apti-ex991

apti-ex991_6.htm

EXHIBIT 99.1

Apptio Announces Results for the Second Quarter 2018

Reported Q2 revenue of $59 million, 31% growth year over year

Bellevue, WA (August 1, 2018) - Apptio, Inc. (NASDAQ:APTI), the business management system of record for hybrid IT, today announced results for the fiscal second quarter ended June 30, 2018.

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

Second Quarter Financial Summary

•

Subscription revenue was $49.2 million, an increase of 32% from the second quarter of 2017, and comprised 83% of total revenue. Services revenue was $9.8 million, an increase of 23% from the second quarter of 2017. Total revenue was $59.0 million, an increase of 31% from the second quarter of 2017.

•

GAAP gross margin was 67.5%, in line with the second quarter of 2017 GAAP gross margin of 67.9%. Non-GAAP gross margin of 70.3% improved from non-GAAP gross margin of 68.9% in the second quarter of 2017.

•

GAAP operating margin was negative 6.6%, improving from GAAP operating margin of negative 15.9% in the second quarter of 2017. Non-GAAP operating margin improved to 3.4%, as compared to non-GAAP operating margin of negative 7.7% in the second quarter of 2017.

•

GAAP net loss per basic and diluted share was $0.12 based on 43.9 million weighted average shares outstanding, compared to GAAP net loss per basic and diluted share of $0.18 based on 39.2 million weighted average shares outstanding in the second quarter of 2017.

•

Non-GAAP net income per diluted share was $0.01 based on 48.6 million weighted average shares outstanding, compared to non-GAAP net loss per basic and diluted share of $0.08 based on 39.2 million weighted average shares outstanding in the second quarter of 2017.

•

Cash, cash equivalents and marketable securities were approximately $254.9 million as of June 30, 2018.

Business Highlights

•

First Public Sector Summit in Washington, DC, involving close to 400 federal IT leaders

•

Launched early adopter program for federal agencies looking to leverage machine learning in Apptio deployments

•

Announced a new application, Apptio for Hybrid IT

•

Completed the fifth TBM European Summit in London, involving more than 400 customers and prospects across Europe

•

Welcomed Rebecca Jacoby to the Apptio Board of Directors

Financial Outlook

Apptio provides guidance based on current market conditions and expectations and actual results may differ materially. Please refer to the company’s comments below regarding Forward Looking Statements. Apptio is providing guidance for the third quarter ending September 30, 2018 and for the full year 2018 as follows:

Third quarter of 2018:

•

Total revenue is expected to be in the range of $57.5 to $58.5 million

•

Non-GAAP operating income between $1.0 and $2.0 million

Full year 2018:

•

Total revenue is expected to be in the range of $230 and $233 million

•

Non-GAAP operating income between $3.0 and $5.0 million

All forward-looking non-GAAP financial measures contained in this section titled "Financial Outlook" exclude the effects of stock-based compensation expense, acquisition-related expenses, and amortization of acquisition related intangible assets. Guidance reflects the February 2, 2018 contribution from Digital Fuel and the impact of the full retrospective adoption of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) on January 1, 2018.

Conference Call Information

Apptio plans to host a conference call today to discuss the results. The call is scheduled to begin at 2:00 p.m. PT/ 5:00 p.m. ET and can be accessed by dialing 844-233-0116 (passcode: 8357219), or if outside North America, by dialing 574-990-1011 (passcode: 8357219). Individuals may also access the live teleconference from the investor relations section of the Apptio website at investors.apptio.com. A replay will be available following completion of the live broadcast.

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

Forward-Looking Statements
This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding our strategy, prospects, customer demand, application adoption and our financial outlook for the third quarter of, and full year, 2018. Forward-looking statements are subject to risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward-looking statements. Actual results may differ materially from the results predicted, and reported results should not be considered as an indication of future performance. The potential risks and uncertainties that could cause actual results to differ from the results predicted include, among others, those risks and uncertainties included under the caption "Risk Factors" and elsewhere in our filings with the U.S. Securities and Exchange Commission, including, without limitation, the Form 10-Q filed with the SEC on May 7, 2018. All information provided in this release and in the attachments is as of the date hereof, and we undertake no duty to update this information unless required by law.

Non-GAAP Financial Measures
To supplement our condensed consolidated financial statements, which are prepared and presented in

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

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

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

Apptio, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2018			2017			2018			2017
				*As Adjusted						*As Adjusted

Revenue
Subscription	$	49,206		$	37,247		$	94,677		$	73,434
Professional services		9,839			7,978			18,438			15,722
Total revenue		59,045			45,225			113,115			89,156
Cost of revenue
Subscription		9,671			7,252			18,620			15,102
Professional services		9,544			7,267			18,009			14,836
Total cost of revenue		19,215			14,519			36,629			29,938
Gross profit		39,830			30,706			76,486			59,218
Operating expenses
Research and development		12,177			10,263			24,074			19,921
Sales and marketing		24,024			20,992			46,702			40,609
General and administrative		7,499			6,620			17,653			13,154
Total operating expenses		43,700			37,875			88,429			73,684
Loss from operations		(3,870	)		(7,169	)		(11,943	)		(14,466	)
Other (expense) income
Interest expense		(1,912	)		(10	)		(2,124	)		(20	)
Interest income		871			275			1,249			533
Other income (expense), net		10			(1	)		(28	)		(13	)
Foreign exchange (loss) gain		(576	)		119			(462	)		66
Loss before income taxes		(5,477	)		(6,786	)		(13,308	)		(13,900	)
Benefit from (provision for) income taxes		180			(126	)		(88	)		(151	)
Net loss	$	(5,297	)	$	(6,912	)	$	(13,396	)	$	(14,051	)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.12	)	$	(0.18	)	$	(0.31	)	$	(0.36	)
Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted		43,921			39,175			43,345			38,793

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

Apptio, Inc.

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

	June 30,			December 31,
	2018			2017
				*As Adjusted
Assets
Current assets
Cash and cash equivalents	$	174,994		$	55,069
Short-term investments		74,390			93,901
Accounts receivable, net of allowance for doubtful accounts
of $444 and $413		59,136			68,782
Deferred costs		13,705			11,898
Prepaid expenses and other current assets		4,824			5,079
Total current assets		327,049			234,729
Long-term assets
Property and equipment, net of accumulated depreciation
of $24,257 and $21,924		9,352			10,437
Long-term investments		5,493			--
Deferred costs, net of current portion		18,155			17,182
Acquisition-related intangible assets, net		19,008			--
Goodwill		31,004			--
Other long-term assets		989			983
Total assets	$	411,050		$	263,331
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	6,753		$	5,598
Accrued payroll and other expenses		16,484			16,481
Deferred revenue		118,346			116,831
Deferred rent		940			892
Capital leases		25			21
Total current liabilities		142,548			139,823
Long-term liabilities
Convertible senior notes, net		108,153			--
Deferred revenue, net of current portion		6,022			2,470
Deferred rent, net of current portion		2,987			3,483
Capital leases, net of current portion		110			26
Asset retirement obligation		198			199
Total liabilities		260,018			146,001

Stockholders’ equity
Class A and Class B Common stock		5			4
Additional paid-in capital		361,277			314,301
Accumulated other comprehensive income (loss)		11			(110	)
Accumulated deficit		(210,261	)		(196,865	)
Total stockholders’ equity		151,032			117,330
Total liabilities and stockholders' equity	$	411,050		$	263,331

*As adjusted for the year ended December 31, 2017 to reflect the adoption of Accounting Standards Update, ASU, No. 2014-09, Revenue from Contracts with Customers (Topic 606).

Apptio, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2018			2017			2018			2017
				*As Adjusted						*As Adjusted
Cash flows from operating activities
Net loss	$	(5,297	)	$	(6,912	)	$	(13,396	)	$	(14,051	)
Adjustments to reconcile net loss to net cash provided by operating activities
Depreciation and amortization		1,308			1,552			2,684			3,082
(Accretion of discounts)/amortization of premiums on investments		(195	)		31			(237	)		54
Amortization of acquisition-related intangible assets		909			--			1,492			--
Amortization of deferred costs		4,014			3,348			7,950			6,616
Amortization of debt discount and issuance costs		1,598			9			1,774			18
Loss (gain) on disposal of property and equipment		--			3			47			(4	)
Stock-based compensation		5,579			3,685			10,531			7,310
Other		(573	)		--			--			--
Foreign exchange loss (gain)		576			108			462			(66	)
Change in operating assets and liabilities, net of impact of business combination
Accounts receivable		(3,507	)		(12,768	)		15,508			7,330
Prepaid expenses and other assets		(1,658	)		1,191			89			1,481
Deferred costs		(5,255	)		(3,447	)		(8,163	)		(6,119	)
Accounts payable		(1,424	)		(758	)		839			1,037
Accrued expenses		1,464			(769	)		(1,328	)		(1,727	)
Deferred revenue		1,039			4,750			(9,674	)		(2,820	)
Deferred rent		(222	)		(198	)		(446	)		(398	)
Net cash (used in) provided by operating activities		(1,644	)		(10,175	)		8,132			1,743
Cash flows from investing activities
Business combination, net of cash acquired		(4,472	)		--			(39,041	)		--
Purchases of property and equipment		(716	)		(691	)		(1,396	)		(2,236	)
Proceeds from sale of equipment		--			--			--			9
Proceeds from maturities of investments		32,150			12,900			81,550			19,700
Purchases of investments		(48,425	)		(7,453	)		(67,218	)		(28,898	)
Return of (payments for) security deposits		81			(20	)		50			(29	)
Net cash (used in) provided by investing activities		(21,382	)		4,736			(26,055	)		(11,454	)
Cash flows from financing activities
Proceeds from borrowings on convertible notes, net of discounts and issuance costs		--			--			139,438			--
Purchase of capped calls		--			--			(17,092	)		--
Proceeds from exercises of common stock options		6,427			4,937			13,942			5,495
Payment of debt issuance fees		(465	)		--			(465	)		--
Proceeds from purchases of stock under employee stock purchase plan		2,391			2,251			2,391			2,251
Payment of initial public offering costs		--			--			--			(243	)
Principal payments on capital lease obligations		(7	)		(10	)		(13	)		(21	)
Net cash provided by financing activities		8,346			7,178			138,201			7,482
Foreign currency effect on cash, cash equivalents and restricted cash		(392	)		191			(353	)		56
Net (decrease) increase in cash, cash equivalents and restricted cash		(15,072	)		1,930			119,925			(2,173	)
Cash, cash equivalents and restricted cash
Beginning of period		190,066			37,904			55,069			42,007
End of period	$	174,994		$	39,834		$	174,994		$	39,834

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

Apptio, Inc.

Results of Operations GAAP to Non-GAAP Reconciliation

(In thousands, except per share data)

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2018			2017			2018			2017
				*As Adjusted						*As Adjusted
Revenue
Subscription	$	49,206		$	37,247		$	94,677		$	73,434
Professional services		9,839			7,978			18,438			15,722
Total revenue		59,045			45,225			113,115			89,156

Cost of revenue reconciliation:
GAAP subscription		9,671			7,252			18,620			15,102
Non-GAAP adjustment:
Stock-based compensation		(289	)		(240	)		(608	)		(597	)
Amortization of acquisition-related intangible assets		(909	)		--			(1,492	)		--
Non-GAAP subscription cost of revenue		8,473			7,012			16,520			14,505

GAAP professional services		9,544			7,267			18,009			14,836
Non-GAAP adjustment:
Stock-based compensation		(479	)		(230	)		(807	)		(548	)
Non-GAAP professional services cost of revenue	$	9,065		$	7,037		$	17,202		$	14,288

Gross profit and gross margin reconciliation:
GAAP subscription gross profit	$	39,535		$	29,995		$	76,057		$	58,332
Non-GAAP adjustment:
Stock-based compensation		289			240			608			597
Amortization of acquisition-related intangible assets		909			--			1,492			--
Non-GAAP subscription gross profit		40,733			30,235			78,157			58,929
GAAP subscription gross margin		80.3	%		80.5	%		80.3	%		79.4	%
Non-GAAP subscription gross margin		82.8	%		81.2	%		82.6	%		80.2	%

GAAP professional services gross profit		295			711			429			886
Non-GAAP adjustment:
Stock-based compensation		479			230			807			548
Non-GAAP professional services gross profit		774			941			1,236			1,434
GAAP professional services gross margin		3.0	%		8.9	%		2.3	%		5.6	%
Non-GAAP professional services gross margin		7.9	%		11.8	%		6.7	%		9.1	%

GAAP gross profit		39,830			30,706			76,486			59,218
Non-GAAP adjustment:
Stock-based compensation		768			470			1,415			1,145
Amortization of acquisition-related intangible assets		909			--			1,492			--
Non-GAAP gross profit	$	41,507		$	31,176		$	79,393		$	60,363
GAAP gross margin		67.5	%		67.9	%		67.6	%		66.4	%
Non-GAAP gross margin		70.3	%		68.9	%		70.2	%		67.7	%

Operating expenses reconciliation:
GAAP research and development	$	12,177		$	10,263		$	24,074		$	19,921
Non-GAAP adjustment:
Stock-based compensation		(1,399	)		(1,112	)		(2,792	)		(2,153	)
Non-GAAP research and development		10,778			9,151			21,282			17,768
As a % of total revenue, non-GAAP		18.3	%		20.2	%		18.8	%		19.9	%

GAAP sales and marketing		24,024			20,992			46,702			40,609
Non-GAAP adjustment:
Stock-based compensation		(1,706	)		(1,077	)		(3,136	)		(2,077	)
Non-GAAP sales and marketing		22,318			19,915			43,566			38,532
As a % of total revenue, non-GAAP		37.8	%		44.0	%		38.5	%		43.2	%

GAAP General and administrative		7,499			6,620			17,653			13,154
Non-GAAP adjustment:
Stock-based compensation		(1,706	)		(1,026	)		(3,188	)		(1,935	)
Acquisition-related expenses and purchase accounting adjustment		590			--			(1,949	)		--
Non-GAAP general and administrative		6,383			5,594			12,516			11,219
As a % of total revenue, non-GAAP		10.8	%		12.4	%		11.1	%		12.6	%

Loss from operations reconciliation:
GAAP loss from operations		(3,870	)		(7,169	)		(11,943	)		(14,466	)
Non-GAAP adjustment:
Stock-based compensation		5,579			3,685			10,531			7,310
Acquisition-related expenses and purchase accounting adjustment		(590	)		--			1,949			--
Amortization of acquisition-related intangible assets		909			--			1,492			--
Non-GAAP income (loss) from operations	$	2,028		$	(3,484	)	$	2,029		$	(7,156	)
Loss from operations as a percentage of revenue:
GAAP loss from operations		(6.6	%)		(15.9	%)		(10.6	%)		(16.2	%)
Non-GAAP income (loss) from operations		3.4	%		(7.7	%)		1.8	%		(8.0	%)

Net income (loss) reconciliation:
GAAP	$	(5,297	)	$	(6,912	)	$	(13,396	)	$	(14,051	)
Non-GAAP adjustment:
Stock-based compensation		5,579			3,685			10,531			7,310
Acquisition-related expenses and purchase accounting adjustment		(590	)		--			1,949			--
Amortization of acquisition-related intangible assets		909			--			1,492			--
Non-GAAP Net income (loss)	$	601		$	(3,227	)	$	576		$	(6,741	)


Weighted-average shares used in Non-GAAP basic net income (loss) per share		43,921			39,175			43,345			38,793
Effect of potentially dilutive shares		4,668			--			4,794			--
Weighted-average shares used in Non-GAAP diluted net income (loss) per share		48,589			39,175			48,139			38,793

Non-GAAP net income (loss) per share:
Basic	$	0.01		$	(0.08	)	$	0.01		$	(0.17	)
Diluted	$	0.01		$	(0.08	)	$	0.01		$	(0.17	)

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

Apptio, Inc.

Free Cash Flow Non-GAAP Reconciliation

(In thousands)

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2018			2017			2018			2017
				*As Adjusted						*As Adjusted

Net cash (used in) provided by operating activities	$	(1,644	)	$	(10,175	)	$	8,132		$	1,743
Less: purchases of property and equipment		(716	)		(691	)		(1,396	)		(2,236	)
Free cash flow	$	(2,360	)	$	(10,866	)	$	6,736		$	(493	)

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

© 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~~