Press Release

Apptio Announces Results for the Third Quarter 2018

Reported Q3 revenue of $59 million, 26% growth year over year

Bellevue, WA (October 29, 2018) – Apptio, Inc. (NASDAQ:APTI), the business management system of record for hybrid IT, today announced results for the fiscal third quarter ended September 30, 2018.

“Our third quarter highlights include 26% year over year revenue growth and expanding non-GAAP operating income to $4 million,” said Sunny Gupta, co-founder and CEO, Apptio. “We had strong contributions from our strategic segment and continued progress with our upsells, further validating our land and expand strategy.  The move toward a digital enterprise, enabled by cloud, is fueling the need for CIOs to adopt Apptio.  We are excited about our recent acquisition of FittedCloud, which will add capabilities to our offering in the rapidly expanding Hybrid and Multi-cloud market.”

Third Quarter Financial Summary

  • Subscription revenue was $49.6 million, an increase of 26% from the third quarter of 2017, and comprised 84% of total revenue. Services revenue was $9.6 million, an increase of 27% from the third quarter of 2017. Total revenue was $59.2 million, an increase of 26% from the third quarter of 2017.
  • GAAP gross margin was 69.5%, as compared to the third quarter of 2017 GAAP gross margin of 70.4%.  Non-GAAP gross margin of 72.3% improved from non-GAAP gross margin of 71.7% in the third quarter of 2017.
  • GAAP operating margin was negative 4.9%, an improvement from GAAP operating margin of negative 8.6% in the third quarter of 2017. Non-GAAP operating margin improved to 7.3%, as compared to non-GAAP operating margin of 0.6% in the third quarter of 2017.
  • GAAP net loss per basic and diluted share was $0.10 based on 44.8 million weighted average shares outstanding, compared to GAAP net loss per basic and diluted share of $0.10 based on 40.1 million weighted average shares outstanding in the third quarter of 2017.
  • Non-GAAP net income per diluted share was $0.05 based on 49.3 million weighted average shares outstanding, compared to non-GAAP net income per basic and diluted share of $0.01 based on 43.3 million weighted average shares outstanding in the third quarter of 2017.
  • Cash, cash equivalents and marketable securities were approximately $258.0 million as of September 30, 2018.

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 fourth quarter ending December 31, 2018 and for the full year 2018 as follows:

Fourth quarter of 2018:

  • Total revenue is expected to be in the range of $61.0 to $62.0 million
  • Non-GAAP operating income of approximately $1.0 million

Full year 2018:

  • Total revenue is expected to be in the range of $233.3 and $234.3 million
  • Non-GAAP operating income of approximately $7.4 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 contribution from Digital Fuel which we acquired on February 2, 2018 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: 6180216), or if outside North America, by dialing 574-990-1011 (passcode: 6180216). 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, potential benefits from acquired companies, and our financial outlook for the fourth 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 August 3, 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

 

 

Nine Months Ended

 
   

September 30,

 

 

September 30,

 
   

2018

 

 

2017

 

 

2018

 

 

2017

 
 

 

 

 

 

 

*As Adjusted

 

 

 

 

 

 

*As Adjusted

 
   

 

 
Revenue                                
Subscription   $

49,610

    $

39,426

    $

144,287

    $

112,860

 
Professional services    

9,613

     

7,570

     

28,051

     

23,292

 
Total revenue    

59,223

     

46,996

     

172,338

     

136,152

 
Cost of revenue                                
Subscription    

9,157

     

7,167

     

27,777

     

22,269

 
Professional services    

8,916

     

6,763

     

26,925

     

21,599

 
Total cost of revenue    

18,073

     

13,930

     

54,702

     

43,868

 
Gross profit    

41,150

     

33,066

     

117,636

     

92,284

 
Operating expenses                                
Research and development    

12,130

     

10,139

     

36,204

     

30,060

 
Sales and marketing    

23,993

     

19,792

     

70,695

     

60,401

 
General and administrative    

7,905

     

7,188

     

25,558

     

20,342

 
Total operating expenses    

44,028

     

37,119

     

132,457

     

110,803

 
Loss from operations    

(2,878

)    

(4,053

)    

(14,821

)    

(18,519

)
Other (expense) income                                
Interest expense    

(1,897

)    

(1

)    

(4,021

)    

(21

)
Interest income    

1,126

     

326

     

2,375

     

859

 
Other income (expense), net    

109

     

(14

)    

81

     

(27

)
Foreign exchange (loss) gain    

(335

)    

93

     

(797

)    

159

 
Loss before income taxes    

(3,875

)    

(3,649

)    

(17,183

)    

(17,549

)
Provision for income taxes    

(695

)    

(463

)    

(783

)    

(614

)
Net loss   $

(4,570

)   $

(4,112

)   $

(17,966

)   $

(18,163

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

(0.10

)   $

(0.10

)   $

(0.41

)   $

(0.46

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

44,785

     

40,120

     

43,830

     

39,240

 
                                 
 *As adjusted for the three and nine months ended September 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)

 

   

September 30,

 

 

December 31,

 
   

2018

 

 

2017

 

 

 

 

 

 

 

*As Adjusted

 
Assets                
Current assets                
Cash and cash equivalents   $

177,677

    $

55,069

 
Short-term investments    

77,495

     

93,901

 
Accounts receivable, net of allowance for doubtful accounts                
 of $839 and $413    

66,485

     

68,782

 
Deferred costs    

14,252

     

11,898

 
Prepaid expenses and other current assets    

5,078

     

5,079

 
Total current assets    

340,987

     

234,729

 
Long-term assets                
Property and equipment, net of accumulated depreciation and amortization                
of $25,394 and $21,924    

10,592

     

10,437

 
Long-term investments    

2,837

     

 
Deferred costs, net of current portion    

18,779

     

17,182

 
Acquisition-related intangible assets, net    

18,112

     

 
Goodwill    

31,004

     

 
Other long-term assets    

951

     

983

 
Total assets   $

423,262

    $

263,331

 
Liabilities and Stockholders Equity                
Current liabilities                
Accounts payable   $

8,492

    $

5,598

 
Accrued payroll and other expenses    

19,816

     

16,481

 
Deferred revenue    

118,242

     

116,831

 
Deferred rent    

1,000

     

892

 
Capital leases    

25

     

21

 
Total current liabilities    

147,575

     

139,823

 
Long-term liabilities                
Convertible senior notes, net    

109,772

     

 
Deferred revenue, net of current portion    

5,919

     

2,470

 
Deferred rent, net of current portion    

2,996

     

3,483

 
Capital leases, net of current portion    

103

     

26

 
Asset retirement obligation    

222

     

199

 
Total liabilities    

266,587

     

146,001

 
                 
Stockholders’ equity                
Class A and Class B Common stock    

5

     

4

 
Additional paid-in capital    

371,491

     

314,301

 
Accumulated other comprehensive income (loss)    

10

     

(110

)
Accumulated deficit    

(214,831

)    

(196,865

)
Total stockholders’ equity    

156,675

     

117,330

 
Total liabilities and stockholders’ equity   $

423,262

    $

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

   

Nine Months Ended

 
   

September 30,

   

September 30,

 
   

2018

 

 

2017

   

2018

 

 

2017

 
     

 

 

 

*As Adjusted

     

 

 

 

*As Adjusted

 
Cash flows from operating activities                                
Net loss   $

(4,570

)   $

(4,112

)   $

(17,966

)   $

(18,163

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

1,316

     

1,575

     

4,000

     

4,657

 
(Accretion of discounts)/amortization of premiums on investments    

(280

)    

5

     

(517

)    

59

 
Amortization of acquisition-related intangible assets    

896

     

     

2,388

     

 
Amortization of deferred costs    

4,272

     

3,477

     

12,222

     

10,093

 
Amortization of debt discount and issuance costs    

1,588

     

     

3,362

     

18

 
(Gain) loss on disposal of property and equipment    

(38

)    

11

     

9

     

7

 
Stock-based compensation    

6,155

     

4,357

     

16,686

     

11,667

 
Foreign exchange loss (gain)    

335

     

(93

)    

797

     

(159

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

(7,522

)    

4,696

     

7,986

     

12,026

 
Prepaid expenses and other assets    

(682

)    

1,779

     

(593

)    

3,260

 
Deferred costs    

(5,448

)    

(4,529

)    

(13,611

)    

(10,648

)
Accounts payable    

265

     

(402

)    

1,104

     

635

 
Accrued expenses    

3,765

     

(298

)    

2,437

     

(2,025

)
Deferred revenue    

(197

)    

2,892

     

(9,871

)    

72

 
Deferred rent    

(148

)    

(198

)    

(594

)    

(596

)
Net cash (used in) provided by operating activities    

(293

)    

9,160

     

7,839

     

10,903

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

     

     

(39,041

)    

 
Purchases of property and equipment    

(842

)    

(601

)    

(2,238

)    

(2,837

)
Proceeds from sale of equipment    

38

     

2

     

38

     

11

 
Proceeds from maturities of investments    

34,400

     

15,375

     

115,950

     

35,075

 
Purchases of investments    

(34,567

)    

(37,298

)    

(101,785

)    

(66,196

)
Return of (payments for) security deposits    

3

     

6

     

53

     

(23

)
Net cash used in investing activities    

(968

)    

(22,516

)    

(27,023

)    

(33,970

)
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    

4,090

     

3,453

     

18,032

     

8,948

 
Payment of debt issuance fees    

(4

)    

     

(469

)    

 
Proceeds from purchases of stock under employee stock purchase plan    

     

     

2,391

     

2,251

 
Payment of initial public offering costs    

     

     

     

(243

)
Principal payments on capital lease obligations    

(7

)    

(11

)    

(20

)    

(32

)
Net cash provided by financing activities    

4,079

     

3,442

     

142,280

     

10,924

 
Foreign currency effect on cash, cash equivalents and restricted cash    

(135

)    

(641

)    

(488

)    

(585

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

2,683

     

(10,555

)    

122,608

     

(12,728

)
Cash, cash equivalents and restricted cash                                
Beginning of period    

174,994

     

39,834

     

55,069

     

42,007

 
End of period   $

177,677

    $

29,279

    $

177,677

    $

29,279

 
                                 
 *As adjusted for the three and nine months ended September 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

 

 

Nine Months Ended

 
 

September 30,

 

 

September 30,

 
 

2018

 

 

2017

 

 

2018

 

 

2017

 
   

 

 

 

*As Adjusted

 

 

 

 

 

 

*As Adjusted

 
 Revenue                              
 Subscription $

49,610

    $

39,426

    $

144,287

    $

112,860

 
 Professional services  

9,613

     

7,570

     

28,051

     

23,292

 
 Total revenue  

59,223

     

46,996

     

172,338

     

136,152

 
                               
 Cost of revenue reconciliation:                              
 GAAP subscription  

9,157

     

7,167

     

27,777

     

22,269

 
 Non-GAAP adjustment:                              
 Stock-based compensation  

(286

)    

(330

)    

(894

)    

(927

)
 Amortization of acquisition-related intangible assets  

(896

)    

     

(2,388

)    

 
 Non-GAAP subscription cost of revenue  

7,975

     

6,837

     

24,495

     

21,342

 
                               
 GAAP professional services  

8,916

     

6,763

     

26,925

     

21,599

 
 Non-GAAP adjustment:                              
 Stock-based compensation  

(507

)    

(294

)    

(1,314

)    

(842

)
 Non-GAAP professional services cost of revenue $

8,409

    $

6,469

    $

25,611

    $

20,757

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

40,453

    $

32,259

    $

116,510

    $

90,591

 
 Non-GAAP adjustment:                              
 Stock-based compensation  

286

     

330

     

894

     

927

 
 Amortization of acquisition-related intangible assets  

896

     

     

2,388

     

 
 Non-GAAP subscription gross profit  

41,635

     

32,589

     

119,792

     

91,518

 
 GAAP subscription gross margin  

81.5

%    

81.8

%    

80.7

%    

80.3

%
 Non-GAAP subscription gross margin  

83.9

%    

82.7

%    

83.0

%    

81.1

%
                               
 GAAP professional services gross profit  

697

     

807

     

1,126

     

1,693

 
 Non-GAAP adjustment:                              
 Stock-based compensation  

507

     

294

     

1,314

     

842

 
 Non-GAAP professional services gross profit  

1,204

     

1,101

     

2,440

     

2,535

 
 GAAP professional services gross margin  

7.3

%    

10.7

%    

4.0

%    

7.3

%
 Non-GAAP professional services gross margin  

12.5

%    

14.5

%    

8.7

%    

10.9

%
                               
 GAAP gross profit  

41,150

     

33,066

     

117,636

     

92,284

 
 Non-GAAP adjustment:                              
 Stock-based compensation  

793

     

624

     

2,208

     

1,769

 
 Amortization of acquisition-related intangible assets  

896

     

     

2,388

     

 
 Non-GAAP gross profit $

42,839

    $

33,690

    $

122,232

    $

94,053

 
 GAAP gross margin  

69.5

%    

70.4

%    

68.3

%    

67.8

%
 Non-GAAP gross margin  

72.3

%    

71.7

%    

70.9

%    

69.1

%
                               
 Operating expenses reconciliation:                              
 GAAP research and development $

12,130

    $

10,139

    $

36,204

    $

30,060

 
 Non-GAAP adjustment:                              
 Stock-based compensation  

(1,516

)    

(1,179

)    

(4,308

)    

(3,332

)
 Non-GAAP research and development  

10,614

     

8,960

     

31,896

     

26,728

 
 As a % of total revenue, non-GAAP  

17.9

%    

19.1

%    

18.5

%    

19.6

%
                               
 GAAP sales and marketing  

23,993

     

19,792

     

70,695

     

60,401

 
 Non-GAAP adjustment:                              
 Stock-based compensation  

(2,050

)    

(1,239

)    

(5,186

)    

(3,316

)
 Non-GAAP sales and marketing  

21,943

     

18,553

     

65,509

     

57,085

 
 As a % of total revenue, non-GAAP  

37.1

%    

39.5

%    

38.0

%    

41.9

%
                               
 GAAP General and administrative  

7,905

     

7,188

     

25,558

     

20,342

 
 Non-GAAP adjustment:                              
 Stock-based compensation  

(1,796

)    

(1,315

)    

(4,984

)    

(3,250

)
 Acquisition-related expenses and purchase accounting adjustment  

(160

)    

     

(2,109

)    

 
 Non-GAAP general and administrative  

5,949

     

5,873

     

18,465

     

17,092

 
 As a % of total revenue, non-GAAP  

10.0

%    

12.5

%    

10.7

%    

12.6

%
                               
 Loss from operations reconciliation:                              
 GAAP loss from operations  

(2,878

)    

(4,053

)    

(14,821

)    

(18,519

)
 Non-GAAP adjustment:                              
 Stock-based compensation  

6,155

     

4,357

     

16,686

     

11,667

 
 Acquisition-related expenses and purchase accounting adjustment  

160

     

     

2,109

     

 
 Amortization of acquisition-related intangible assets  

896

     

     

2,388

     

 
 Non-GAAP income (loss) from operations $

4,333

    $

304

    $

6,362

    $

(6,852

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

(4.9

%)    

(8.6

%)    

(8.6

%)    

(13.6

%)
 Non-GAAP income (loss) from operations  

7.3

%    

0.6

%    

3.7

%    

(5.0

%)
                               
 Net income (loss) reconciliation:                              
 GAAP $

(4,570

)   $

(4,112

)   $

(17,966

)   $

(18,163

)
 Non-GAAP adjustment:                              
 Stock-based compensation  

6,155

     

4,357

     

16,686

     

11,667

 
 Acquisition-related expenses and purchase accounting adjustment  

160

     

     

2,109

     

 
 Amortization of acquisition-related intangible assets  

896

     

     

2,388

     

 
 Non-GAAP Net income (loss) $

2,641

    $

245

    $

3,217

    $

(6,496

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

44,785

     

40,120

     

43,830

     

39,240

 
 Effect of potentially dilutive shares  

4,493

     

3,161

     

4,573

     

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

49,278

     

43,281

     

48,403

     

39,240

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

0.06

    $

0.01

    $

0.07

    $

(0.17

)
 Diluted $

0.05

    $

0.01

    $

0.07

    $

(0.17

)
                               
 *As adjusted for the three and nine months ended September 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

   

Nine Months Ended

 
   

September 30,

   

September 30,

 
   

2018

 

 

2017

   

2018

 

 

2017

 
     

 

 

 

*As Adjusted

     

 

 

 

*As Adjusted

 
   

 

 
 Net cash (used in) provided by operating activities   $

(293

)   $

9,160

    $

7,839

    $

10,903

 
 Less: purchases of property and equipment    

(842

)    

(601

)    

(2,238

)    

(2,837

)
 Free cash flow   $

(1,135

)   $

8,559

    $

5,601

    $

8,066

 
                                 
 *As adjusted for the three and nine months ended September 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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ir@apptio.com

 

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