjustment:                              
 Stock-based compensation  

(1,366

)    

(999

)    

(4,616

)    

(2,639

)
 Non-GAAP general and administrative  

5,998

     

5,261

     

23,090

     

20,590

 
 As a % of total revenue, non-GAAP  

11.5

%    

11.9

%    

12.2

%    

12.8

%
                               
 

Loss from operations reconciliation:

                             
 GAAP loss from operations  

(7,138

)    

(7,363

)    

(26,239

)    

(28,151

)
 Non-GAAP adjustment:                              
 Stock-based compensation  

4,403

     

3,557

     

16,070

     

10,459

 
 Non-GAAP loss from operations $

(2,735

)   $

(3,806

)   $

(10,169

)   $

(17,692

)
 Loss from operations as a percentage of revenue:                              
 GAAP loss from operations  

(13.6

%)    

(16.6

%)    

(13.9

%)    

(17.5

%)
 Non-GAAP loss from operations  

(5.2

%)    

(8.6

%)    

(5.4

%)    

(11.0

%)
                               
 Net loss reconciliation:                              
 GAAP $

(6,890

)   $

(7,917

)   $

(25,621

)   $

(31,553

)
 Non-GAAP adjustment:                              
 Stock-based compensation  

4,403

     

3,557

     

16,070

     

10,459

 
 Non-GAAP Net loss $

(2,487

)   $

(4,360

)   $

(9,551

)   $

(21,094

)
                               
 Basic and diluted net loss per share                              
 reconciliation:                              
 GAAP $

(0.17

)   $

(0.21

)   $

(0.64

)   $

(1.61

)
 Non-GAAP $

(0.06

)   $

(0.11

)   $

(0.24

)   $

(1.08

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

41,276

     

38,323

     

39,754

     

19,595

 
                               

 

 

Apptio, Inc.

Free Cash Flow Non-GAAP Reconciliation

(In thousands)

(Unaudited)

 

   

Three Months Ended

   

Year Ended

 
   

December 31,

   

December 31,

 
   

2017

 

 

2016

   

2017

 

 

2016

 
   

 

 
 Net cash (used in) provided by operating activities   $

(1,520

)   $

(1,806

)   $

9,356

    $

(3,994

)
 Less: purchases of property and equipment    

(766

)    

(1,884

)    

(3,603

)    

(5,402

)
 Free cash flow   $

(2,286

)   $

(3,690

)   $

5,753

    $

(9,396

)
                                 

 

 

© 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