Still in the Red, Apptio Eyes $75M IPO for IT Management Business
Apptio, a top IPO prospect from the Seattle tech industry, is taking the plunge. The company filed paperwork late last week to raise up to $75 million.
Apptio, co-founded in 2007 by CEO Sunny Gupta and CFO Kurt Shintaffer, makes cloud-based software, sold as a subscription, to help businesses understand and plan their IT spending. (Gupta is pictured, top right, Shintaffer at left.)
Earlier this summer, Seattle-based Impinj went public, raising $67.2 million and breaking a drought for the region’s tech industry that stretched back to 2014.
Appito is growing fast by equipping corporate technology leaders to address several generational shifts occurring on their watch, including: the ongoing transition to cloud computing; IT’s growing function as a driver of business innovation, rather than just an enabler; and new procurement practices that make it easier for departments to acquire technology without help of the IT department.
The $75.6 million in revenue Apptio reported through the first half of 2016 exceeded its full-year revenue in 2013 (the earliest financial information Apptio released in its IPO filing). But as Apptio’s revenues have grown over the last three years, its losses have mounted too. Apptio’s accumulated deficit was $183.7 million at June 30, according to the company’s offering prospectus, which is the source of the Apptio company data that follows.
The company says in its prospectus that it expects operating expenses to continue increasing as it invests in product development and sales and marketing. “We expect to incur losses for the foreseeable future and may not be able to achieve or sustain profitability,” it warns.
Apptio says it had more than 325 customers as of June 30, up from 250 the year earlier. It initially targeted companies that spend more than $100 million a year on IT, pitching them a full suite of technology management software. In 2014, it began selling to smaller companies, offering them individual applications.
A growing share of its business (24 percent of revenue during the last six months) comes from customers outside of North America.
Apptio, headquartered in Bellevue, WA, had 694 employees as of June 30, up from 628 a year earlier. Among 13 executive officers and board directors named in its prospectus, one is a woman—Barbara Gordon, whose appointment as chief customer officer was announced last month. The prospectus provides no other data about the composition of its workforce.
The company has raised $136 million in venture capital—including $95 million across two late-stage rounds in 2012 and 2013. Investors, and their percentage stakes in the company, include: Madrona Venture Group (16.6 percent); Greylock Partners (16.5 percent); and Shasta Ventures (9.5 percent). Other backers include Andreessen Horowitz and T. Rowe Price.
Apptio says the IPO would serve to create a market for its stock, facilitate access to capital in the future, build brand awareness, repay indebtedness (the company lists some $19.4 million in long-term debt), provide working capital, and be used for other general corporate purposes. Its shares would trade on the NASDAQ Global Market under the ticker symbol APTI.
Apptio has been viewed as one of the Seattle area’s top tech IPO prospects for several years. The company first filed formal paperwork in preparation for selling shares to the public last summer. Its draft registration statement and amendments were kept confidential—something it can do under JOBS Act rules meant to make the path to the public markets less burdensome for so-called emerging growth companies.
Even as Apptio increased its revenue by 75 percent from $73.8 million in 2013 to $129.3 million in 2015, its net loss climbed along with it. The company reported a net loss of $41 million in 2015, 73 percent higher than the $24 million it had in 2013.
Things have improved slightly in 2016. The company reported a net loss of $14.9 million through the first half of 2016, compared with $18.4 million during the same period a year ago.