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

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

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Feb 05, 2018, 16:15 ET

BELLEVUE, Wash., Feb. 5, 2018 /PRNewswire/ -- Apptio, Inc. (NASDAQ: APTI), the business management system of record for hybrid IT, today announced results for the fiscal fourth quarter and full year ended December 31, 2017.

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

Fourth Quarter Financial Summary

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

Fiscal Year 2017 Financial Summary

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

Business Highlights

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

Financial Outlook

Apptio provides guidance based on current market conditions and expectations and actual results may differ materially. Please refer to the company's comments below regarding Forward Looking Statements. Apptio is initiating guidance for the first quarter ending March 31, 2018 and for the full year 2018 as follows:

First quarter of 2018:

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

Full year 2018:

Total revenue is expected to be in the range of $220 and $225 million
Approximately break-even Non-GAAP operating income

All forward-looking non-GAAP financial measures contained in this section titled "Financial Outlook" exclude the effects of stock-based compensation expense. Guidance reflects the February 2, 2018 acquisition of Digital Fuel and the adoption of ASC 606 on January 1, 2018. Non-GAAP operating income guidance excludes transaction expenses related to the acquisition of Digital Fuel.

Conference Call Information

Apptio plans to host a conference call today to discuss the results. The call is scheduled to begin at 2:00 p.m. PT/ 5:00 p.m. ET and can be accessed by dialing 844-233-0116 (passcode: 4795737), or if outside North America, by dialing 574-990-1011 (passcode: 4795737). Individuals may also access the live teleconference from the investor relations section of the Apptio website at investors.apptio.com. A replay will be available following completion of the live broadcast.

About Apptio
Apptio (NASDAQ: APTI) is the business management system of record for hybrid IT. We transform the way IT runs its business and makes decisions. With our cloud-based applications, IT leaders manage, plan and optimize their technology investments across on-premises and cloud. With Apptio, IT leaders become strategic partners to the business by demonstrating the value of IT investments, accelerate innovation and shift their technology investments from running the business to digital innovation. Hundreds of customers choose Apptio as their business system of record for hybrid IT. For more information, please visit www.Apptio.com.

Forward-Looking Statements
This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding our strategy, prospects, customer demand, application adoption and our financial outlook for the first quarter of, and full year, 2018. Forward-looking statements are subject to known and unknown risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward-looking statements. Actual results may differ materially from the results predicted, and reported results should not be considered as an indication of future performance. The potential risks and uncertainties that could cause actual results to differ from the results predicted include, among others, those risks and uncertainties included under the caption "Risk Factors" and elsewhere in our filings with the U.S. Securities and Exchange Commission, including, without limitation, the Form 10-Q filed with the SEC on October 31, 2017. All information provided in this release and in the attachments is as of the date hereof, and we undertake no duty to update this information unless required by law.

Non-GAAP Financial Measures
To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with Generally Accepted Accounting Principles in the United States of America (GAAP), we use the following non-GAAP financial measures: non-GAAP gross margin, non-GAAP operating loss, non-GAAP net loss per basic and diluted share, and free cash flow. In computing these measures, with the exception of free cash flow, we exclude the effects of stock-based compensation expense. We define free cash flow as net cash used in operating activities, less the purchases of property and equipment. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP, and our non-GAAP measures may be different from non-GAAP measures used by other companies.

We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses and expenditures that may not be indicative of our ongoing core business operating results. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when analyzing historical performance and liquidity and planning, forecasting, and analyzing future periods.

For a reconciliation of these non-GAAP financial measures to GAAP measures, please see the tables captioned "Results of Operations GAAP to Non-GAAP Reconciliation" included at the end of this release. We have not reconciled guidance for non-GAAP metrics to their most directly comparable GAAP measures because such items that impact these measures are not within our control or cannot be reasonably predicted.

Apptio, Inc. Condensed Consolidated Statements of Operations (In thousands, except per share amounts) (Unaudited)

	Three Months Ended				Year Ended
	December 31,				December 31,
	2017		2016		2017		2016

Revenue
Subscription	$	42,557	$	35,066	$	155,417	$	130,061
Professional services		9,810		9,254		33,102		30,508
Total revenue		52,367		44,320		188,519		160,569
Cost of revenue
Subscription		7,381		7,338		29,650		27,298
Professional services		7,304		7,082		28,903		26,862
Total cost of revenue		14,685		14,420		58,553		54,160
Gross profit		37,682		29,900		129,966		106,409
Operating expenses
Research and development		10,490		9,403		40,550		35,475
Sales and marketing		26,966		21,600		87,949		75,856
General and administrative		7,364		6,260		27,706		23,229
Total operating expenses		44,820		37,263		156,205		134,560
Loss from operations		(7,138)		(7,363)		(26,239)		(28,151)
Other income (expense)
Interest income (expense) and other, net		393		213		1,204		(1,533)
Foreign exchange loss		(198)		(643)		(25)		(1,417)
Loss before provision for income taxes		(6,943)		(7,793)		(25,060)		(31,101)
Income tax benefit (provision)		53		(124)		(561)		(452)
Net loss	$	(6,890)	$	(7,917)	$	(25,621)	$	(31,553)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.17)	$	(0.21)	$	(0.64)	$	(1.61)
Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted		41,276		38,323		39,754		19,595

Apptio, Inc. Condensed Consolidated Balance Sheets (In thousands) (Unaudited)

	December 31,		December 31,
	2017		2016
Assets
Current assets
Cash and cash equivalents	$	55,069	$	42,007
Short-term investments		93,901		36,741
Accounts receivable, net of allowance for doubtful accounts
of $413 and $122		68,782		58,587
Prepaid expenses and other current assets		5,079		5,440
Total current assets		222,831		142,775
Long-term assets
Property and equipment, net of accumulated depreciation
of $21,924 and $17,091		10,437		12,827
Long-term investments		--		38,446
Other long-term assets		983		734
Total assets	$	234,251	$	194,782
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable	$	5,598	$	3,574
Accrued payroll and other expenses		16,481		14,073
Deferred revenue		116,831		97,885
Deferred rent		892		799
Capital leases		21		43
Total current liabilities		139,823		116,374
Long-term liabilities
Deferred revenue, net of current portion		2,470		2,254
Deferred rent, net of current portion		3,483		4,360
Capital leases, net of current portion		26		51
Asset retirement obligation		199		175
Total liabilities		146,001		123,214

Stockholders' equity
Class A and Class B Common stock		4		4
Additional paid-in capital		314,301		271,982
Accumulated other comprehensive loss		(110)		(94)
Accumulated deficit		(225,945)		(200,324)
Total stockholders' equity		88,250		71,568
Total liabilities and stockholders' equity	$	234,251	$	194,782

Apptio, Inc. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited)

	Three Months Ended				Year Ended
	December 31,				December 31,
	2017		2016		2017		2016
Cash flows from operating activities
Net loss	$	(6,890)	$	(7,917)	$	(25,621)	$	(31,553)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities
Depreciation and amortization		1,444		1,501		6,101		5,988
Amortization of premiums on investments		(24)		18		35		38
Loss (gain) on disposal of property and equipment		(11)		(1)		(4)		25
Stock-based compensation		4,403		3,557		16,070		10,459
Accretion of expense on line of credit fees		--		9		18		136
Loss on extinguishment of debt		--		--		--		722
Remeasurement of preferred stock warrant liability		--		--		--		202
Foreign exchange loss		198		412		25		412
Change in operating assets and liabilities
Accounts receivable		(22,810)		(16,067)		(10,784)		(5,765)
Prepaid expenses and other assets		78		(2,946)		3,338		(3,606)
Accounts payable		1,607		(1,370)		2,242		278
Accrued expenses		1,597		4,068		(428)		1,626
Deferred revenue		19,091		16,373		19,163		16,908
Deferred rent		(203)		557		(799)		136
Net cash (used in) provided by operating activities		(1,520)		(1,806)		9,356		(3,994)
Cash flows from investing activities
Purchases of property and equipment		(766)		(1,884)		(3,603)		(5,402)
Proceeds from sale of equipment		13		--		24		--
Proceeds from maturities of investments		15,382		--		50,457		6,245
Purchases of investments		(3,026)		(64,477)		(69,222)		(75,303)
Payment of security deposits		(39)		(141)		(62)		(184)
Net cash provided by (used in) investing activities		11,564		(66,502)		(22,406)		(74,644)
Cash flows from financing activities
Proceeds from exercise of common stock options		12,920		333		21,868		1,333
Proceeds from purchases of stock under employee stock purchase plan		2,130		--		4,381		--
Proceeds from initial public offering		--		--		--		102,672
Payment of initial public offering costs		--		(1,788)		(243)		(2,362)
Proceeds from long-term debt		--		--		--		20,000
Principal payments on long-term debt		--		--		--		(20,000)
Payment of debt prepayment fees		--		--		--		(200)
Principal payments on capital lease obligations		(11)		(10)		(43)		(43)
Payment of capitalized loan fees		--		--		--		(248)
Net cash provided by (used in) financing activities		15,039		(1,465)		25,963		101,152
Foreign currency effect on cash, cash equivalents and restricted cash		707		68		149		(263)
Net increase (decrease) in cash, cash equivalents and restricted cash		25,790		(69,705)		13,062		22,251
Cash, cash equivalents and restricted cash
Beginning of period		29,279		111,712		42,007		19,756
End of period	$	55,069	$	42,007	$	55,069	$	42,007

Apptio, Inc. Results of Operations GAAP to Non-GAAP Reconciliation (In thousands, except per share data) (Unaudited)

	Three Months Ended						Year Ended
	December 31,						December 31,
	2017			2016			2017			2016
Revenue
Subscription	$	42,557		$	35,066		$	155,417		$	130,061
Professional services		9,810			9,254			33,102			30,508
Total revenue		52,367			44,320			188,519			160,569

Cost of revenue reconciliation:
GAAP subscription		7,381			7,338			29,650			27,298
Non-GAAP adjustment:
Stock-based compensation		(291)			(327)			(1,218)			(891)
Non-GAAP subscription cost of revenue		7,090			7,011			28,432			26,407

GAAP professional services		7,304			7,082			28,903			26,862
Non-GAAP adjustment:
Stock-based compensation		(289)			(263)			(1,131)			(820)
Non-GAAP professional services cost of revenue	$	7,015		$	6,819		$	27,772		$	26,042

Gross profit and gross margin reconciliation:
GAAP subscription gross profit	$	35,176		$	27,728		$	125,767		$	102,763
Non-GAAP adjustment:
Stock-based compensation		291			327			1,218			891
Non-GAAP subscription gross profit		35,467			28,055			126,985			103,654
GAAP subscription gross margin		82.7	%		79.1	%		80.9	%		79.0	%
Non-GAAP subscription gross margin		83.3	%		80.0	%		81.7	%		79.7	%

GAAP professional services gross profit		2,506			2,172			4,199			3,646
Non-GAAP adjustment:
Stock-based compensation		289			263			1,131			820
Non-GAAP professional services gross profit		2,795			2,435			5,330			4,466
GAAP professional services gross margin		25.5	%		23.5	%		12.7	%		12.0	%
Non-GAAP professional services gross margin		28.5	%		26.3	%		16.1	%		14.6	%

GAAP gross profit		37,682			29,900			129,966			106,409
Non-GAAP adjustment:
Stock-based compensation		580			590			2,349			1,711
Non-GAAP gross profit	$	38,262		$	30,490		$	132,315		$	108,120
GAAP gross margin		72.0	%		67.5	%		68.9	%		66.3	%
Non-GAAP gross margin		73.1	%		68.8	%		70.2	%		67.3	%

Operating expenses reconciliation:
GAAP research and development	$	10,490		$	9,403		$	40,550		$	35,475
Non-GAAP adjustment:
Stock-based compensation		(1,159)			(1,012)			(4,491)			(2,977)
Non-GAAP research and development		9,331			8,391			36,059			32,498
As a % of total revenue, non-GAAP		17.8	%		18.9	%		19.1	%		20.2	%

GAAP sales and marketing		26,966			21,600			87,949			75,856
Non-GAAP adjustment:
Stock-based compensation		(1,298)			(956)			(4,614)			(3,132)
Non-GAAP sales and marketing		25,668			20,644			83,335			72,724
As a % of total revenue, non-GAAP		49.0	%		46.6	%		44.2	%		45.3	%

GAAP General and administrative		7,364			6,260			27,706			23,229
Non-GAAP adjustment:
Stock-based compensation		(1,366)			(999)			(4,616)			(2,639)
Non-GAAP general and administrative		5,998			5,261			23,090			20,590
As a % of total revenue, non-GAAP		11.5	%		11.9	%		12.2	%		12.8	%

Loss from operations reconciliation:
GAAP loss from operations		(7,138)			(7,363)			(26,239)			(28,151)
Non-GAAP adjustment:
Stock-based compensation		4,403			3,557			16,070			10,459
Non-GAAP loss from operations	$	(2,735)		$	(3,806)		$	(10,169)		$	(17,692)
Loss from operations as a percentage of revenue:
GAAP loss from operations		(13.6)	%		(16.6)	%		(13.9)	%		(17.5)	%
Non-GAAP loss from operations		(5.2)	%		(8.6)	%		(5.4)	%		(11.0)	%

Net loss reconciliation:
GAAP	$	(6,890)		$	(7,917)		$	(25,621)		$	(31,553)
Non-GAAP adjustment:
Stock-based compensation		4,403			3,557			16,070			10,459
Non-GAAP Net loss	$	(2,487)		$	(4,360)		$	(9,551)		$	(21,094)

Basic and diluted net loss per share
reconciliation:
GAAP	$	(0.17)		$	(0.21)		$	(0.64)		$	(1.61)
Non-GAAP	$	(0.06)		$	(0.11)		$	(0.24)		$	(1.08)

Shares used to compute basic and diluted GAAP
and Non-GAAP net loss per share		41,276			38,323			39,754			19,595

Apptio, Inc. Free Cash Flow Non-GAAP Reconciliation (In thousands) (Unaudited)

	Three Months Ended				Year Ended
	December 31,				December 31,
	2017		2016		2017		2016

Net cash (used in) provided by operating activities	$	(1,520)	$	(1,806)	$	9,356	$	(3,994)
Less: purchases of property and equipment		(766)		(1,884)		(3,603)		(5,402)
Free cash flow	$	(2,286)	$	(3,690)	$	5,753	$	(9,396)

© 2018 Apptio, Inc. All rights reserved. Apptio and the Apptio logo are registered trademarks of Apptio, Inc. All other brand and product names are trademarks or registered trademarks of their respective holders.

Investor Contact:
Susanna Morgan
(425) 279-6101
[email protected]

Media Contact:
Sarah Vreugdenhil
(425) 279-6097
[email protected]

SOURCE Apptio