Press Release

Apptio Announces Results for the Second Quarter 2018

BELLEVUE, Wash., Aug. 1, 2018 /PRNewswire/ — Apptio, Inc. (NASDAQ:APTI), the business management system of record for hybrid IT, today announced results for the fiscal second quarter ended June 30, 2018.

“Our second quarter subscription revenue growth accelerated to 32% year over year and we generated positive non-GAAP operating income,” said Sunny Gupta, co-founder and CEO, Apptio. “The quarter was driven by momentum with our IT Financial Management Foundation application, solid renewals and upsells, and strength in the public sector.  The growth of cloud spending, the complexity of hybrid IT, and the shift toward digital and agile are all serving as market tailwinds for Apptio.”

Second Quarter Financial Summary

  • Subscription revenue was $49.2 million, an increase of 32% from the second quarter of 2017, and comprised 83% of total revenue. Services revenue was $9.8 million, an increase of 23% from the second quarter of 2017. Total revenue was $59.0 million, an increase of 31% from the second quarter of 2017.
  • GAAP gross margin was 67.5%, in line with the second quarter of 2017 GAAP gross margin of 67.9%.  Non-GAAP gross margin of 70.3% improved from non-GAAP gross margin of 68.9% in the second quarter of 2017.
  • GAAP operating margin was negative 6.6%, improving from GAAP operating margin of negative 15.9% in the second quarter of 2017. Non-GAAP operating margin improved to 3.4%, as compared to non-GAAP operating margin of negative 7.7% in the second quarter of 2017.
  • GAAP net loss per basic and diluted share was $0.12 based on 43.9 million weighted average shares outstanding, compared to GAAP net loss per basic and diluted share of $0.18 based on 39.2 million weighted average shares outstanding in the second quarter of 2017.
  • Non-GAAP net income per diluted share was $0.01 based on 48.6 million weighted average shares outstanding, compared to non-GAAP net loss per basic and diluted share of $0.08 based on 39.2 million weighted average shares outstanding in the second quarter of 2017.
  • Cash, cash equivalents and marketable securities were approximately $254.9 million as of June 30, 2018.

Business Highlights

  • First Public Sector Summit in Washington, DC, involving close to 400 federal IT leaders
  • Launched early adopter program for federal agencies looking to leverage machine learning in Apptio deployments
  • Announced a new application, Apptio for Hybrid IT
  • Completed the fifth TBM European Summit in London, involving more than 400 customers and prospects across Europe
  • Welcomed Rebecca Jacoby to the Apptio Board of Directors

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 third quarter ending September 30, 2018 and for the full year 2018 as follows:

Third quarter of 2018:

  • Total revenue is expected to be in the range of $57.5 to $58.5 million
  • Non-GAAP operating income between $1.0 and $2.0 million

Full year 2018:

  • Total revenue is expected to be in the range of $230 and $233 million
  • Non-GAAP operating income between $3.0 and $5.0 million

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: 8357219), or if outside North America, by dialing 574-990-1011 (passcode: 8357219). 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 third quarter of, and full year, 2018. Forward-looking statements are subject to 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 May 7, 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

 

 

Six Months Ended

 
   

June 30,

 

 

June 30,

 
   

2018

 

 

2017

 

 

2018

 

 

2017

 
 

 

 

 

 

 

*As Adjusted

 

 

 

 

 

 

*As Adjusted

 
   

 

 
Revenue                                
Subscription   $

49,206

    $

37,247

    $

94,677

    $

73,434

 
Professional services    

9,839

     

7,978

     

18,438

     

15,722

 
Total revenue    

59,045

     

45,225

     

113,115

     

89,156

 
Cost of revenue                                
Subscription    

9,671

     

7,252

     

18,620

     

15,102

 
Professional services    

9,544

     

7,267

     

18,009

     

14,836

 
Total cost of revenue    

19,215

     

14,519

     

36,629

     

29,938

 
Gross profit    

39,830

     

30,706

     

76,486

     

59,218

 
Operating expenses                                
Research and development    

12,177

     

10,263

     

24,074

     

19,921

 
Sales and marketing    

24,024

     

20,992

     

46,702

     

40,609

 
General and administrative    

7,499

     

6,620

     

17,653

     

13,154

 
Total operating expenses    

43,700

     

37,875

     

88,429

     

73,684

 
Loss from operations    

(3,870

)    

(7,169

)    

(11,943

)    

(14,466

)
Other (expense) income                                
Interest expense    

(1,912

)    

(10

)    

(2,124

)    

(20

)
Interest income    

871

     

275

     

1,249

     

533

 
Other income (expense), net    

10

     

(1

)    

(28

)    

(13

)
Foreign exchange (loss) gain    

(576

)    

119

     

(462

)    

66

 
Loss before income taxes    

(5,477

)    

(6,786

)    

(13,308

)    

(13,900

)
Benefit from (provision for) income taxes    

180

     

(126

)    

(88

)    

(151

)
Net loss   $

(5,297

)   $

(6,912

)   $

(13,396

)   $

(14,051

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

(0.12

)   $

(0.18

)   $

(0.31

)   $

(0.36

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

43,921

     

39,175

     

43,345

     

38,793

 
                                 
 *As adjusted for the three and six months ended June 30, 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)

 

   

June 30,

 

 

December 31,

 
   

2018

 

 

2017

 

 

 

 

 

 

 

*As Adjusted

 
Assets                
Current assets                
Cash and cash equivalents   $

174,994

    $

55,069

 
Short-term investments    

74,390

     

93,901

 
Accounts receivable, net of allowance for doubtful accounts                
 of $444 and $413    

59,136

     

68,782

 
Deferred costs    

13,705

     

11,898

 
Prepaid expenses and other current assets    

4,824

     

5,079

 
Total current assets    

327,049

     

234,729

 
Long-term assets                
Property and equipment, net of accumulated depreciation                
of $24,257 and $21,924    

9,352

     

10,437

 
Long-term investments    

5,493

     

 
Deferred costs, net of current portion    

18,155

     

17,182

 
Acquisition-related intangible assets, net    

19,008

     

 
Goodwill    

31,004

     

 
Other long-term assets    

989

     

983

 
Total assets   $

411,050

    $

263,331

 
Liabilities and Stockholders Equity                
Current liabilities                
Accounts payable   $

6,753

    $

5,598

 
Accrued payroll and other expenses    

16,484

     

16,481

 
Deferred revenue    

118,346

     

116,831

 
Deferred rent    

940

     

892

 
Capital leases    

25

     

21

 
Total current liabilities    

142,548

     

139,823

 
Long-term liabilities                
Convertible senior notes, net    

108,153

     

 
Deferred revenue, net of current portion    

6,022

     

2,470

 
Deferred rent, net of current portion    

2,987

     

3,483

 
Capital leases, net of current portion    

110

     

26

 
Asset retirement obligation    

198

     

199

 
Total liabilities    

260,018

     

146,001

 
                 
Stockholders’ equity                
Class A and Class B Common stock    

5

     

4

 
Additional paid-in capital    

361,277

     

314,301

 
Accumulated other comprehensive income (loss)    

11

     

(110

)
Accumulated deficit    

(210,261

)    

(196,865

)
Total stockholders’ equity    

151,032

     

117,330

 
Total liabilities and stockholders’ equity   $

411,050

    $

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

   

Six Months Ended

 
   

June 30,

   

June 30,

 
   

2018

 

 

2017

   

2018

 

 

2017

 
     

 

 

 

*As Adjusted

     

 

 

 

*As Adjusted

 
Cash flows from operating activities                                
Net loss   $

(5,297

)   $

(6,912

)   $

(13,396

)   $

(14,051

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

1,308

     

1,552

     

2,684

     

3,082

 
(Accretion of discounts)/amortization of premiums on investments    

(195

)    

31

     

(237

)    

54

 
Amortization of acquisition-related intangible assets    

909

     

     

1,492

     

 
Amortization of deferred costs    

4,014

     

3,348

     

7,950

     

6,616

 
Amortization of debt discount and issuance costs    

1,598

     

9

     

1,774

     

18

 
Loss (gain) on disposal of property and equipment    

     

3

     

47

     

(4

)
Stock-based compensation    

5,579

     

3,685

     

10,531

     

7,310

 
Other    

(573

)    

     

     

 
Foreign exchange loss (gain)    

576

     

108

     

462

     

(66

)
Change in operating assets and liabilities, net of impact of business combination                                
Accounts receivable    

(3,507

)    

(12,768

)    

15,508

     

7,330

 
Prepaid expenses and other assets    

(1,658

)    

1,191

     

89

     

1,481

 
Deferred costs    

(5,255

)    

(3,447

)    

(8,163

)    

(6,119

)
Accounts payable    

(1,424

)    

(758

)    

839

     

1,037

 
Accrued expenses    

1,464

     

(769

)    

(1,328

)    

(1,727

)
Deferred revenue    

1,039

     

4,750

     

(9,674

)    

(2,820

)
Deferred rent    

(222

)    

(198

)    

(446

)    

(398

)
Net cash (used in) provided by operating activities    

(1,644

)    

(10,175

)    

8,132

     

1,743

 
Cash flows from investing activities                                
Business combination, net of cash acquired    

(4,472

)    

     

(39,041

)    

 
Purchases of property and equipment    

(716

)    

(691

)    

(1,396

)    

(2,236

)
Proceeds from sale of equipment    

     

     

     

9

 
Proceeds from maturities of investments    

32,150

     

12,900

     

81,550

     

19,700

 
Purchases of investments    

(48,425

)    

(7,453

)    

(67,218

)    

(28,898

)
Return of (payments for) security deposits    

81

     

(20

)    

50

     

(29

)
Net cash (used in) provided by investing activities    

(21,382

)    

4,736

     

(26,055

)    

(11,454

)
Cash flows from financing activities                                
Proceeds from borrowings on convertible notes, net of discounts and issuance costs    

     

     

139,438

     

 
Purchase of capped calls    

     

     

(17,092

)    

 
Proceeds from exercises of common stock options    

6,427

     

4,937

     

13,942

     

5,495

 
Payment of debt issuance fees    

(465

)    

     

(465

)    

 
Proceeds from purchases of stock under employee stock purchase plan    

2,391

     

2,251

     

2,391

     

2,251

 
Payment of initial public offering costs    

     

     

     

(243

)
Principal payments on capital lease obligations    

(7

)    

(10

)    

(13

)    

(21

)
Net cash provided by financing activities    

8,346

     

7,178

     

138,201

     

7,482

 
Foreign currency effect on cash, cash equivalents and restricted cash    

(392

)    

191

     

(353

)    

56

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

(15,072

)    

1,930

     

119,925

     

(2,173

)
Cash, cash equivalents and restricted cash                                
Beginning of period    

190,066

     

37,904

     

55,069

     

42,007

 
End of period   $

174,994

    $

39,834

    $

174,994

    $

39,834

 
                                 
 *As adjusted for the three and six months ended June 30, 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

 

 

Six Months Ended

 
 

June 30,

 

 

June 30,

 
 

2018

 

 

2017

 

 

2018

 

 

2017

 
   

 

 

 

*As Adjusted

 

 

 

 

 

 

*As Adjusted

 
 Revenue                              
 Subscription $

49,206

    $

37,247

    $

94,677

    $

73,434

 
 Professional services  

9,839

     

7,978

     

18,438

     

15,722

 
 Total revenue  

59,045

     

45,225

     

113,115

     

89,156

 
                               
 Cost of revenue reconciliation:                              
 GAAP subscription  

9,671

     

7,252

     

18,620

     

15,102

 
 Non-GAAP adjustment:                              
 Stock-based compensation  

(289

)    

(240

)    

(608

)    

(597

)
 Amortization of acquisition-related intangible assets  

(909

)    

     

(1,492

)    

 
 Non-GAAP subscription cost of revenue  

8,473

     

7,012

     

16,520

     

14,505

 
                               
 GAAP professional services  

9,544

     

7,267

     

18,009

     

14,836

 
 Non-GAAP adjustment:                              
 Stock-based compensation  

(479

)    

(230

)    

(807

)    

(548

)
 Non-GAAP professional services cost of revenue $

9,065

    $

7,037

    $

17,202

    $

14,288

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

39,535

    $

29,995

    $

76,057

    $

58,332

 
 Non-GAAP adjustment:                              
 Stock-based compensation  

289

     

240

     

608

     

597

 
 Amortization of acquisition-related intangible assets  

909

     

     

1,492

     

 
 Non-GAAP subscription gross profit  

40,733

     

30,235

     

78,157

     

58,929

 
 GAAP subscription gross margin  

80.3

%    

80.5

%    

80.3

%    

79.4

%
 Non-GAAP subscription gross margin  

82.8

%    

81.2

%    

82.6

%    

80.2

%
                               
 GAAP professional services gross profit  

295

     

711

     

429

     

886

 
 Non-GAAP adjustment:                              
 Stock-based compensation  

479

     

230

     

807

     

548

 
 Non-GAAP professional services gross profit  

774

     

941

     

1,236

     

1,434

 
 GAAP professional services gross margin  

3.0

%    

8.9

%    

2.3

%    

5.6

%
 Non-GAAP professional services gross margin  

7.9

%    

11.8

%    

6.7

%    

9.1

%
                               
 GAAP gross profit  

39,830

     

30,706

     

76,486

     

59,218

 
 Non-GAAP adjustment:                              
 Stock-based compensation  

768

     

470

     

1,415

     

1,145

 
 Amortization of acquisition-related intangible assets  

909

     

     

1,492

     

 
 Non-GAAP gross profit $

41,507

    $

31,176

    $

79,393

    $

60,363

 
 GAAP gross margin  

67.5

%    

67.9

%    

67.6

%    

66.4

%
 Non-GAAP gross margin  

70.3

%    

68.9

%    

70.2

%    

67.7

%
                               
 Operating expenses reconciliation:                              
 GAAP research and development $

12,177

    $

10,263

    $

24,074

    $

19,921

 
 Non-GAAP adjustment:                              
 Stock-based compensation  

(1,399

)    

(1,112

)    

(2,792

)    

(2,153

)
 Non-GAAP research and development  

10,778

     

9,151

     

21,282

     

17,768

 
 As a % of total revenue, non-GAAP  

18.3

%    

20.2

%    

18.8

%    

19.9

%
                               
 GAAP sales and marketing  

24,024

     

20,992

     

46,702

     

40,609

 
 Non-GAAP adjustment:                              
 Stock-based compensation  

(1,706

)    

(1,077

)    

(3,136

)    

(2,077

)
 Non-GAAP sales and marketing  

22,318

     

19,915

     

43,566

     

38,532

 
 As a % of total revenue, non-GAAP  

37.8

%    

44.0

%    

38.5

%    

43.2

%
                               
 GAAP General and administrative  

7,499

     

6,620

     

17,653

     

13,154

 
 Non-GAAP adjustment:                              
 Stock-based compensation  

(1,706

)    

(1,026

)    

(3,188

)    

(1,935

)
 Acquisition-related expenses and purchase accounting adjustment  

590

     

     

(1,949

)    

 
 Non-GAAP general and administrative  

6,383

     

5,594

     

12,516

     

11,219

 
 As a % of total revenue, non-GAAP  

10.8

%    

12.4

%    

11.1

%    

12.6

%
                               
 Loss from operations reconciliation:                              
 GAAP loss from operations  

(3,870

)    

(7,169

)    

(11,943

)    

(14,466

)
 Non-GAAP adjustment:                              
 Stock-based compensation  

5,579

     

3,685

     

10,531

     

7,310

 
 Acquisition-related expenses and purchase accounting adjustment  

(590

)    

     

1,949

     

 
 Amortization of acquisition-related intangible assets  

909

     

     

1,492

     

 
 Non-GAAP income (loss) from operations $

2,028

    $

(3,484

)   $

2,029

    $

(7,156

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

(6.6

%)    

(15.9

%)    

(10.6

%)    

(16.2

%)
 Non-GAAP income (loss) from operations  

3.4

%    

(7.7

%)    

1.8

%    

(8.0

%)
                               
 Net income (loss) reconciliation:                              
 GAAP $

(5,297

)   $

(6,912

)   $

(13,396

)   $

(14,051

)
 Non-GAAP adjustment:                              
 Stock-based compensation  

5,579

     

3,685

     

10,531

     

7,310

 
 Acquisition-related expenses and purchase accounting adjustment  

(590

)    

     

1,949

     

 
 Amortization of acquisition-related intangible assets  

909

     

     

1,492

     

 
 Non-GAAP Net income (loss) $

601

    $

(3,227

)   $

576

    $

(6,741

)
                               
                               
 Weighted-average shares used in Non-GAAP basic net income (loss) per share  

43,921

     

39,175

     

43,345

     

38,793

 
 Effect of potentially dilutive shares  

4,668

     

     

4,794

     

 
 Weighted-average shares used in Non-GAAP diluted net income (loss) per share  

48,589

     

39,175

     

48,139

     

38,793

 
                               
 Non-GAAP net income (loss) per share:                              
 Basic $

0.01

    $

(0.08

)   $

0.01

    $

(0.17

)
 Diluted $

0.01

    $

(0.08

)   $

0.01

    $

(0.17

)
                               
 *As adjusted for the three and six months ended June 30, 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

   

Six Months Ended

 
   

June 30,

   

June 30,

 
   

2018

 

 

2017

   

2018

 

 

2017

 
     

 

 

 

*As Adjusted

     

 

 

 

*As Adjusted

 
   

 

 
 Net cash (used in) provided by operating activities   $

(1,644

)   $

(10,175

)   $

8,132

    $

1,743

 
 Less: purchases of property and equipment    

(716

)    

(691

)    

(1,396

)    

(2,236

)
 Free cash flow   $

(2,360

)   $

(10,866

)   $

6,736

    $

(493

)
                                 
 *As adjusted for the three and six months ended June 30, 2017 to reflect the adoption of Accounting Standards Update, ASU, No. 2014-09, Revenue from Contracts with Customers (Topic 606).                  

 

 

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