OREANDA-NEWS. May 26, 2016. Apigee (NASDAQ:APIC), developer of a leading cloud native API platform for digital business, today announced financial results for the third fiscal quarter ended April 30, 2016.

We are pleased to deliver another solid quarter of revenue and billings growth, driving us closer to our goal of achieving positive operating cash flow by the quarter ending January 2017, said Chet Kapoor, Apigee CEO. We see our business benefitting from two key trends in enterprise IT the ongoing adoption of digital business and the shift to cloud.  Across both of these trends, APIs are a key enabler for quickly delivering customer value.  With our growing customer base and expanding partner engagement, we believe Apigee is positioned to drive these trends.

Third Quarter Fiscal 2016 Highlights:

For Q3 16, Apigee reported total revenue of \\$23.5 million, at the high end of its guidance range of \\$22.5 million to \\$23.5 million.  Q3 16 total revenue was up 36% compared to \\$17.3 million in Q3 15.  Apigee reported Q3 16 product revenue (defined as license revenue plus subscription and support revenue) of \\$18.6 million, up 39% from \\$13.4 million in Q3 15.  Q3 16 gross billings were \\$29.0 million, above the midpoint of its guidance range of \\$27.5 million to \\$29.5 million.  Q3 16 gross billings were up 29% from \\$22.5 million a year ago.  Q3 16 product gross billings were \\$24.8 million, up 34% from \\$18.6 million a year ago.

Apigee reported Q3 16 GAAP gross margin of 69.8%, up from 65.1% in Q3 15, and non-GAAP gross margin of 71.5%, up from 66.7% in Q3 15.   Apigee reported a Q3 16 GAAP operating loss of \\$9.9 million, compared to \\$10.8 million in Q3 15.  Q3 16 non-GAAP operating loss was \\$7.5 million, compared to \\$9.7 million in Q3 15.  Both GAAP and non-GAAP operating loss improved as a result of revenue growth rate that was significantly higher than operating expense growth rate, as well as improved gross margin.  Q3 16 GAAP net loss per share was \\$0.33. Q3 16 non-GAAP net loss per share was \\$0.25, at the high end of its guidance range of a loss of \\$0.25 to \\$0.29.  Q3 16 operating cash flow was (\\$3.5) million, compared to (\\$8.1) million in Q2 16.  Total deferred revenue was \\$50.9 million at the end of Q3 16, up 33% from \\$38.4 million at the end of Q3 15.  The balance of cash and cash equivalents at the end of Q3 16 was \\$70.2 million.

A reconciliation of GAAP to non-GAAP financial measures has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading Non-GAAP Financial Measures.

Recent Business Updates:

  • Apigee now has over 300 customers, up 114 compared to the end of Q3 15. In Q3 16, we did expansion deals with 42 customers.
  • Our Q3 16 simple dollar-based renewal rate exceeded 90% for the fourth consecutive quarter.
  • New, renewal and expansion customers in the quarter included Advance Digital, Kaiser Permanente, KAO Brands, National Geographic, Nationwide Building Society, Papa Johns, Paymark, Silicon Valley Bank, Telstra, TomTom and Tradier.
  • Apigee announced the availability of the Apigee Edge integration with Pivotal Cloud Foundry. Pivotal users can now select Apigee Edge software from the Pivotal Network marketplace to get Apigees comprehensive API management capabilities integrated into the Web applications they build with Pivotals Cloud Native Platform.
  • Apigee and Amazon Web Services (AWS) announced that dozens of new customers signed on to use Apigee Edge on AWS in the first three months of calendar 2016, including AccuWeather, Allstate Corporation, OpenGov Inc., and Sage Payment Solutions, as well as other leading companies in the financial services, insurance, retail, media and technology industries.
  • Apigee announced a new reference architecture designed to make it easier for developers to use Apigee Edge on AWS.  In addition, Apigee is working with AWS Lambda to develop an open-source plug-in enabling access to AWS services on Apigee Edge.
  • Apigee released Apigee Edge for Microsoft Azure, and has also placed Apigee Edge in the Azure marketplace.  Apigee and Microsoft recently conducted a joint webinar, covering migration of Apigee Edge deployments to Azure, new services available for API developers, and a demonstration of our integrated products.
  • Apigee delivered general availability of Apigee Sense, an API security solution that provides data-driven API security including bot detection, automated threat protection, security governance, advanced risk analytics and automated risk mitigation capabilities.
  • Apigee announced a new software solution built on Apigee Edge that is designed to help banks within the European Union (EU) more quickly and easily embrace open banking and comply with the revised Directive on Payment Services (PSD2).  Apigee is teaming with Accenture, as part of the ongoing Apigee and Accenture global alliance, to work on developing customized client solutions for open banking spurred by PSD2.
  • Apigee hosted an Open Banking and PSD2 summit in London dedicated to providing financial institutions with information and guidance on how to implement open banking and comply with PSD2.  http://apigee.com/about/search/gss/open%20banking%20summit
  • Apigee hosted a FinTech API Summit, with speakers from Forrester, First Data, Tradier, and Vantiv, as well as Apigee.  The summit provided financial services executives with information and guidance on how to better leverage digital technologies to foster digital engagements with their customers, partners and employees.  http://apigee.com/about/search/gss/fintech%20summit  
  • Additional product updates included Apigee Edge Gateway 2.0 and release of Apigees Health APIx in the Salesforce Health Cloud.
  • New partners in the quarter included Abacus Consulting Technology, Astrakhan, BCX Keyna, Centric Digital, Compuware, HCL America Solutions, Innovative Software Technologies, ITbook, LiquidHub, Middleware New Zealand, Pitney Bowes, Pyramid Consulting, Shift Technologies, SMS Consulting Group, Trace3, and UST Global.

Guidance:

As of May 25, 2016, Apigee is providing initial guidance for its fourth quarter fiscal 2016 and updating guidance for the fiscal year ending July 31, 2016.

Fourth Quarter Fiscal 2016 Guidance:

  • Total revenue is expected to be in the range of \\$24.0 million to \\$25.5 million.
  • Non-GAAP operating loss is expected to be in the range of \\$8.0 million to \\$9.0 million.
  • Non-GAAP net loss per share is expected to be in the range of \\$0.27 to \\$0.30 based on approximately 30 million GAAP weighted-average shares outstanding.
  • Gross billings are expected to be in the range of \\$30.0 million to \\$32.5 million.

Full Year Fiscal 2016 Guidance:

  • Total revenue is expected to be in the range of \\$90.9 million to \\$92.4 million.
  • Total license revenue is expected to be in the range of \\$31.8 million to \\$33.3 million.
  • Non-GAAP operating loss is expected to be in the range of \\$33.1 million to \\$34.1 million.
  • Non-GAAP net loss per share is expected to be in the range of \\$1.11 to \\$1.14 based on approximately 29.8 million GAAP weighted-average shares outstanding.
  • Gross billings are expected to be in the range of \\$107.0 million to \\$109.5 million.

Conference Call Details:

  • What:  Results of Apigee Corporation (APIC) third quarter fiscal year 2016 ended April 30, 2016.
  • When: Wednesday, May 25, 2016 at 2 pm PDT (5 pm EDT). 
  • Dial in:  To access the call in the United States, please dial (877) 407-4018, and for international callers please dial (201) 689-8471. Callers may provide confirmation number 13636744 to access the call more quickly, and are encouraged to dial into the call 10 to 15 minutes prior to the start to prevent any delay in joining.
  • Webcast:   http://investors.apigee.com (live and replay)
  • Replay:  A replay of the call will be available via telephone for seven days, beginning two hours after the call. To listen to the telephone replay in the United States, please dial (877) 870-5176, and for international callers please dial (858) 384-5517 and enter access code 13636744.

About Apigee

Apigee (NASDAQ:APIC) provides a cloud native API platform for digital business. Many of the world's largest organizations select Apigee to enable their digital business, including 33 percent of the Fortune 100, four of the top five Global 2000 retail companies, and five of the top 10 global telecommunications companies. Apigee customers include global enterprises such as Walgreens, Burberry, Morningstar, and First Data. Apigee is headquartered in San Jose, California. For more information, go to http://apigee.com.

Forward-Looking Statements

This press release contains forward-looking statements, including statements regarding Apigees anticipated growth; the momentum and trends in its business, markets and certain vertical markets, and Apigees belief that it is positioned to drive and benefit from those trends; its forecasted positive operating cash flow; and its forecasted total revenue, license revenue, gross billings, non-GAAP operating loss and non-GAAP net loss per share for the fiscal fourth quarter and fiscal year 2016. Words such as expect, will, believes, and similar expressions are intended to identify forward-looking statements.  These forward-looking statements are based on current expectations and are subject to inherent uncertainties, risks, and changes in circumstances that are difficult or impossible to predict. Consequently, you should not rely on these forward-looking statements.  Actual outcomes and results may differ materially from those contemplated by these forward-looking statements as a result of such uncertainties, risks, and changes in circumstances, including without limitation risks and uncertainties related to Apigees limited operating history; risks associated with its history of losses and its expectation of incurring losses for the foreseeable future; risks associated with the potential significant fluctuation of its future quarterly results and variances in its quarterly bookings, license revenue and operating cash flows; risks associated with revenue mix; risks associated with the effective management of its growth; risks associated with the role its strategic relationships with third parties plays in its growth; risks associated with market acceptance of its platform and Apigee Edge product; risks associated with Apigees experience in developing and introducing new products; risks associated with successfully implementing partnerships and strategic relationships; risks associated with Apigees ability to meet its customers needs for infrastructure capacity and the quality of its software, support and services; and risks associated with Apigees ability to obtain renewals from current customers.

The foregoing list of factors is not exclusive.  Additional risks and uncertainties that could affect Apigees financial and operating results are included under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in Apigees Annual Report on Form 10-Q filed with the SEC on March 4, 2016.  Apigees SEC filings are available on the Investor Relations section of the Companys website at http://investors.apigee.com and on the SEC's website at www.sec.gov.  Apigee disclaims any obligation to update the forward-looking statements provided to reflect any change in its expectations or any change in events, conditions, or circumstances on which any such statement is based.

Non-GAAP Financial Measures

Apigee provides the following non-GAAP financial measures in this release and in the earnings call referencing this press release: gross billings, product gross billings, non-GAAP license gross margin, non-GAAP subscription and support gross margin, non-GAAP professional services gross margin, non-GAAP gross margin, non-GAAP operating expense, non-GAAP operating loss, non?GAAP net loss, and non-GAAP net loss per share.  These non-GAAP items are key measures used by our management to understand and evaluate our operating performance and trends.  In particular, because a number of these measures exclude certain non-cash expenses, they can provide useful measures for period-to-period comparisons of our business.

Apigee uses these non-GAAP financial measures internally in analyzing its operating results and believes they are useful to investors, as a supplement to GAAP measures, in evaluating its ongoing operational performance. Apigee believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends.

Non-GAAP financial measures should not be considered in isolation from, or as substitutes for, their most directly comparable financial measure prepared in accordance with GAAP.  A reconciliation of the historical non-GAAP financial measures to their most directly comparable GAAP measures has been provided in the financial statement tables included below in this press release.  Investors are encouraged to review the reconciliation of these historical non-GAAP financial measures to their most directly comparable GAAP financial measures.

We calculate non-GAAP gross profit, non-GAAP gross margin, non-GAAP license gross margin, non-GAAP subscription and support gross margin, non-GAAP professional services gross margin, non-GAAP operating expenses, non-GAAP sales and marketing expenses, non-GAAP research and development expenses, non-GAAP general and administrative expenses, non-GAAP operating loss and non-GAAP net loss as the respective GAAP balances, adjusted for: (1) stock-based compensation and (2) the amortization of intangible assets. Non-GAAP net loss per share is calculated as non-GAAP net loss divided by GAAP weighted average shares outstanding.

We define gross billings as our total revenue plus the change in our deferred revenue in a period. We define product gross billings as our total product revenue (where product is defined as license, subscription and support) plus the change in our license, subscription and support deferred revenue in a period. Gross billings and product gross billings in any period consists of sales to new customers plus renewals and additional sales to existing customers. Our management uses gross billings and product gross billings as a performance measurement because we believe that gross billings and product gross billings provide valuable insight into the sales of our solutions and the performance of our business.  On certain transactions, a portion of gross billings will be recognized as revenue over a period of more than 12 months.  We do not consider gross billings as a substitute for revenue recognition or revenue measurement.

With respect to Apigees outlook under Fourth Quarter Fiscal 2016 Guidance and "Full Year Fiscal 2016 Guidance" above, Apigee has not reconciled its expectations regarding non-GAAP loss from operations to GAAP loss from operations, nor reconciled non-GAAP net loss per share to GAAP net loss per share, because stock-based compensation expenses cannot be reasonably predicted and calculated.  Accordingly, reconciliation is not available without unreasonable effort.

 
Apigee Corporation
Consolidated Balance Sheets
(in thousands)
    
  April 30, July 31,
   2016   2015 
  (Unaudited) 
Assets   
Current assets   
Cash and cash equivalents \\$70,215  \\$89,562 
Accounts receivable, net  27,516   21,451 
Prepaid expenses and other current assets  4,669   5,806 
Total current assets  102,400   116,819 
Property and equipment, net  2,267   3,144 
Goodwill  14,744   14,744 
Intangible assets, net  2,413   3,200 
Other assets  827   799 
Total assets \\$122,651  \\$138,706 
Liabilities and stockholders equity        
Current liabilities   
Accounts payable \\$606  \\$2,015 
Accrued expenses and other current liabilities  11,925   9,796 
Deferred revenue, current portion  42,548   35,648 
Term debt, current portion  1,317   2,079 
Total current liabilities  56,396   49,538 
Non-current liabilities        
Deferred revenue, non-current  8,361   5,154 
Deferred rent, non-current  1,177   1,550 
Other liabilities, non-current  639   773 
Term debt, non-current  1,212   1,787 
Total non-current liabilities  11,389   9,264 
Total liabilities  67,785   58,802 
Commitments and contingencies        
Stockholders equity        
Common stock  30   29 
Additional paid-in capital  283,044   276,099 
Accumulated deficit  (228,208)  (196,224)
Total stockholders equity  54,866   79,904 
Total liabilities and stockholders equity \\$122,651  \\$138,706 
         
Apigee Corporation
Consolidated Statements of Comprehensive Loss
(in thousands, except per share amounts)
    
  Three Months Ended
April 30,
 Nine Months Ended
April 30,
   2016   2015   2016   2015 
                 
  (Unaudited)(Unaudited)
Revenue     
License \\$8,161  \\$5,697  \\$23,764  \\$15,219 
Subscription and support  10,452   7,694   31,331   21,858 
Professional services and other  4,864   3,899   11,816   12,828 
Total revenue  23,477   17,290   66,911   49,905 
Cost of revenue     
License  128   129   385   386 
Subscription and support  3,077   2,808   9,301   8,175 
Professional services and other  3,879   3,103   10,528   10,147 
Total cost of revenue  7,084   6,040   20,214   18,708 
Gross profit  16,393   11,250   46,697   31,197 
Operating expenses     
Research and development  9,477   7,567   27,514   21,952 
Sales and marketing  12,702   11,139   38,012   36,313 
General and administrative  4,075   3,299   12,473   10,003 
Total operating expenses  26,254   22,005   77,999   68,268 
Loss from operations  (9,861)  (10,755)  (31,302)  (37,071)
Other income (expense), net  19   (93)  (402)  (383)
Loss before provision for income taxes  (9,842)  (10,848)  (31,704)  (37,454)
Provision for income taxes  73   140   280   343 
Net loss and comprehensive loss \\$(9,915) \\$(10,988) \\$(31,984) \\$(37,797)
Net loss per share:                
Basic and diluted \\$(0.33) \\$(2.16) \\$(1.08) \\$(8.66)
Weighted-average shares outstanding used in calculating net loss per share:                
Basic and diluted  29,830   5,095   29,620   4,363 
                 
Apigee Corporation
Consolidated Statements of Cash Flows
(in thousands)
     
  Three Months Ended Nine Months Ended
  April 30, April 30,
   2016   2015   2016   2015 
  (Unaudited) (Unaudited)
Cash flows from operating activities        
Net loss \\$(9,915) \\$(10,988) \\$(31,984) \\$(37,797)
Adjustments to reconcile net loss to net cash used in operating activities        
Depreciation and amortization  583   597   1,790   1,809 
Provision for doubtful accounts  9   20   66   38 
Amortization of debt discount  10   12   25   38 
Deferred income taxes            
Stock-based compensation expense  2,110   822   5,378   2,269 
Changes in operating assets and liabilities        
Accounts receivable  (1,659)  2,903   (6,131)  273 
Prepaid expenses and other assets  (268)  395   1,100   38 
Accounts payable  (609)  (1,225)  (1,248)  (1,429)
Accrued expenses, other liabilities and deferred rent  665   558   1,779   1,078 
Deferred revenue  5,558   4,686   10,108   10,189 
Net cash used in operating activities  (3,516)  (2,220)  (19,117)  (23,494)
Cash flows from investing activities                
Purchase of property and equipment  (28)  (485)  (136)  (835)
Net cash used in investing activities  (28)  (485)  (136)  (835)
Cash flows from financing activities                
Proceeds from issuance of debt, net of issuance costs  2,648      2,648   4,000 
Repayments of debt obligations  (3,108)  (526)  (4,158)  (4,858)
        
Proceeds from initial public offering, net of offering costs    79,341     78,264 
Payment of deferred costs related to initial public offering        (152)   
Taxes paid related to net share settlement of equity awards    (387)    (387)
Proceeds from exercise of stock options, net of taxes paid  192   389   607   796 
Proceeds from issuance of Employee Stock Purchase Plan shares        961    
Net cash provided by (used in) financing activities  (268)  78,817   (94)  77,815 
Net increase (decrease) in cash and cash equivalents  (3,812)  76,112   (19,347)  53,486 
Cash and cash equivalents                
Beginning of period  74,027   29,133   89,562   51,759 
End of period  70,215   105,245   70,215   105,245 
                 
Apigee Corporation
Reconciliation of GAAP to Non-GAAP Financial Measures
(in thousands, except per share amounts)
     
  Three Months Ended  Nine Months Ended
  April 30,  April 30,
   2016   2015   2016   2015 
Gross billings                
Total revenue \\$23,477  \\$17,290  \\$66,911  \\$49,905 
Total deferred revenue, end of period  50,909   38,379   50,909   38,379 
Less: Total deferred revenue, beginning of period  (45,352)  (33,193)  (40,802)  (28,190)
Total change in deferred revenue  5,557   5,186   10,107   10,189 
Gross billings \\$29,034  \\$22,476  \\$77,018  \\$60,094 
Product gross billings                 
License \\$8,161  \\$5,697  \\$23,764  \\$15,219 
Subscription and support  10,452   7,694   31,331   21,858 
Total product revenue  18,613   13,391   55,095   37,077 
Total license, subscription and support deferred revenue, end of period  43,177   34,749   43,177   34,749 
Less: Total license, subscription and support deferred revenue, beginning of period  (36,954)  (29,546)  (36,638)  (24,848)
Total change in license, subscription and support deferred revenue  6,223   5,203   6,539   9,901 
Product gross billings  \\$24,836  \\$18,594  \\$61,634  \\$46,978 
Non-GAAP gross margin                
Gross margin  69.8%  65.1%  69.8%  62.5%
Add: Stock-based compensation expense  0.7%  0.3%  0.6%  0.3%
Add: Amortization of intangible assets  1.0%  1.3%  1.0%  1.4%
Non-GAAP gross margin  71.5%  66.7%  71.4%  64.2%
Non-GAAP license gross profit:                
License gross profit \\$8,033  \\$5,568  \\$23,379  \\$14,833 
License gross margin  98.4%  97.7%  98.4%  97.5%
Add: Amortization of intangible assets  114   113   342   340 
Non-GAAP license gross profit \\$8,147  \\$5,681  \\$23,721  \\$15,173 
Non-GAAP license gross margin  99.8%  99.7%  99.8%  99.7%
Non-GAAP subscription and support gross profit:        
Subscription and support gross profit \\$7,375  \\$4,886  \\$22,030  \\$13,683 
Subscription and support gross margin  70.6%  63.5%  70.3%  62.6%
Add: Stock-based compensation expense  43   8   114   21 
Add: Amortization of intangible assets  113   114   339   341 
Non-GAAP subscription and support gross profit  \\$7,531  \\$5,008  \\$22,483  \\$14,045 
Non-GAAP subscription and support gross margin   72.1%  65.1%  71.8%  64.3%
Non-GAAP professional services and other gross profit:        
Professional services and other gross profit \\$985  \\$796  \\$1,288  \\$2,681 
Professional services and other gross margin  20.3%  20.4%  10.9%  20.9%
Add: Stock-based compensation expense  132   54   328   145 
Non-GAAP professional services and other gross profit \\$1,117  \\$850  \\$1,616  \\$2,826 
Non-GAAP professional services and other margin  23.0%  21.8%  13.7%  22.0%
Non-GAAP research and development expense:        
GAAP research and development expense \\$9,477  \\$7,567  \\$27,514  \\$21,952 
Less: Stock-based compensation expense  (897)  (306)  (2,135)  (759)
Less: Amortization of intangible assets  (18)  (44)  (106)  (132)
Non-GAAP research and development expense \\$8,562  \\$7,217  \\$25,273  \\$21,061 
Non-GAAP sales and marketing expense:                
GAAP sales and marketing expense \\$12,702  \\$11,139  \\$38,013  \\$36,313 
Less: Stock-based compensation expense  (426)  (173)  (1,225)  (492)
Less: Amortization of intangible assets           (58)
Non-GAAP sales and marketing expense \\$12,276  \\$10,966  \\$36,788  \\$35,763 
Non-GAAP general and administrative expense:        
GAAP general and administrative expense \\$4,075  \\$3,299  \\$12,473  \\$10,003 
Less : Stock-based compensation expense  (612)  (281)  (1,576)  (852)
Non-GAAP general and administrative expense \\$3,463  \\$3,018  \\$10,897  \\$9,151 
Non-GAAP operating loss:        
Operating loss \\$(9,861) \\$(10,755) \\$(31,302) \\$(37,071)
Add: Stock-based compensation expense  2,110   822   5,378   2,269 
Add: Amortization of intangible assets  245   271   787   871 
Non-GAAP operating loss \\$(7,506) \\$(9,662) \\$(25,137) \\$(33,931)
Non-GAAP net loss:        
Net loss \\$(9,915) \\$(10,988) \\$(31,984) \\$(37,797)
Add: Stock-based compensation expense  2,110   822   5,378   2,269 
Add: Amortization of intangible assets  245   271   787   871 
Non-GAAP net loss \\$(7,560) \\$(9,895) \\$(25,819) \\$(34,657)
Non-GAAP net loss per share:        
GAAP net loss per share \\$(0.33) \\$(2.16) \\$(1.08) \\$(8.66)
Non-GAAP adjustments to net loss per share  0.08   0.21   0.21   0.72 
Non-GAAP adjustments to weighted average shares used in calculating net loss per share     1.54      6.50 
Non-GAAP net loss per share \\$(0.25) \\$(0.41) \\$(0.87) \\$(1.44)
GAAP Weighted-average shares outstanding used in calculating net loss per share,  29,830   5,095   29,620   4,363