Apptio, Inc. (NASDAQ:APTI) Q3 2018 Earnings Conference Call Transcript

Oct 29, 2018 • 12:00 am ET

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Apptio, Inc. (NASDAQ:APTI) Q3 2018 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good day, ladies and gentlemen, and welcome to the Q3 2018 Apptio Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, today's conference is being recorded.

I would now like to turn the call over to Drew Laxton, Director of IR. Sir, you may begin.

Executive
Drew Laxton

Thank you. Good afternoon, everyone, and welcome to Apptio's third quarter 2018 earnings call. Joining me on the call today are Sunny Gupta, our CEO; and Kurt Shintaffer, our CFO.

Our press release was issued today after close of market and is posted on our corporate website, where the call is being simultaneously webcast. The webcast replay of the call will be available under the IR link of our website at investors.apptio.com.

(Forward-Looking Cautionary Statements)

During the call today, we will review our third quarter 2018 financial results and discuss our guidance for Q4 and full year 2018. All financial figures we discuss are non-GAAP except for revenues and balance sheet data. These non-GAAP financial measures, which we believe are useful in measuring Apptio's performance and liquidity, should be considered in addition to, not as a substitute for, or in isolation from GAAP results. Our non-GAAP measures, except for free cash flow, exclude the effect of stock-based compensation expense, acquisition-related expenses and amortization of acquisition-related intangible assets. We define free cash flow as cash used in operating activities less purchases of property and equipment. To see the reconciliation between the historical non-GAAP and GAAP results, please refer to our earnings press releases, which are posted on the IR page of our website.

With that, I'll hand it over to Sunny.

Executive
Sachin Gupta

Thanks, Drew, and welcome, everyone. I'm happy to report strong results for the third quarter, highlighted by 26% year-over-year revenue growth and $4 million of non-GAAP operating income. We had a solid contribution from our strategic segment. Continued strength in our upsells sales motion, progress addressing Global 10,000 customers and our public sector business. I'm also excited about our recent acquisition of FittedCloud, which I will expand on more today.

The move of enterprises towards digital, powered by the adoption of cloud and agile development models is serving as a catalyst for companies of all sizes to adopt Apptio TBM applications. Apptio remains in the unique position to help customers manage hybrid IT workloads. IT is an extremely complex function in the enterprise, and the business of technology cannot be managed on spreadsheets.

I'll discuss four areas in detail today: an update on our strategic segment, upsell motion, downmarket expansion strategy and continued innovation in helping IT leaders understand and optimize their cloud spend. First, I wanted to start by saying we were pleased with the contribution from our strategic segment this quarter. As a reminder, these are customers with over $20 billion in revenue. One of our largest transactions in the segment for the quarter was with a Fortune 5 customer