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Apptio Announces Results for the Second Quarter 2018

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Apptio Announces Results for the Second Quarter 2018
Reported Q2 revenue of $59 million, 31% growth year over year

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.

Apptio (PRNewsFoto/Apptio)

"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).

 

© 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

 

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