OREANDA-NEWS. September 15, 2016. Apigee (NASDAQ:APIC), the API company, today announced financial results for its fourth quarter and fiscal year ended July 31, 2016.

Fiscal Year 2016

For FY 16, Apigee reported total revenue of \\$92.0 million, up 34% compared to \\$68.6 million in FY 15.  Apigee reported FY 16 product revenue (defined as license revenue plus subscription and support revenue) of \\$75.3 million, up 46% compared to \\$51.6 million in FY 15.

Apigee reported FY 16 GAAP gross margin of 70.1%, up from 63.6% in FY 15, and non-GAAP gross margin of 71.8% compared to 65.3% in FY 15.  Apigee reported an FY 16 GAAP operating loss of \\$40.9 million, compared to \\$49.5 million in FY 15.  FY 16 non-GAAP operating loss was \\$31.5 million compared to \\$44.9 million in FY 15.  FY 16 GAAP net loss per share was \\$1.39, compared to \\$4.73 in FY 15, and FY 16 non-GAAP net loss per share was  \\$1.08 compared to \\$1.81 in FY 15.  FY 16 operating cash flow improved to \\$(21.7) million compared to \\$(37.4) million in FY 15.  Total deferred revenue was \\$53.9 million at the end of FY 16 up 32% from \\$40.8 million at the end of FY 15.  The balance of cash and cash equivalents at the end of FY 16 was \\$68.3 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.

Fourth Quarter Fiscal 2016

For Q4 16, Apigee reported total revenue of \\$25.1 million, up 34% from \\$18.7 million in Q4 15.  Apigee reported Q4 16 product revenue (defined as license revenue plus subscription and support revenue) of \\$20.2 million, up 39% from \\$14.5 million in Q4 15.

Apigee reported Q4 16 GAAP gross margin of 70.9%, up from 66.4% in Q4 15, and Q4 16 non-GAAP gross margin of 72.7%, up from 68.1% in Q4 15. Apigee reported a Q4 16 GAAP operating loss of \\$9.6 million, compared to \\$12.4 million in Q4 15. Q4 16 non-GAAP operating loss was \\$6.3 million, compared to \\$11.0 million in Q4 15. Q4 16 GAAP net loss per share was \\$0.32, compared to \\$0.43 in Q4 15. Q4 16 non-GAAP net loss per share was \\$0.21, compared to \\$0.38 in Q4 15. Q4 16 operating cash flow was \\$(2.6) million, compared to \\$(13.9) million in Q4 15.

Recent Business Updates:

  • Apigee now has more than 335 customers, up more than 130 compared to the end of Q4 15.  In Q4 16, we did expansion deals with 50 customers.
  • Key customers in the quarter included Allstate, CLEAR, digitalSTROM, Du, Emaratech, Lego, MindBody, Morrisons, SEI Investments, Shutterfly, T-Mobile, Telstra, Thomson Reuters, Uptake and Western Union.
  • Our FY 16 simple dollar-based renewal rate exceeded 90%.
  • For FY 16, Apigee reported gross billings of \\$105.1 million, up 29% from \\$81.2 million in FY 15.  FY 16 product gross billings were \\$84.1 million, up 33% from \\$63.4 million a year ago.
  • We announced Apigee Open Banking APIx, a new software accelerator designed to help banks within the European Union more quickly and easily embrace open banking requirements set out in the revised Payment Services Directive (PSD2).
  • Apigee and Pivotal announced that Apigee Edge's Microgateway capability is now supported by Pivotal Cloud Foundry, enabling developers to more easily leverage Apigee's API management software to share, monitor and secure APIs and microservices for applications developed with Pivotal's cloud native platform.
  • We entered into new or expanded partnership agreements in the quarter with Acclaim Consulting Group, Algorism, Cloud Elements, Data Factory Labs, DigitalAPICraft, finRenaissance, Incentro, Juggernaut Innovations, Okta, Pivotal, PromptNow, Tata America International, Tavant Technologies, The APIfoundry, The Coral Edge, and Winning Edge Solutions.

Guidance:

On September 8, 2016, Apigee announced that it had entered into a definitive agreement to be acquired by Google.  As a result, Apigee will not provide an outlook for our future financial results.  Any previous statements that could be interpreted to project our future financial performance should no longer be relied upon.

Conference Call Details:

As a result of the acquisition announcement, the conference call previously scheduled for today to discuss our financial results has been canceled.

About Apigee

Apigee (NASDAQ:APIC) provides a leading API platform for digital business.  Many of the world's largest organizations select Apigee to power their digital business. 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 communication contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the proposed transaction and business combination between Google and Apigee.  Forward-looking statements are predictions, projections and other statements about future events that are based on current expectations and assumptions and, as a result, are subject to risks and uncertainties. Many factors could cause actual results to differ materially from the forward-looking statements in this press release, including but not limited to: (i) the risk that the transaction may not be completed in a timely manner or at all, which may adversely affect Apigee's business and the price of the common stock of Apigee, (ii) the failure to satisfy the conditions to the consummation of the transaction, including the adoption of the merger agreement by the stockholders of Apigee and the receipt of certain governmental and regulatory approvals, (iii) the occurrence of any event, change or other circumstance that could give rise to termination of the merger agreement, (iv) the effect of the announcement or pendency of the transaction on Apigee's business relationships, operating results, and business generally, (v) risks that the proposed transaction disrupts current plans and operations of Google or Apigee, including disruptions to relationships with customers, licensees, and other business partners of Apigee and potential difficulties in Apigee employee retention as a result of the transaction, (vi) risks related to diverting management's attention from Apigee's ongoing business operations, and (vii) the outcome of any legal proceedings that may be instituted against Google or against Apigee related to the merger agreement or the transaction.

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 Managements Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in Apigees Quarterly Report on Form 10-Q filed with the SEC on May 27, 2016. Apigees SEC filings are available on the Investor Relations section of the Companys website at http://investors.apigee.com and on the SECs website at www.sec.gov. While Apigee may elect to update forward-looking statements at some point in the future, Apigee specifically 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, and, therefore, you should not rely on these forward-looking statements as representing Apigee's views as of any date subsequent to today.

Non-GAAP Financial Measures

Apigee provides the following non-GAAP financial measures in this release: gross billings, product gross billings, non-GAAP gross margin, 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 margin, 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, except with respect to FY 15.  For FY 15, non-GAAP net loss per share is calculated as non-GAAP net loss divided by non-GAAP weighted average shares outstanding. The non-GAAP weighted average shares outstanding are adjusted to assume the conversion of outstanding preferred shares to common shares as of the beginning of the period.

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.

 
Apigee Corporation
Consolidated Balance Sheets
(in thousands)
     
  July 31, July 31,
  2016 2015
  (Unaudited)  
Assets    
Current assets    
Cash and cash equivalents \\$68,303  \\$89,562 
Accounts receivable, net 25,958  21,451 
Prepaid expenses and other current assets 5,092  5,806 
Total current assets 99,353  116,819 
Property and equipment, net 1,923  3,144 
Goodwill 14,744  14,744 
Intangible assets, net 2,165  3,200 
Other assets 652  799 
Total assets \\$118,837  \\$138,706 
Liabilities and stockholders equity    
Current liabilities    
Accounts payable \\$368  \\$2,015 
Accrued expenses and other current liabilities 11,247  9,796 
Deferred revenue, current portion 44,833  35,648 
Term debt, current portion 1,318  2,079 
Total current liabilities 57,766  49,538 
Non-current liabilities    
Deferred revenue, non-current 9,056  5,154 
Deferred rent, non-current 1,038  1,550 
Other liabilities, non-current 645  773 
Term debt, non-current 882  1,787 
Total non-current liabilities 11,621  9,264 
Total liabilities 69,387  58,802 
Commitments and contingencies    
Stockholders equity    
Common stock 30  29 
Additional paid-in capital 287,156  276,099 
Accumulated deficit (237,736) (196,224)
Total stockholders equity 49,450  79,904 
Total liabilities and stockholders equity \\$118,837  \\$138,706 
         
Apigee Corporation
Consolidated Statements of Comprehensive Loss
(in thousands, except per share amounts)
     
  Three Months Ended
 July 31,
 Year Ended
 July 31,
  2016 2015 2016 2015
  (Unaudited) (Unaudited)
Revenue        
License \\$8,582  \\$5,538  \\$32,345  \\$20,757 
Subscription and support 11,604  9,007  42,936  30,865 
Professional services and other 4,930  4,157  16,746  16,985 
Total revenue 25,116  18,702  92,027  68,607 
Cost of revenue        
License 136  128  521  514 
Subscription and support 3,168  2,887  12,469  11,062 
Professional services and other 4,007  3,268  14,535  13,415 
Total cost of revenue 7,311  6,283  27,525  24,991 
Gross profit 17,805  12,419  64,502  43,616 
Operating expenses        
Research and development 10,281  8,435  37,795  30,387 
Sales and marketing 12,166  12,937  50,178  49,250 
General and administrative 4,963  3,450  17,436  13,453 
Total operating expenses 27,410  24,822  105,409  93,090 
Loss from operations (9,605) (12,403) (40,907) (49,474)
Other income (expense), net 11  (69) (390) (452)
Loss before provision for income taxes (9,594) (12,472) (41,297) (49,926)
Provision for income taxes (65) 84  215  427 
Net loss and comprehensive loss \\$(9,529) \\$(12,556) \\$(41,512) \\$(50,353)
Net loss per share:        
Basic and diluted \\$(0.32) \\$(0.43) \\$(1.39) \\$(4.73)
Weighted-average shares outstanding used in calculating net loss per share:        
Basic and diluted 30,211  29,313  29,769  10,651 
             
Apigee Corporation
Consolidated Statements of Cash Flows
(in thousands)
     
  Three Months Ended
 July 31,
 Year Ended
 July 31,
  2016 2015 2016 2015
  (Unaudited) (Unaudited)
Cash flows from operating activities        
Net loss \\$(9,529) \\$(12,556) \\$(41,512) \\$(50,353)
Adjustments to reconcile net loss to net cash used in operating activities        
Depreciation and amortization 611  627  2,401  2,436 
Provision for doubtful accounts (80) 4  (14) 42 
Amortization of debt discount 14  8  39  46 
Deferred income taxes        
Stock-based compensation expense 3,010  1,182  8,388  3,451 
Loss (gain) on disposal of fixed assets   10    10 
Loss on lease abandonment        
Changes in operating assets and liabilities        
Accounts receivable 1,638  (5,363) (4,493) (5,090)
Prepaid expenses and other assets (259) (1,771) 841  (1,733)
Accounts payable (152) 433  (1,400) (996)
Accrued expenses, other liabilities and deferred rent (810) 1,131  968  2,209 
Deferred revenue 2,979  2,422  13,087  12,611 
Net cash used in operating activities (2,578) (13,873) (21,695) (37,367)
Cash flows from investing activities        
Purchase of property and equipment (105) (131) (241) (966)
Net cash used in investing activities (105) (131) (241) (966)
Cash flows from financing activities        
Proceeds from issuance of debt, net of issuance costs     2,648  4,000 
Repayments of debt obligations (331) (524) (4,489) (5,382)
Proceeds from initial public offering, net of offering costs     (152) 77,092 
Payment of deferred costs related to initial public offering   (1,172)    
Repurchase of Series G-1 convertible preferred stock     (18)  
Cash paid for fractional shares (18) (8)   (8)
Distribution of vested Restricted stock units (net)     (531)  
Taxes paid related to net share settlement of equity awards (531)      
Proceeds from exercise of stock options, net of taxes paid 555  25  1,162  434 
Proceeds from issuance of Employee Stock Purchase Plan shares 1,096    2,057   
Net cash provided by (used in) financing activities 771  (1,679) 677  76,136 
Net increase (decrease) in cash and cash equivalents (1,912) (15,683) (21,259) 37,803 
Cash and cash equivalents        
Beginning of period 70,215  105,245  89,562  51,759 
End of period 68,303  89,562  68,303  89,562 
             
Apigee Corporation
Reconciliation of GAAP to Non-GAAP Financial Measures
(in thousands, except per share amounts)
     
  Three Months Ended
 July 31,
 Year Ended
 July 31,
  2016 2015 2016 2015
Gross billings        
Total revenue \\$25,116  \\$18,702  \\$92,027  \\$68,607 
Total deferred revenue, end of period 53,889  40,802  53,889  40,802 
Less: Total deferred revenue, beginning of period (50,909) (38,379) (40,802) (28,190)
Total change in deferred revenue 2,980  2,423  13,087  12,612 
Gross billings \\$28,096  \\$21,125  \\$105,114  \\$81,219 
Product gross billings        
         
License \\$8,582  \\$5,538  \\$32,345  20,757 
Subscription and support 11,604  9,007  42,936  30,865 
Total product revenue 20,186  14,545  75,281  51,622 
Total license, subscription and support deferred revenue, end of period 45,492  36,638  45,492  36,638 
Less: Total license, subscription and support deferred revenue, beginning of period (43,177) (34,749) (36,638) (24,848)
Total change in license, subscription and support deferred revenue 2,315  1,889  8,854  11,790 
Product gross billings \\$22,501  \\$16,434  \\$84,135  \\$63,412 
Non-GAAP gross margin        
Gross margin 70.9% 66.4% 70.1% 63.6%
Add: Stock-based compensation expense 0.8% 0.5% 0.7% 0.4%
Add: Amortization of intangible assets 1.0% 1.2% 1.0% 1.3%
Non-GAAP gross margin 72.7% 68.1% 71.8% 65.3%
Non-GAAP license gross profit:        
License gross profit \\$8,446  \\$5,410  \\$31,824  \\$20,243 
License gross margin 98.4% 97.7% 98.4% 97.5%
Add: Amortization of intangible assets 121  114  463  454 
Non-GAAP license gross profit \\$8,567  \\$5,524  \\$32,287  \\$20,697 
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 \\$8,436  \\$6,120  \\$30,467  \\$19,803 
Subscription and support gross margin 72.7% 67.9% 71.0% 64.2%
Add: Stock-based compensation expense 33  23  147  44 
Add: Amortization of intangible assets 121  113  460  454 
Non-GAAP subscription and support gross profit \\$8,590  \\$6,256  \\$31,074  \\$20,301 
Non-GAAP subscription and support gross margin 74.0% 69.5% 72.4% 65.8%
Non-GAAP professional services and other gross profit:        
Professional services and other gross profit \\$923  \\$889  \\$2,211  \\$3,570 
Professional services and other gross margin 18.7% 21.4% 13.2% 21.0%
Add: Stock-based compensation expense 192  78  520  223 
Non-GAAP professional services and other gross profit \\$1,115  \\$967  \\$2,731  \\$3,793 
Non-GAAP professional services and other gross margin 22.6% 23.3% 16.3% 22.3%
Non-GAAP research and development expense:        
GAAP research and development expense \\$10,281  \\$8,435  \\$37,795  \\$30,387 
Less: Stock-based compensation expense (1,457) (436) (3,592) (1,195)
Less: Amortization of intangible assets (6) (44) (112) (176)
Non-GAAP research and development expense \\$8,818  \\$7,955  \\$34,091  \\$29,016 
Non-GAAP sales and marketing expense:        
GAAP sales and marketing expense \\$12,166  \\$12,937  \\$50,178  \\$49,250 
Less: Stock-based compensation expense (583) (285) (1,808) (777)
Less: Amortization of intangible assets       (58)
Non-GAAP sales and marketing expense \\$11,583  \\$12,652  \\$48,370  \\$48,415 
Non-GAAP general and administrative expense:        
GAAP general and administrative expense \\$4,963  \\$3,450  \\$17,436  \\$13,453 
Less : Stock-based compensation expense (745) (360) (2,321) (1,212)
Non-GAAP general and administrative expense \\$4,218  \\$3,090  \\$15,115  \\$12,241 
Non-GAAP operating loss:        
Operating loss \\$(9,605) \\$(12,403) \\$(40,907) \\$(49,474)
Add: Stock-based compensation expense 3,010  1,182  8,388  3,451 
Add: Amortization of intangible assets 248  271  1,035  1,142 
Non-GAAP operating loss \\$(6,347) \\$(10,950) \\$(31,484) \\$(44,881)
Non-GAAP net loss:        
Net loss \\$(9,529) \\$(12,556) \\$(41,513) \\$(50,353)
Add: Stock-based compensation expense 3,010  1,182  8,388  3,451 
Add: Amortization of intangible assets 248  271  1,035  1,142 
Non-GAAP net loss \\$(6,271) \\$(11,103) \\$(32,090) \\$(45,760)
Non-GAAP net loss per share:        
GAAP net loss per share \\$(0.32) \\$(0.43) \\$(1.39) \\$(4.73)
Non-GAAP adjustments to net loss per share 0.11  0.05  0.32  0.43 
Non-GAAP adjustments to weighted average shares used in calculating net loss per share       2.49 
Non-GAAP net loss per share \\$(0.21) \\$(0.38) \\$(1.08) \\$(1.81)
Non-GAAP weighted average shares outstanding:        
Weighted-average shares outstanding used in calculating net loss per share, basic and diluted 30,211  29,313  29,769  10,651 
Conversion of preferred convertible stock       14,665 
Non-GAAP Weighted-average shares outstanding used in calculating net loss per share 30,211  29,313  29,769  25,316