8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 2, 2016

Apptio, Inc.

(Exact name of Registrant as Specified in Its Charter)

Delaware	001-37885	26-1175252
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)
11100 NE 8th Street, Suite 600 Bellevue, WA		98004
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code: (866) 470-0320

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition.

On November 2, 2016, Apptio, Inc. (the “Company”) issued a press release announcing its financial results for the quarterly period ended September 30, 2016. A copy of the press release is furnished herewith as Exhibit 99.1.

The information furnished under this Item 2.02 and in the accompanying Exhibit 99.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference in such filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit Number	Description
99.1	Press release issued by Apptio, Inc. dated November 2, 2016.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Company Name
Date: November 2, 2016	By:	/s/ Kurt Shintaffer
		Kurt Shintaffer
		Chief Financial Officer

Exhibit Index

Exhibit Number	Description
99.1	Press release issued by Apptio, Inc. dated November 2, 2016.

EX-99.1

EXHIBIT 99.1

Apptio Announces Results for the Third Quarter of 2016

Q3 subscription revenue of $33.3 million, up 30% year-over-year

Bellevue, WA (November 2, 2016) - Apptio, Inc. (NASDAQ:APTI), the leading provider of cloud-based Technology Business Management (TBM) software, today announced results for the third quarter ended September 30, 2016.

"The momentum continues to build for Apptio and the TBM category. This quarter, we generated record quarterly revenues of over $40 million and significantly improved operating margins while acquiring new customers across the Global 10,000” said Sunny Gupta, co-founder and CEO, Apptio. "The global trends of digitalization and cloud migration are a tailwind for our large and growing market.  In the third quarter, we successfully completed our IPO, continued to innovate across our product portfolio and extended our market leadership.”

Third Quarter Financial Summary

• Subscription revenue was $33.3 million,an increaseof 30% from the third quarter of 2015, and comprised 82% of total revenue. Services revenue was $7.3 million, an increase of 10% from the third quarter of 2015.  Total revenues were $40.6 million, an increase of 26% from the third quarter of 2015.

• GAAP gross margins grew to 66% as compared to 60% in the third quarter of 2015.  Non-GAAP gross margins grew to 67%, as compared to 61% in the third quarter of 2015.

• GAAP operating loss was $7.0 million, an improvement from an operating loss of $9.4 million in the third quarter of 2015. Non-GAAP operating loss was $4.5 million, compared to a Non-GAAP operating loss of $7.4 million in the third quarter of 2015. 

• GAAP net loss per basic and diluted share was $0.63 based on 13.9 million weighted average shares outstanding, compared to a GAAP net loss per basic and diluted share of $0.77 based on 12.8 million weighted average shares outstanding in the third quarter of 2015.

• Non-GAAP net loss per basic and diluted share was $0.45 based on 13.9 million weighted average shares outstanding, compared to a non-GAAP net loss per basic and diluted share of $0.61 based on 12.8 million weighted average shares outstanding in the third quarter of 2015.

• For the nine months ended September 30, 2016, net cash used in operating activities was $2.2 million as compared to $8.8 million in the comparable period last year.  Free cash flow was negative $5.7 million, as compared to negative $15.4 million in the nine months ended September 30, 2015.

• Cash, cash equivalents and marketable securities were approximately $122.5 million as of September 30, 2016.  As of September 30, 2016 there was no outstanding bank debt.

Recent Business Highlights

• Completed our initial public offering and began trading on the NASDAQ on September 23, 2016. Net proceeds from the IPO were approximately $99.1 million, after underwriting discounts and commissions and other offering expenses.

• Experienced continued success selling additional applications to existing accounts and expanding customers’ spend managed through Apptio.  

• Released significant enhancements to our SaaS platform and Cost Transparency application to increase user productivity, improve our visual cost modeling and data management capabilities, and continue lowering deployment times.

• Released our new Apptio Vendor Insights product, which provides IT leaders with a single location for all vendor spend and contract details.

• Experienced a significant increase in the adoption of cloud Infrastructure as a Service functionality across both our new and existing customers. With our cloud solution, customers can see an integrated view across all IT spend, including cloud.

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 fourth quarter ending December 31, 2016 and for the full year 2016 as follows:

Fourth quarter of 2016:

• Total revenue is expected to be in the range of $41.5 to $42.5 million

• Non-GAAP operating loss between $8.0 and $9.0 million

Full year 2016:

• Total revenue is expected to be in the range of $157.7 and $158.7 million

• Non-GAAP operating loss between $21.9 and $22.9 million

All forward-looking non-GAAP financial measures contained in this section titled "Financial Outlook" exclude the effects of stock-based compensation expense.

Conference Call Information

Apptio plans to host a conference call today to review its third quarter financial results and to discuss its financial outlook. 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: 98784993), or if outside North America, by dialing 574-990-1011 (passcode: 98784993). 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 ApptioApptio (NASDAQ: APTI) is the CIO's business management system. We build advanced data and analytics applications that help IT leaders make informed decisions about their technology investments, capitalize on the cloud transformation and drive innovation within their organizations. We call it Technology Business Management. Our applications help companies align technology spending to business outcomes and automate IT processes like cost transparency, benchmarking, charge-back and planning. Hundreds of customers, including more than 40 percent of the Fortune 100, use Apptio as their business system of record for 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 fourth quarter of, and full year, 2016.  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 prospectus filed pursuant to Rule 424(b) under the Securities Act of 1993 with the SEC on September 23, 2016.  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 and free cash flow. In computing non-GAAP operating loss and non-GAAP gross margin, 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						Nine Months Ended
	September 30,						September 30,
	2016			2015			2016			2015
Revenue
Subscription	$	33,314		$	25,594		$	94,995		$	72,836
Professional services		7,313			6,660			21,254			21,573
Total revenue		40,627			32,254			116,249			94,409
Cost of revenue
Subscription		6,921			6,173			19,960			17,315
Professional services		7,068			6,684			19,780			19,720
Total cost of revenue		13,989			12,857			39,740			37,035
Gross profit		26,638			19,397			76,509			57,374
Operating expenses
Research and development		9,015			7,928			26,072			22,602
Sales and marketing		18,300			15,855			54,256			49,129
General and administrative		6,285			5,023			16,969			12,721
Total operating expenses		33,600			28,806			97,297			84,452
Loss from operations		(6,962	)		(9,409	)		(20,788	)		(27,078	)
Other income (expense)
Interest (expense) income and other, net		(1,312	)		(18	)		(1,746	)		1
Foreign exchange loss		(367	)		(351	)		(774	)		(958	)
Loss before provision for income taxes		(8,641	)		(9,778	)		(23,308	)		(28,035	)
Provision for income taxes		(114	)		(87	)		(328	)		(236	)
Net loss	$	(8,755	)	$	(9,865	)	$	(23,636	)	$	(28,271	)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.63	)	$	(0.77	)	$	(1.78	)	$	(2.25	)
Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted		13,884			12,754			13,307			12,575

Apptio, Inc.

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

	September 30,			December 31,
	2016			2015
Assets
Current assets
Cash and cash equivalents	$	111,712		$	17,256
Short-term investments		10,818			6,260
Accounts receivable, net of allowance for doubtful accounts
of $215 and $289		42,585			52,887
Prepaid expenses and other current assets		5,249			3,990
Total current assets		170,364			80,393
Long-term assets
Property and equipment, net		13,058			13,487
Restricted cash		--			2,500
Deferred initial public offering costs		--			1,973
Other long-term assets, net		616			798
Total assets	$	184,038		$	99,151
Liabilities, Convertible Preferred Stock and Stockholders’ Equity (Deficit)
Current liabilities
Accounts payable	$	6,375		$	3,462
Accrued payroll and other expenses		12,456			14,732
Deferred revenue		81,415			82,422
Deferred rent		784			613
Capital leases		42			42
Total current liabilities		101,072			101,271
Long-term liabilities
Deferred revenue, net of current portion		2,346			803
Deferred rent, net of current portion		4,540			4,810
Capital leases, net of current portion		62			95
Preferred stock warrant liability		--			414
Asset retirement obligation		184			210
Total liabilities		108,204			107,603
Convertible preferred stock		--			133,809
Stockholders’ equity (deficit)
Class A and Class B Common stock		4			1
Additional paid-in capital		268,240			26,509
Accumulated other comprehensive loss		(3	)		--
Accumulated deficit		(192,407	)		(168,771	)
Total stockholders’ equity (deficit)		75,834			(142,261	)
Total liabilities, convertible preferred stock and stockholders' equity (deficit)	$	184,038		$	99,151

Apptio, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2016			2015			2016			2015
Cash flows from operating activities
Net loss	$	(8,755	)	$	(9,865	)	$	(23,636	)	$	(28,271	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization		1,502			1,728			4,487			4,916
Amortization of premiums on investments		5			23			20			67
Loss (gain) on disposal of property and equipment		1			--			26			(12	)
Stock-based compensation		2,487			2,022			6,902			5,877
Accretion of expense on line of credit fees		55			27			127			39
Loss on extinguishment of debt		722			--			722			--
Remeasurement of preferred stock warrant liability		210			10			202			57
Change in operating assets and liabilities
Accounts receivable		1,759			(1,075	)		10,302			14,689
Prepaid expenses and other assets		101			(651	)		(660	)		(2,167	)
Accounts payable		173			2,193			1,648			812
Accrued expenses		(500	)		(2,020	)		(2,442	)		(2,199	)
Deferred revenue		1,576			2,105			535			(2,959	)
Deferred rent		(115	)		55			(421	)		391
Net cash used in operating activities		(779	)		(5,448	)		(2,188	)		(8,760	)
Cash flows from investing activities
Purchases of property and equipment		(1,198	)		(1,877	)		(3,518	)		(6,636	)
Proceeds from maturities of investments		--			2,200			6,245			13,309
Purchases of investments		(10,826	)		--			(10,826	)		(2,017	)
(Payment) return of security deposits		9			7			(43	)		157
Return of restricted cash		--			--			2,500			85
Net cash (used in) provided by investing activities		(12,015	)		330			(5,642	)		4,898
Cash flows from financing activities
Proceeds from initial public offering, net of underwriting discounts		102,672			--			102,672			--
Payment of deferred initial public offering costs		(356	)		(418	)		(574	)		(418	)
Proceeds from long-term debt		--			--			20,000			--
Principal payments on long-term debt		(20,000	)		--			(20,000	)		--
Payment of debt prepayment fees		(200	)		--			(200	)		--
Proceeds from exercise of common stock options		489			613			1,000			2,335
Principal payments on capital lease obligations		(10	)		(9	)		(33	)		(36	)
Payment of capitalized loan fees		(12	)		(9	)		(248	)		(78	)
Net cash provided by financing activities		82,583			177			102,617			1,803
Foreign currency effect on cash and cash equivalents		(129	)		(26	)		(331	)		(77	)
Net increase (decrease) in cash and cash equivalents		69,660			(4,967	)		94,456			(2,136	)
Cash and cash equivalents
Beginning of year		42,052			22,517			17,256			19,686
End of year	$	111,712		$	17,550		$	111,712		$	17,550
Supplemental disclosures
Purchases under capital lease obligations	$	--		$	--		$	--		$	102
Property and furniture additions in accounts payable and accrued expenses		419			37			419			37
Leasehold improvements paid directly by lessor		356			--			356			--
Non-cash debt issuance costs		--			--			285			90
Deferred initial public offering cost accruals		794			1,163			1,004			1,163
Non-cash preferred stock warrant exercise		616			--			616			--

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,
	2016			2015			2016			2015
Revenue
Subscription	$	33,314		$	25,594		$	94,995		$	72,836
Professional services		7,313			6,660			21,254			21,573
Total revenue		40,627			32,254			116,249			94,409
Cost of revenue reconciliation:
GAAP Subscription		6,921			6,173			19,960			17,315
Non-GAAP adjustment:
Stock-based compensation		(232	)		(145	)		(564	)		(341	)
Non-GAAP subscription cost of revenue		6,689			6,028			19,396			16,974
GAAP Professional services		7,068			6,684			19,780			19,720
Non-GAAP adjustment:
Stock-based compensation		(190	)		(179	)		(557	)		(574	)
Non-GAAP professional services cost of revenue	$	6,878		$	6,505		$	19,223		$	19,146
Gross profit and gross margin reconciliation:
GAAP Subscription gross profit	$	26,393		$	19,421		$	75,035		$	55,521
Non-GAAP adjustment:
Stock-based compensation		232			145			564			341
Non-GAAP Subscription gross profit		26,625			19,566			75,599			55,862
GAAP Subscription gross margin		79.2	%		75.9	%		79.0	%		76.2	%
Non-GAAP Subscription gross margin		79.9	%		76.4	%		79.6	%		76.7	%
GAAP Professional services gross profit		245			(24	)		1,474			1,853
Non-GAAP adjustment:
Stock-based compensation		190			179			557			574
Non-GAAP Professional services gross profit		435			155			2,031			2,427
GAAP Professional services gross margin		3.4	%		(0.4	%)		6.9	%		8.6	%
Non-GAAP Professional services gross margin		5.9	%		2.3	%		9.6	%		11.3	%
GAAP gross profit		26,638			19,397			76,509			57,374
Non-GAAP adjustment:
Stock-based compensation		422			324			1,121			915
Non-GAAP gross profit	$	27,060		$	19,721		$	77,630		$	58,289
GAAP  gross margin		65.6	%		60.1	%		65.8	%		60.8	%
Non-GAAP gross margin		66.6	%		61.1	%		66.8	%		61.7	%
Operating expenses reconciliation:
GAAP Research and development	$	9,015		$	7,928		$	26,072		$	22,602
Non-GAAP adjustment:
Stock-based compensation		(698	)		(577	)		(1,965	)		(1,737	)
Non-GAAP research and development		8,317			7,351			24,107			20,865
As a % of total revenue, non-GAAP		20.5	%		22.8	%		20.7	%		22.1	%
GAAP Sales and marketing		18,300			15,855			54,256			49,129
Non-GAAP adjustment:
Stock-based compensation		(735	)		(623	)		(2,176	)		(1,833	)
Non-GAAP sales and marketing		17,565			15,232			52,080			47,296
As a % of total revenue, non-GAAP		43.2	%		47.2	%		44.8	%		50.1	%
GAAP General and administrative		6,285			5,023			16,969			12,721
Non-GAAP adjustment:
Stock-based compensation		(632	)		(498	)		(1,640	)		(1,392	)
Non-GAAP General and administrative		5,653			4,525			15,329			11,329
As a % of total revenue, non-GAAP		13.9	%		14.0	%		13.2	%		12.0	%

Loss from operations reconciliation:
GAAP loss from operations		(6,962	)		(9,409	)		(20,788	)		(27,078	)
Non-GAAP adjustment:
Stock-based compensation		2,487			2,022			6,902			5,877
Non-GAAP loss from operations	$	(4,475	)	$	(7,387	)	$	(13,886	)	$	(21,201	)
Loss from operations as a percentage of revenue:
GAAP loss from operations		(17.1	%)		(29.2	%)		(17.9	%)		(28.7	%)
Non-GAAP loss from operations		(11.0	%)		(22.9	%)		(11.9	%)		(22.5	%)
Net loss reconciliation:
GAAP	$	(8,755	)	$	(9,865	)	$	(23,636	)	$	(28,271	)
Non-GAAP adjustment:
Stock-based compensation		2,487			2,022			6,902			5,877
Non-GAAP Net loss	$	(6,268	)	$	(7,843	)	$	(16,734	)	$	(22,394	)
Basic and diluted net loss per share
reconciliation:
GAAP	$	(0.63	)	$	(0.77	)	$	(1.78	)	$	(2.25	)
Non-GAAP	$	(0.45	)	$	(0.61	)	$	(1.26	)	$	(1.78	)
Shares used to compute basic and diluted GAAP
and Non-GAAP net loss per share		13,884			12,754			13,307			12,575

Apptio, Inc.

Free Cash Flow Non-GAAP Reconciliation

(In thousands)

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2016			2015			2016			2015
Net cash used in operating activities	$	(779	)	$	(5,448	)	$	(2,188	)	$	(8,760	)
Less: purchases of property and equipment		(1,198	)		(1,877	)		(3,518	)		(6,636	)
Free cash flow	$	(1,977	)	$	(7,325	)	$	(5,706	)	$	(15,396	)

© 2016. 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) 974-1331  

pr@apptio.com