Posted on Wednesday, Mar 7th 2018
Researchers estimate the global IT Business Management (ITBM) sector to grow at more than 20% annually over the next few years. The industry was estimated at a $2 billion market back in 2016. IT Business Management includes the IT Financial Management and Technology Business Management services. Bellevue, Washington-based Apptio (Nasdaq: APTI) is a leading vendor in the space.
Apptio recently announced its fourth quarter results that beat market expectations. Revenues for the quarter grew 18% over the year to $52.4 million, ahead of the Street’s forecast of $49.7 million. Adjusted net loss of $0.06 per share was also better than the market’s expected loss of $0.09 per share.
By segment, subscription revenues grew 21% to $42.6 million and accounted for 81% of total revenues. Services revenue grew 6% over the year to $9.8 million.
The company ended the year with revenues growing 17% to $188.5 million. Subscription revenues grew 19% to $155.4 million and services revenues increased 9% to $33.1 million. Non-GAAP net loss per share was $0.24 compared with a loss of $1.08 per share a year ago.
For the current quarter, Apptio forecast revenues of $51-$52 million with a net non GAAP loss of $2.5-$3 million. It expects to end the year with revenues of $220-$225 million and a break-even non GAAP operating income. Analysts estimate revenues at $51.65 million for the quarter and $223.08 million for the year.
Apptio recently announced the acquisition of Digital Fuel from global investment firm Skyview Capital for an estimated $42.5 million. Founded in 2000, Digital Fuel was a service level management provider that expanded to 2008 to IT financial management solutions. In 2011, Digital Fuel was acquired by VMware and integrated with VMware’s cloud management and infrastructure products to help provide customers with transparency and control over costs and quality of IT services. In 2016, it was acquired by private equity firm Skyview Capital. Today, the company offers Technology Business Management solutions focused on helping IT leaders deliver work more cost effectively.
The acquisition brings together the two leading players in the ITBM space. Post the acquisition, Digital Fuel will continue to operate as an independent business unit, but will offer its customers access to Apptio’s product family. Apptio’s customers will be able to leverage Digital Fuel’s product capabilities that include service level management and integration with VMware vSphere and cloud management solutions.
Questions for Apptio’s Board
Apptio’s recent acquisition of Digital Fuel is representative of the unprecedented opportunity available to the SaaS players these days both on the buy-side and the sell-side. The increased number of sizable SaaS players has led to a wider array of lucrative exit options for companies. And for those SaaS players, there are many acquisition targets ready for picking. Digital Fuel will help Apptio benefit from a deeper integration with VMWare products. A recent report by Gartner on the ITFM market suggested that the industry is nascent and was forecast to grow at 17% annually. Gartner believes that there are several other smaller players in the market. What other capabilities and players is Apptio looking to add to its arsenal? Both Apptio and Digital Fuel were vendors of choice for North American enterprises. Is Apptio looking at international acquisitions to help expand its geographic reach?
The market is pleased with Apptio’s moves. Its stock is currently trading at 52-week high levels of $29.59 with a market capitalization of $1.3 billion. It had fallen to a 52-week low of $10.77 in April last year. The stock had listed in 2016 at $16 and a valuation of $610 million. Since then, it has steadily climbed from its pre-listing valuation of $600 million and has crossed Unicorn levels.
This segment is a part in the series : Billion Dollar Unicorns
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