Prospectus Summary
PROSPECTUS SUMMARY This summary highlights selected information contained elsewhere in this prospectus and is qualified in its entirety by the more detailed information and financial statements included elsewhere in this prospectus. It does not contain all of the information that may be important to you and your investment decision. You should carefully read this entire prospectus, including the matters set forth under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes.Overview
We are the leading provider of Technology Business Management, or TBM, solutions. We pioneered the TBM software category to provide the strategic business management system for the CIO because IT needed a data-driven system comparable to those leveraged by other enterprise functions such as sales, human resources and finance. Our cloud-based platform and SaaS applications enable IT leaders to analyze, optimize and plan technology investments, and to benchmark their financial and operational performance against peers. We empower IT leaders to transform IT into a service provider, to navigate the cloud transition, and to shift technology resources to drive more business innovation.
Our TBM solutions consist of a powerful, cloud-based platform and a suite of SaaS applications: Cost Transparency, IT Benchmarking, Business Insights, Bill of IT and IT Planning. Our data and analytics platform leverages proprietary modeling capabilities, powerful self-service analytics and planning workflows to enable customers to make actionable, data-driven strategic and operational decisions. Our platform automatically aggregates, cleanses and establishes relationships across large amounts of customer data from disparate sources and maps the data into our standard IT operating model. Our solutions are the business system of record for our customers’ IT organizations.
Our growing customer base, which includes over 40% of the FORTUNE 100, spans a broad spectrum of industries, including financial services, professional services, technology, energy, consumer goods, manufacturing, healthcare, media, retail and transportation, as well as federal and state government agencies. We offer our solutions on a subscription basis, with subscription fees based on spend managed by our applications and the number of applications or capabilities for which the customer has subscribed. Our customers’ annual IT spend ranges from less than $10 million to billions of dollars.
We formed the Technology Business Management Council, or TBM Council, as a separate non-profit entity in 2012 to foster the growth of the TBM category. The TBM Council has become the leading community for CIOs, IT professionals and IT finance professionals dedicated to advancing the discipline of managing the business of IT, with over 2,900 members. This community establishes industry-endorsed best practices for TBM and helps create a powerful network effect for TBM solutions.
We had total revenue of $73.8 million, $106.6 million and $129.3 million in 2013, 2014 and 2015, respectively, reflecting a year-over-year increase of 45% and 21% in 2014 and 2015, respectively. For 2013, 2014 and 2015, our net losses were $23.7 million, $32.9 million and $41.0 million, respectively, as we focused on growing our business.
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Industry Background
Digitalization of business processes has increasingly made technology a strategic priority for enterprises of all sizes and across industries. Rapid innovation in technology, particularly the emergence of cloud computing, is simultaneously increasing the complexity of technology decision making and fundamentally transforming the way IT services are delivered. To gain and maintain a competitive advantage, IT leaders must focus more time and resources on transforming their IT business, and less time managing legacy infrastructure and applications.
In today’s world, IT professionals must not only measure and manage traditional infrastructure, but also a wide array of modern IT options, such as cloud computing and IT purchased directly by business units. IT leaders are faced with the need to evaluate hybrid approaches to IT, using a mixture of public cloud, private cloud and owned infrastructure solutions in order to best suit their application, workload and business needs.
The challenge with traditional approaches to managing IT is that technology and business leaders do not always have the data and analytics to understand how technology spending and services align to business priorities. The IT function has historically lacked the insight into costs, capacity, and utilization necessary to make data-driven decisions. However, business and IT leaders desire the ability to make fast decisions, drive innovation and adopt new technology to drive better business results, while also demanding better control, cost management and asset utilization. In order to be aligned on objectives, business and IT leaders need data and analytical solutions to drive optimal business results. The benefits the cloud provides in agility and cost are driving greater urgency by IT leaders to adopt solutions enabling them to understand their existing infrastructure and make decisions on how their infrastructure needs evolve as part of an ongoing transition.
Given these factors, we believe that there is significant pent up demand for a single system of record to manage the business of IT.
Our Opportunity
We believe the total addressable market for TBM solutions is large and largely unpenetrated. The total addressable market for our solutions is driven by global IT spend, which Gartner, an independent technology industry and market research firm, expects to be $2.7 trillion in 2016, which is the sum of all enterprise IT spending by vertical industry market worldwide.1 Subscription fees for our applications are based primarily on the customer’s annual costs being managed by our applications and the number of applications or capabilities for which the customer has subscribed. We typically sell a subset of the five applications we offer so that customers can realize a rapid time to value from a targeted implementation, and seek to sell additional applications over time. Assuming full deployment of all of our current applications, subscription fees typically range from 0.1% to 0.5% of a customer’s annual IT spend. With a reasonable expectation of our ability to penetrate the market, we believe that the current total addressable market for our existing TBM solutions is approximately $6 billion.
We also believe that, with the development of additional capabilities and applications, our platform can be extended to other areas of customers’ businesses. In fact, our solutions are currently deployed by several customers to address a variety of non-IT, enterprise business management use cases in shared services such as legal, human resources and facilities and for analyzing operational
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metrics, and we believe that enterprise business management use cases such as these represent future market opportunities. If we are successful in our strategy of developing and selling additional applications beyond our current offerings, we believe that our market opportunity will expand.
Our Technology Business Management Solutions
We provide the business system of record used by our customers’ IT organizations to analyze, optimize and plan investments, and benchmark their financial and operational performance against peers. Our TBM solutions consist of a powerful, cloud-based platform and a suite of SaaS applications that empower IT leaders to understand, communicate and transform IT to drive greater value from technology investments.
Key elements of our solutions include:
Our platform provides the following benefits:
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Our Competitive Strengths
The following strengths are key to our success:
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Our Growth Strategy
We are pursuing the following strategies to grow our business:
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Risks Associated with Our Business
Our business is subject to numerous risks and uncertainties, including those highlighted in the section of this prospectus captioned “Risk Factors” immediately following this prospectus summary. Some of these risks are:
Corporate Information
We were incorporated in Delaware in October 2007. Our principal executive offices are located at 11100 NE 8th Street, Suite 600, Bellevue, Washington 98004. Our telephone number is (866) 470-0320. Our website address is www.apptio.com. Information contained on, or that can be accessed through, our website does not constitute part of this prospectus and inclusions of our website address in this prospectus are inactive textual references only.
Unless the context indicates otherwise, as used in this prospectus, the terms “Apptio,” “the Company,” “we,” “us” and “our” refer to Apptio, Inc. and its subsidiaries, Apptio Europe Limited, Apptio GmbH, Apptio Nordic ApS, Apptio NL B.V., Apptio Pty Ltd and Apptio Technology Canada Ltd. We use “APPTIO®”, “APPTIO TBM UNIFIED MODEL®”, “ATUM®”, the Dissolving Circle Logo Design and other marks as trademarks in the United States and other countries. This prospectus contains references to our trademarks and to those belonging to other entities. Solely for convenience, trademarks and trade names referred to in this prospectus, including logos, artwork and other visual displays, may appear without the ® or ™ symbols, but such references are not intended to indicate in any way that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other entities’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other entity.
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Additionally, we are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act, or the JOBS Act, and therefore we may take advantage of certain exemptions from various public company reporting requirements, including not being required to have our internal control over financial reporting audited by our independent registered public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute payments. In addition, the JOBS Act provides that an “emerging growth company” can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to avail ourselves of this exemption and, therefore, we will not be subject to the same implementation timing of new or revised accounting standards as other public companies that are not “emerging growth companies” until these standards apply to private companies unless we elect to early adopt as permitted by the relevant guidance for private companies.
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The Offering
Each $1.00 increase (decrease) in the assumed initial price to public of $ per share, would increase (decrease) the net proceeds to us from this offering by approximately $ , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. Each increase (decrease) of in the number of shares offered by us would increase (decrease) the net proceeds to us from this offering by approximately $ , assuming that the assumed initial price to public remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We do not expect that a change in the initial price to public or the number of shares by these amounts would have a material effect on our uses of the proceeds from this offering, although it may accelerate the time at which we will need to seek additional capital.
We intend to use the net proceeds from this offering to repay $ million principal amount of term borrowings under our credit facilities and the remainder for working capital and other general corporate purposes, including making investments in our sales, marketing, professional services and product development organizations. Additionally, we may choose to expand our current business through acquisitions of or -8- investments in other complementary businesses, technologies, or other assets. However, we currently have no agreements or commitments with respect to any such acquisitions or investments. See the section of this prospectus captioned “Use of Proceeds” for additional information.
Shares of Class B common stock are entitled to 10 votes per share. Holders of Class A common stock and Class B common stock will generally vote together as a single class, unless otherwise required by law or our certificate of incorporation. The holders of our outstanding Class B common stock will hold approximately % of the voting power of our outstanding capital stock following this offering and will have the ability to control the outcome of matters submitted to our stockholders for approval, including the election of our directors and the approval of any change in control transaction. See the sections of this prospectus captioned “Principal Stockholders” and “Description of Capital Stock” for additional information.Prior to the closing of this offering, we had one class of common stock. Upon the closing of this offering, we will have authorized a new class of Class A common stock and a new class of Class B common stock. All currently outstanding shares of common stock and convertible preferred stock (including shares issuable upon the exercise of the warrants described below) will convert into shares of new Class B common stock. In addition, all currently outstanding options to purchase shares of capital stock will become exercisable for shares of new Class B common stock.
The number of shares of common stock to be outstanding following this offering is based on 31,285,839 shares of common stock outstanding as of June 30, 2016, and excludes:
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which will become effective on the business day immediately prior to the date of effectiveness of the registration statement of which this prospectus forms a part; and
Unless otherwise indicated, other than in our consolidated financial statements, this prospectus reflects and assumes the following:
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Summary Consolidated Financial Data
We derived the following summary consolidated statements of operations data for the years ended December 31, 2014 and 2015 from audited consolidated financial statements appearing elsewhere in this prospectus. We derived the following summary consolidated statement of operations data for the year ended December 31, 2013 from audited consolidated financial statements not included in this prospectus. We derived the following summary consolidated statements of operations data for the six months ended June 30, 2015 and 2016 and the summary consolidated balance sheet data as of June 30, 2016 from unaudited consolidated financial statements appearing elsewhere in this prospectus. In the opinion of management, the unaudited consolidated financial statements reflect all adjustments, which include normal recurring adjustments, necessary for a fair presentation of the financial statements. Historical results are not necessarily indicative of the results that may be expected in the future and the results for the six months ended June 30, 2016 are not necessarily indicative of the results that may be expected for the full year or any other period. The summary financial data set forth below should be read together with the financial statements and the related notes to those statements, as well as the sections of this prospectus captioned “Selected Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
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Non-GAAP Financial Measures
In addition to our results determined in accordance with U.S. generally accepted accounting principles, or GAAP, we believe the following non-GAAP measure is useful in evaluating our business performance. We regularly review the liquidity measure set forth below.
We believe free cash flow facilitates period-to-period comparisons of liquidity. We consider free cash flow to be an important measure because it measures the amount of cash we generate from our operations after our capital expenditures and reflects changes in working capital. We use free cash flow in conjunction with traditional GAAP measures as part of our overall assessment of our liquidity, including the preparation of our annual operating budget and quarterly forecasts, to evaluate the effectiveness of our business strategies and to communicate with our board of directors concerning our liquidity.
Our definitions may differ from the definitions used by other companies and therefore comparability may be limited. In addition, other companies may not publish these or similar metrics. Thus, our free cash flow should be considered in addition to, not as a substitute for, or in isolation from, measures prepared in accordance with GAAP.
We compensate for these limitations by providing investors and other users of our financial information reconciliations of free cash flow to the related GAAP financial measure, net cash used in operating activities. We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure and to view free cash flow in conjunction with the related GAAP financial measure.
The following table provides a reconciliation of net cash used in operating activities to free cash flow.
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