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Apptio Announces Results for the Third Quarter 2018

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Apptio Announces Results for the Third Quarter 2018
Reported Q3 revenue of $59 million, 26% growth year over year

BELLEVUE, Wash., Oct. 29, 2018 /PRNewswire/ -- 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.

Apptio (PRNewsFoto/Apptio)

"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).

© 2018 Apptio, Inc. All rights reserved. Apptio and the Apptio logo are registered trademarks of Apptio, Inc.

Investor Contact:
Drew Laxton
(425) 279-6101
ir@apptio.com

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

 

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