Instructure Announces Third Quarter 2023 Financial Results

Instructure Holdings, Inc. -0.52%

Instructure Holdings, Inc.

INST

22.92

-0.52%

Third Quarter GAAP Revenue of $134.9 Million Grows 10.2% Year Over Year

SALT LAKE CITY, Oct. 30, 2023 /PRNewswire/ -- Instructure Holdings, Inc. (Instructure) (NYSE: INST), the makers of the Canvas Learning Management System, today announced financial results for the third quarter ended September 30, 2023.

Instructure official logo (PRNewsFoto/Instructure)

"Our third quarter results once again demonstrated the growth and leverage of our business, including best-in-class margin performance and record cash flow and free cash flow," said Steve Daly, Instructure CEO.  "The power of Instructure is in its people and their dedication to delivering powerful solutions for our customers that drive the type of financial results our investors expect."

Financial Highlights:

  • GAAP Revenue of $134.9 million, an increase of 10.2% year over year
  • Operating income of $4.6 million, or 3.4% of revenue, compared with a loss of $2.4 million in the third quarter of 2022
  • Non-GAAP operating income* of $57.0 million, or 42.3% of revenue, up 23.5% compared with the third quarter of 2022
  • GAAP net loss of $5.5 million, or negative 4.1% of revenue, an improvement of $4.6 million compared with a net loss of $10.1 million in the third quarter of 2022
  • Adjusted EBITDA* of $58.2 million for the quarter, or 43.2% of revenue, an increase of $10.6 million, or 22.3% compared with the third quarter of 2022
  • Cash flow from operations of $182.6 million and Adjusted Unlevered Free Cash Flow* of $200.1 million, up $2.8 million and $12.4 million, respectively compared with the third quarter of 2022
  • Remaining Performance Obligations (RPOs) were $862.9 million, 75% of which is expected to be realized in the next 24 months

*See "Non-GAAP Financial Measures" for information regarding the Company's use of non-GAAP financial measures as well as reconciliations to the most closely comparable GAAP measures in this press release.

Business and Operating Highlights:

  • Announced the departure of Chief Financial Officer, Dale Bowen, who will end his tenure at Instructure on November 12, 2023. Succeeding Bowen is Peter Walker, currently Chief Financial Officer of Sterling Check Corp., who has more than 15 years of executive experience, including more than 10 years as a Chief Financial Officer. He will begin his role with Instructure on November 13, 2023.



  • The Montana University System (MUS) consolidated all of its 16 higher education and one K-12 school onto Canvas, choosing to migrate 10 of its campuses away from two competitors' products. MUS was looking to drive ease of use, better content sharing with Canvas Commons, and provide a consistent experience for students across its different campuses.



  • The Pasadena Independent School District took advantage of Instructure's growing suite of K-12 solutions, choosing Canvas, Studio, MasteryConnect, Mastery Item Bank, and Training Portal. With nearly 50,000 students, the Southern California-based district signed a 10-year contract whereby Instructure will replace its current classroom solutions because district leaders recognized Canvas as the "go-to system" for large districts like theirs.



  • CFRE, a private and independent educational company based in Germany, selected Canvas and Credentials to aid in its focus on non-traditional students across vocational, higher education, and further education. With 18 brands and more than 30,000 students in Germany, CFRE selected our platform based on quality of delivery and user experience, with the opportunity for diversity around branding and administrative capabilities.

Business Outlook

Based on information as of today, October 30, 2023, the Company is issuing the following financial guidance.

Fourth Quarter Fiscal 2023:

  • Revenue is expected to be in the range of $133.3 million to $135.3 million
  • Non-GAAP operating income* is expected to be in the range of $51.5 million to $53.5 million
  • Adjusted EBITDA* is expected to be in the range of $53.0 million to $55.0 million
  • Non-GAAP net income* is expected to be in the range of $32.5 million to $34.5 million

Full Year 2023:

  • Revenue is expected to be in the range of $528.0 million to $530.0 million
  • Non-GAAP operating income* is expected to be in the range of $206.5 million to $208.5 million
  • Adjusted EBITDA* is expected to be in the range of $211.0 million to $213.0 million
  • Non-GAAP net income* is expected to be in the range of $124.0 million to $126.0 million
  • Adjusted Unlevered Free Cash Flow* is expected to be in the range of $207.0 million to $211.0 million

*Non-GAAP operating income, Adjusted EBITDA, non-GAAP net income and Adjusted Unlevered Free Cash Flow are non-GAAP measures. Instructure is unable to provide guidance, or a reconciliation, for operating income/(loss) and net loss, the most closely comparable GAAP measures with respect to non-GAAP operating income, Adjusted EBITDA and non-GAAP net income, and net cash provided by operating activities, the most closely comparable measure with respect to Adjusted Unlevered Free Cash Flow, because Instructure cannot provide a meaningful or accurate calculation or estimation of certain reconciling items without unreasonable effort. This is due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation, including stock-based compensation and amortization of acquisition-related intangibles. Thus, Instructure is unable to present a quantitative reconciliation of non-GAAP guidance to GAAP guidance because such information is not available.

Effective January 1, 2022, Instructure adopted ASU No. 2021-08, Business Combinations (Topic 805), which requires that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Revenue from Contracts with Customers (Topic 606). As a result, Instructure will no longer present guidance for ACR because GAAP revenue and ACR have now converged.

Conference Call Information

Instructure's management team will hold a conference call to discuss our third quarter ended September 30, 2023 results today, October 30, 2023 at 5:00 p.m. ET. The conference call can be accessed by dialing (888) 330-2384 from the United States and Canada or (240) 789-2701 internationally with conference ID 1348899. A live webcast and replay of the conference call can be accessed from the investor relations page of Instructure's website at ir.instructure.com. An archived replay of the webcast will be available following the conclusion of the call.

About Instructure

Instructure (NYSE: INST) is an education technology company dedicated to elevating student success, amplifying the power of teaching, and inspiring everyone to learn together. Today the Instructure Learning Platform supports tens of millions of educators and learners around the world. Learn more at www.instructure.com.

Non-GAAP Financial Measures

Instructure has provided in this press release financial information that has not been prepared in accordance with generally accepted accounting principles in the United States ("GAAP"). In addition to Instructure's results determined in accordance with GAAP, Instructure believes the following non-GAAP measures are useful in evaluating its operating performance and liquidity. Instructure believes that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance and assists in comparisons with other companies, some of which use similar non-GAAP financial information to supplement their GAAP results. The non-GAAP financial information is presented for supplemental informational purposes only, and should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly-titled non-GAAP measures used by other companies.

A reconciliation of Instructure's historical non-GAAP financial measures to the most directly comparable GAAP measures has been provided in the financial statement tables included in this press release, and investors are encouraged to review the reconciliation.

ACR. We define ACR as the combined receipts of our Company and companies that we have acquired allocated to the period of service delivery. We calculate ACR as the sum of (i) revenue and (ii) the impact of fair value adjustments to acquired unearned revenue related to Thoma Bravo's acquisition of Instructure (the "Take-Private Transaction") and the Certica Holdings, LLC ("Certica"), Eesysoft Software International B.V. (which was rebranded to "Impact by Instructure" or "Impact" subsequent to acquisition), and Kimono LLC (which was rebranded to "Elevate Data Sync" subsequent to acquisition) acquisitions where we do not believe such adjustments are reflective of our ongoing operations. Management uses this measure to evaluate the organic growth of the business period over period, as if the Company had operated as a single entity and excluding the impact of acquisitions or adjustments due to purchase accounting.

Non-GAAP Operating Income. We define non-GAAP operating income as income/(loss) from operations excluding the impact of stock-based compensation, transaction costs, sponsor costs, other non-recurring costs, amortization of acquisition-related intangibles, and the impact of fair value adjustments to acquired unearned revenue relating to the Take-Private Transaction and the Certica, Impact, and Elevate Data Sync acquisitions that we do not believe are reflective of our ongoing operations. We believe non-GAAP operating income is useful in evaluating our operating performance compared to that of other companies in our industry, as this metric generally eliminates the effects of certain items that may vary for different companies for reasons unrelated to overall operating performance. Although we exclude the amortization of acquisition-related intangibles from the non-GAAP measure, management believes it is important for investors to understand that such intangible assets were recorded as part of purchase accounting and contribute to revenue generation.

Non-GAAP Net Income. We define non-GAAP net income as net loss excluding the impact of stock-based compensation, amortization of acquisition-related intangibles, the impact of fair value adjustments to acquired unearned revenue relating to the Take-Private Transaction and the Certica, Impact, and Elevate Data Sync acquisitions, transaction costs, sponsor costs, other non-recurring costs, and effects of foreign currency transaction losses that we do not believe are reflective of our ongoing operations. The tax effects of the adjustments are calculated using the statutory tax rate, taking into consideration the nature of the item and the relevant taxing jurisdiction. We believe Non-GAAP net income is useful in evaluating our operating performance compared to that of other companies in our industry, as this metric generally eliminates the effects of certain items that may vary for different companies for reasons unrelated to overall operating performance. Although we exclude the amortization of acquisition-related intangibles from the non-GAAP measure, management believes it is important for investors to understand that such intangible assets were recorded as part of purchase accounting and contribute to revenue generation. Basic non-GAAP net income per common share attributable to common stockholders is computed by dividing non-GAAP net income attributable to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted non-GAAP net income per common share attributable to common stockholders is computed by giving effect to all potentially dilutive common stock equivalents outstanding for the period.

Adjusted EBITDA; Adjusted EBITDA Margin. EBITDA is defined as earnings before debt-related costs, including interest and loss on debt extinguishment, benefit for taxes, depreciation, and amortization. We further adjust EBITDA to exclude certain items of a significant or unusual nature, including stock-based compensation, transaction costs, sponsor costs, other non-recurring costs, effects of foreign currency transaction (gains) and losses, amortization of acquisition-related intangibles, and the impact of fair value adjustments to acquired unearned revenue relating to the Take-Private Transaction and the Certica, Impact, and Elevate Data Sync acquisitions. Although we exclude the amortization of acquisition-related intangibles from this non-GAAP measure, management believes that it is important for investors to understand that such intangible assets were recorded as part of purchase accounting and contribute to revenue generation. Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by ACR.

Free Cash Flow, Unlevered Free Cash Flow and Adjusted Unlevered Free Cash Flow. We define free cash flow as net cash provided by operating activities less purchases of property and equipment and intangible assets, net of proceeds from disposals of property and equipment. We define unlevered free cash flow as free cash flow adjusted for cash paid for interest on outstanding debt and cash settled stock-based compensation. We define adjusted unlevered free cash flow as unlevered free cash flow adjusted for transaction costs, sponsor costs, impaired leases, and other non-recurring costs paid in cash. We believe free cash flow, unlevered free cash flow and adjusted unlevered free cash flow facilitate period-to-period comparisons of liquidity. We consider free cash flow, unlevered free cash flow and adjusted unlevered free cash flow to be important measures because they measure the amount of cash we generate and reflect changes in working capital.

Non-GAAP Cost of Revenue and Non-GAAP Operating Expenses. We define non-GAAP cost of revenue and non-GAAP operating expenses as GAAP cost of revenue and GAAP operating expenses, respectively, excluding the impact of stock-based compensation, transaction costs, sponsor costs, other non-recurring costs, and amortization of acquisition-related intangibles that we do not believe are reflective of our ongoing operations. Although we exclude the amortization of acquisition-related intangibles from the non-GAAP measures, management believes it is important for investors to understand that such intangible assets were recorded as part of purchase accounting and contribute to revenue generation.

Non-GAAP Gross Profit; Non-GAAP Gross Profit Margin. We define non-GAAP gross profit as gross profit excluding the impact of stock-based compensation, transaction costs, other non-recurring costs, amortization of acquisition-related intangibles, and fair value adjustments to deferred revenue in connection with purchase accounting that we do not believe are reflective of our ongoing operations. Although we exclude the amortization of acquisition-related intangibles from the non-GAAP measure, management believes it is important for investors to understand that such intangible assets were recorded as part of purchase accounting and contribute to revenue generation. Non-GAAP Gross Profit Margin is defined as Non-GAAP gross profit divided by ACR.

Net debt. We define net debt as total debt, net of debt discounts, less cash, cash equivalents, and restricted cash. Management uses this supplemental non-GAAP measure to evaluate the Company's leverage.

Forward-Looking Statements

This press release contains, and statements made during the above referenced conference call will contain, "forward-looking" statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding the Company's financial guidance for the fourth quarter of 2023 and for the full year ending December 31, 2023, the Company's growth, customer demand and application adoption, the Company's research and development efforts and future application releases, the Company's business strategy and the Company's expectations regarding future revenue, expenses, cash flows and net income or loss.

These statements are not guarantees of future performance, but are based on management's expectations as of the date of this press release and assumptions that are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements. Important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements include the following: the ability of the parties to consummate the proposed Parchment transaction and the possibility that various closing conditions for the proposed transaction may not be satisfied or waived, and the ability to realize the benefits expected from the proposed transactions; the impact of the announcement and potential closing of the Parchment transaction on our and Parchment's business, employees and suppliers, and on our investors and common stock; risks associated with the continued economic uncertainty, including high inflation, labor shortages, high interest rates, foreign currency exchange volatility, and reduced spending by customers; failure to continue our recent growth rates; the impact of the Israel-Hamas war on the macroeconomic and geopolitical environment and on our business; risks associated with future stimulus packages approved by the U.S. federal government; our ability to acquire new customers and successfully retain existing customers; the effects of increased usage of, or interruptions or performance problems associated with, our learning platform; the impact on our business and prospects from pandemics; our history of losses and expectation that we will not be profitable for the foreseeable future; the impact of adverse general and industry-specific economic and market conditions; failure to manage our growth effectively; and changes in the spending policies or budget priorities for government funding of Higher Education and K-12 institutions.

These and other important risk factors are described more fully in the Company's most recent Annual Report on Form 10-K and subsequent Quarterly Report on Form 10-Q and other documents filed with the Securities and Exchange Commission and could cause actual results to vary from expectations. All information provided in this press release and in the conference call is as of the date hereof and Instructure undertakes no duty to update this information except as required by law.

 

INSTRUCTURE HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

 





September 30,

2023





December 31,

2022





Assets



(unaudited)











Current assets:















Cash and cash equivalents



$

304,858





$

185,954





Accounts receivable—net





92,708







71,428





Prepaid expenses





18,244







11,120





Deferred commissions





14,363







13,390





Other current assets





4,125







3,144





Total current assets





434,298







285,036





Property and equipment, net





13,656







12,380





Right-of-use assets





10,227







13,575





Goodwill





1,265,316







1,266,402





Intangible assets, net





435,442







542,679





Noncurrent prepaid expenses





5,253







871





Deferred commissions, net of current portion





14,912







18,781





Deferred tax assets





8,389







8,143





Other assets





7,710







5,622





Total assets



$

2,195,203





$

2,153,489





Liabilities and stockholders' equity















Current liabilities:















Accounts payable



$

18,539





$

18,792





Accrued liabilities





21,162







28,483





Lease liabilities





7,355







7,205





Long-term debt, current





4,013







4,013





Deferred revenue





334,404







275,564





Total current liabilities





385,473







334,057





Long-term debt, net of current portion





483,385







486,471





Deferred revenue, net of current portion





12,700







13,816





Lease liabilities, net of current portion





11,090







16,610





Deferred tax liabilities





16,069







24,702





Other long-term liabilities





4,226







1,706





Total liabilities





912,943







877,362





Stockholders' equity:















Common stock





1,447







1,429





Additional paid-in capital





1,610,026







1,575,600





Accumulated deficit





(329,213)







(300,902)





Total stockholders' equity





1,282,260







1,276,127





Total liabilities and stockholders' equity                                                                                                             



$

2,195,203





$

2,153,489





 

INSTRUCTURE HOLDINGS, INC.



CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS



(in thousands, except per share data)

 







Three months

ended September 30,





Nine months

ended September 30,







2023





2022





2023





2022







(unaudited)





(unaudited)



Revenue:

























Subscription and support



$

123,110





$

109,727





$

360,159





$

316,124



Professional services and other





11,811







12,702







34,675







34,344



Total revenue





134,921







122,429







394,834







350,468



Cost of revenue:

























Subscription and support





40,345







37,005







117,532







108,419



Professional services and other





7,082







7,068







21,016







19,063



Total cost of revenue





47,427







44,073







138,548







127,482



Gross profit





87,494







78,356







256,286







222,986



Operating expenses:

























Sales and marketing





46,734







45,737







149,743







134,943



Research and development





20,688







20,596







65,872







56,466



General and administrative





15,522







14,408







44,113







44,277



Total operating expenses





82,944







80,741







259,728







235,686



Income (loss) from operations





4,550







(2,385)







(3,442)







(12,700)



Other income (expense):

























Interest income





1,360







303







3,021







366



Interest expense





(10,868)







(7,173)







(30,642)







(16,337)



Other income (expense)





(2,443)







(3,856)







(1,965)







(6,967)



Total other income (expense), net





(11,951)







(10,726)







(29,586)







(22,938)



Loss before income taxes





(7,401)







(13,111)







(33,028)







(35,638)



Income tax benefit





1,920







3,056







4,717







7,119



Net loss and comprehensive loss



$

(5,481)





$

(10,055)





$

(28,311)





$

(28,519)



Net loss per common share, basic and diluted



$

(0.04)





$

(0.07)





$

(0.20)





$

(0.20)



Weighted-average common shares used in computing basic and diluted net

loss per common share





144,222







142,108







143,665







141,536



 

INSTRUCTURE HOLDINGS, INC.



CONSOLIDATED STATEMENTS OF CASH FLOWS



(in thousands)

 







Three months

ended September 30,





Nine months

ended September 30,







2023





2022





2023





2022







(unaudited)





(unaudited)



Operating Activities:

























Net loss



$

(5,481)





$

(10,055)





$

(28,311)





$

(28,519)



Adjustments to reconcile net loss to net cash provided by (used in) operating

activities:

























Depreciation of property and equipment





1,186







1,088







3,481







3,145



Amortization of intangible assets





35,744







34,261







107,237







102,195



Amortization of deferred financing costs





300







294







889







881



Stock-based compensation





11,675







8,699







32,986







24,670



Deferred income taxes





(3,387)







(4,642)







(7,793)







(10,064)



Other





2,489







3,176







2,853







4,917



Changes in assets and liabilities:

























Accounts receivable, net





114,737







94,959







(22,597)







(20,357)



Prepaid expenses and other assets





11,430







10,235







(15,250)







(10,941)



Deferred commissions





1,074







(1,529)







2,896







(1,333)



Right-of-use assets





1,045







1,228







3,348







3,638



Accounts payable and accrued liabilities





(5,847)







6,736







(7,565)







(2,395)



Deferred revenue





16,366







37,541







57,724







62,621



Lease liabilities





(1,619)







(1,856)







(5,370)







(5,343)



Other liabilities





2,916







(263)







2,520







(1,641)



Net cash provided by operating activities





182,628







179,872







127,048







121,474



Investing Activities:

























Purchases of property and equipment





(1,808)







(1,564)







(4,708)







(4,979)



Proceeds from sale of property and equipment





7







5







42







41



Business acquisitions, net of cash acquired























(19,484)



Net cash used in investing activities





(1,801)







(1,559)







(4,666)







(24,422)



Financing Activities:

























Proceeds from issuance of common stock from employee equity plans





2,723







3,251







6,018







7,327



Shares repurchased for tax withholdings on vesting of restricted stock units





(1,961)







(1,645)







(4,949)







(3,333)



Repayments of long-term debt





(1,250)







(1,250)







(3,750)







(2,500)



Payments of financing costs

















(84)









Net cash provided by (used in) financing activities





(488)







356







(2,765)







1,494



Foreign currency impacts on cash, cash equivalents and restricted cash





(1,523)







(2,823)







(1,246)







(4,256)



Net increase in cash, cash equivalents and restricted cash





178,816







175,846







118,371







94,290



Cash, cash equivalents and restricted cash, beginning of period





129,821







87,596







190,266







169,152



Cash, cash equivalents and restricted cash, end of period



$

308,637





$

263,442





$

308,637





$

263,442



Supplemental cash flow disclosure:

























Cash paid for taxes



$

838





$

259





$

2,657





$

3,034



Interest paid



$

13,781





$

4,184





$

31,455





$

9,950



Non-cash investing and financing activities:

























Capital expenditures incurred but not yet paid



$

75





$

20





$

75





$

20



 

RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES











INSTRUCTURE HOLDINGS, INC.



RECONCILIATION OF NON-GAAP ALLOCATED COMBINED RECEIPTS



(in thousands)



(unaudited)

 







Three months

ended September 30,





Nine months

ended September 30,







2023





2022





2023





2022



Revenue



$

134,921





$

122,429





$

394,834





$

350,468



Fair value adjustments to deferred revenue in connection with

purchase accounting











25













855



Allocated combined receipts



$

134,921





$

122,454





$

394,834





$

351,323



 

INSTRUCTURE HOLDINGS, INC.



RECONCILIATION OF NON-GAAP OPERATING INCOME



(in thousands)



(unaudited)

 







Three months

ended September 30,





Nine months

ended September 30,







2023





2022





2023





2022



Income (loss) from operations



$

4,550





$

(2,385)





$

(3,442)





$

(12,700)



Stock-based compensation





11,755







10,060







33,621







28,923



Transaction costs(1)





3,502







2,565







9,655







4,916



Sponsor costs(2)





31







148







113







451



Other non-recurring costs(3)





1,465







1,531







7,206







2,735



Amortization of acquisition-related intangibles





35,744







34,260







107,236







102,190



Fair value adjustments to deferred revenue in connection with

purchase accounting











25













855



Non-GAAP operating income



$

57,047





$

46,204





$

154,389





$

127,370





























GAAP operating margin





3.4

%





(1.9)

%





(0.9)

%





(3.6)

%

Non-GAAP operating margin





42.3

%





37.7

%





39.1

%





36.3

%

 

INSTRUCTURE HOLDINGS, INC.



RECONCILIATION OF NON-GAAP ADJUSTED EBITDA



(in thousands)



(unaudited)

 







Three months

ended September 30,





Nine months

ended September 30,







2023





2022





2023





2022



Net loss



$

(5,481)





$

(10,055)





$

(28,311)





$

(28,519)



Interest on outstanding debt





10,868







7,173







30,640







16,334



Benefit for taxes





(1,920)







(3,056)







(4,717)







(7,119)



Depreciation





1,186







1,087







3,481







3,145



Amortization











2







2







5



Stock-based compensation





11,755







10,060







33,621







28,923



Transaction costs(1)





3,502







2,565







9,655







4,916



Sponsor costs(2)





31







148







113







451



Other non-recurring costs(4)





1,465







1,531







7,313







2,735



Effects of foreign currency transaction losses





2,420







3,865







1,672







7,050



Amortization of acquisition-related intangibles





35,744







34,260







107,236







102,190



Interest income





(1,346)













(2,963)









Fair value adjustments to deferred revenue in connection with

purchase accounting











25













855



Adjusted EBITDA



$

58,224





$

47,605





$

157,742





$

130,966





























Net loss margin





(4.1)

%





(8.2)

%





(7.2)

%





(8.1)

%

Adjusted EBITDA margin





43.2

%





38.9

%





40.0

%





37.3

%

 

INSTRUCTURE HOLDINGS, INC.



RECONCILIATION OF FREE CASH FLOW, UNLEVERED FREE CASH FLOW & ADJUSTED UNLEVERED FREE CASH FLOW



(in thousands)



(unaudited)

 







Three months

ended September 30,





Nine months

ended September 30,







2023





2022





2023





2022





























Net cash provided by operating activities



$

182,628





$

179,872





$

127,048





$

121,474



Purchases of property and equipment





(1,808)







(1,564)







(4,708)







(4,979)



Proceeds from disposals of property and equipment





7







5







42







41



Free cash flow



$

180,827





$

178,313





$

122,382





$

116,536



Cash paid for interest on outstanding debt





13,781







4,184







31,455







9,950



Cash settled stock-based compensation





81







1,360







638







4,253



Unlevered free cash flow



$

194,689





$

183,857





$

154,475





$

130,739



Transaction costs(1)





1,509







2,018







9,874







7,260



Sponsor costs(2)





46







103







135







344



Impaired leases





263







495







1,096







1,465



Other non-recurring costs(5)





3,553







1,140







8,363







2,598



Adjusted unlevered free cash flow



$

200,060





$

187,613





$

173,943





$

142,406



 

INSTRUCTURE HOLDINGS, INC.



RECONCILIATION OF NON-GAAP NET INCOME



(in thousands, except per share data)



(unaudited)

 







Three months

ended September 30,





Nine months

ended September 30,







2023





2022





2023





2022



Net loss



$

(5,481)





$

(10,055)





$

(28,311)





$

(28,519)



Stock-based compensation





11,755







10,060







33,621







28,923



Amortization of acquisition-related intangibles





35,744







34,260







107,236







102,190



Fair value adjustments to deferred revenue in connection with

purchase accounting











25













855



Transaction costs(1)





3,502







2,565







9,655







4,916



Sponsor costs(2)





31







148







113







451



Other non-recurring costs(4)





1,465







1,531







7,313







2,735



Effects of foreign currency transaction losses





2,420







3,865







1,672







7,050



Tax effects of adjustments(6)





(13,680)







(12,909)







(39,693)







(36,368)



Non-GAAP net income



$

35,756





$

29,490





$

91,606





$

82,233



Non-GAAP net income per common share, basic



$

0.25





$

0.21





$

0.64





$

0.58



Non-GAAP net income per common share, diluted



$

0.25





$

0.21





$

0.63





$

0.57



Weighted average common shares used in computing basic Non-

GAAP net income per common share





144,222







142,108







143,665







141,536



Weighted average common shares used in computing diluted Non-

GAAP net income per common share





145,638







143,781







145,190







143,067



 

INSTRUCTURE HOLDINGS, INC.



RECONCILIATION OF NON-GAAP GROSS PROFIT



(in thousands)



(unaudited)

 







Three months

ended September 30,





Nine months

ended September 30,







2023





2022





2023





2022



Gross profit



$

87,494





$

78,356





$

256,286





$

222,986



Stock-based compensation





1,062







809







2,951







2,257



Transaction costs(1)





336







150







1,011







229



Other non-recurring costs





427







25







1,274







59



Amortization of acquisition-related intangibles





16,265







15,885







48,603







47,434



Fair value adjustments to deferred revenue in connection with

purchase accounting











25













855



Non-GAAP gross profit



$

105,584





$

95,250





$

310,125





$

273,820





























GAAP gross margin





64.8

%





64.0

%





64.9

%





63.6

%

Non-GAAP gross margin





78.3

%





77.8

%





78.5

%





77.9

%

 

INSTRUCTURE HOLDINGS, INC.



RECONCILIATION OF NET DEBT



(in thousands)



(unaudited)

 





























































September 30,

2023





December 31,

2022



Long-term debt, current

























































$

4,013





$

4,013



Long-term debt, net of current portion



























































483,385







486,471



Cash, cash equivalents and restricted cash



























































(308,637)







(190,266)



Net debt

























































$

178,761





$

300,218



 

INSTRUCTURE HOLDINGS, INC.



RECONCILIATION OF TRAILING TWELVE MONTHS NON-GAAP ADJUSTED EBITDA



(in thousands)



(unaudited)

 







Three months

ended

September 30,





Three months

ended

June 30,





Three months

ended

March 31,





Three months

ended

December 31,







2023





2023





2023





2022



Net loss



$

(5,481)





$

(10,973)





$

(11,857)





$

(5,723)



Interest on outstanding debt





10,868







10,287







9,485







8,257



Benefit for taxes





(1,920)







(672)







(2,125)







(1,013)



Depreciation





1,186







1,092







1,203







1,346



Amortization

















2







2



Stock-based compensation





11,755







11,856







10,010







10,856



Transaction costs(1)





3,502







2,317







3,836







4,206



Sponsor costs(2)





31







24







58







66



Other non-recurring costs(7)





1,465







2,298







3,550







630



Effects of foreign currency transaction (gains) and losses





2,420







(397)







(351)







(4,536)



Amortization of acquisition-related intangibles





35,744







35,744







35,748







34,520



Interest income





(1,346)







(316)







(1,301)









Fair value adjustments to deferred revenue in connection with

purchase accounting























13



Adjusted EBITDA



$

58,224





$

51,260





$

48,258





$

48,624



 

INSTRUCTURE HOLDINGS, INC.



RECONCILIATION OF NON-GAAP COST OF REVENUE



Three Months Ended September 30, 2023



(in thousands)



(unaudited)

 







GAAP





Stock-based

compensation

expense





Transaction Costs





Other non-

recurring costs





Amortization

of acquired

intangibles





Non-GAAP



Cost of Revenue:





































Subscription and support



$

40,345





$

(459)





$

(337)





$

(430)





$

(16,265)





$

22,854



Professional services and other





7,082







(603)







1







3













6,483



Total cost of revenue



$

47,427





$

(1,062)





$

(336)





$

(427)





$

(16,265)





$

29,337



 

INSTRUCTURE HOLDINGS, INC.



RECONCILIATION OF NON-GAAP COST OF REVENUE



Three Months Ended September 30, 2022



(in thousands)



(unaudited)

 







GAAP





Stock-based

compensation

expense





Transaction Costs





Other non-

recurring costs





Amortization

of acquired

intangibles





Non-GAAP



Cost of Revenue:





































Subscription and support



$

37,005





$

(358)





$

(135)





$

(6)





$

(15,885)





$

20,621



Professional services and other





7,068







(451)







(15)







(19)













6,583



Total cost of revenue



$

44,073





$

(809)





$

(150)





$

(25)





$

(15,885)





$

27,204



 

INSTRUCTURE HOLDINGS, INC.



RECONCILIATION OF NON-GAAP COST OF REVENUE



Nine Months Ended September 30, 2023



(in thousands)



(unaudited)

 







GAAP





Stock-based

compensation

expense





Transaction Costs





Other non-

recurring costs





Amortization

of acquired

intangibles





Non-GAAP



Cost of Revenue:





































Subscription and support



$

117,532





$

(1,312)





$

(984)





$

(1,066)





$

(48,603)





$

65,567



Professional services and other





21,016







(1,639)







(27)







(208)













19,142



Total cost of revenue



$

138,548





$

(2,951)





$

(1,011)





$

(1,274)





$

(48,603)





$

84,709



 

INSTRUCTURE HOLDINGS, INC.



RECONCILIATION OF NON-GAAP COST OF REVENUE



Nine Months Ended September 30, 2022



(in thousands)



(unaudited)

 







GAAP





Stock-based

compensation

expense





Transaction Costs





Other non-

recurring costs





Amortization

of acquired

intangibles





Non-GAAP



Cost of Revenue:





































Subscription and support



$

108,419





$

(965)





$

(135)





$

(24)





$

(47,434)





$

59,861



Professional services and other





19,063







(1,292)







(94)







(35)













17,642



Total cost of revenue



$

127,482





$

(2,257)





$

(229)





$

(59)





$

(47,434)





$

77,503



 

INSTRUCTURE HOLDINGS, INC.



RECONCILIATION OF NON-GAAP OPERATING EXPENSES



Three Months Ended September 30, 2023



(in thousands)



(unaudited)

 







GAAP





Stock-based compensation expense





Transaction costs





Sponsor costs





Other non-recurring costs





Amortization of acquired intangibles





Non-GAAP





GAAP % of revenue





Non-GAAP % of Revenue



Operating expenses:























































Sales and marketing



$

46,734





$

(3,145)





$

(183)





$





$

(208)





$

(19,475)





$

23,723







34.6

%





17.6

%

Research and development





20,688







(3,792)







(1,216)













(529)







(4)







15,147







15.3

%





11.2

%

General and administrative





15,522







(3,756)







(1,767)







(31)







(301)













9,667







11.5

%





7.2

%

Total operating expenses



$

82,944





$

(10,693)





$

(3,166)





$

(31)





$

(1,038)





$

(19,479)





$

48,537







61.4

%





36.0

%

 

INSTRUCTURE HOLDINGS, INC.



RECONCILIATION OF NON-GAAP OPERATING EXPENSES



Three Months Ended September 30, 2022



(in thousands)



(unaudited)

 







GAAP





Stock-based compensation expense





Transaction costs





Sponsor costs





Other non-recurring costs





Amortization of acquired intangibles





Non-GAAP





GAAP % of revenue





Non-GAAP % of Revenue



Operating expenses:























































Sales and marketing



$

45,737





$

(2,813)





$

(146)





$





$

(266)





$

(18,375)





$

24,137







37.4

%





19.7

%

Research and development





20,596







(3,035)







(1,322)













(662)













15,577







16.8

%





12.7

%

General and administrative





14,408







(3,403)







(947)







(148)







(578)













9,332







11.8

%





7.6

%

Total operating expenses



$

80,741





$

(9,251)





$

(2,415)





$

(148)





$

(1,506)





$

(18,375)





$

49,046







66.0

%





40.0

%

 

INSTRUCTURE HOLDINGS, INC.



RECONCILIATION OF NON-GAAP OPERATING EXPENSES



Nine Months Ended September 30, 2023



(in thousands)



(unaudited)

 







GAAP





Stock-based compensation expense





Transaction costs





Sponsor costs





Other non-recurring costs





Amortization of acquired intangibles





Non-GAAP





GAAP % of revenue





Non-GAAP % of Revenue



Operating expenses:























































Sales and marketing



$

149,743





$

(9,142)





$

(1,949)





$





$

(1,811)





$

(58,620)





$

78,221







37.9

%





19.8

%

Research and development





65,872







(10,446)







(4,009)













(2,718)







(13)







48,686







16.7

%





12.3

%

General and administrative





44,113







(11,082)







(2,686)







(113)







(1,403)













28,829







11.2

%





7.3

%

Total operating expenses



$

259,728





$

(30,670)





$

(8,644)





$

(113)





$

(5,932)





$

(58,633)





$

155,736







65.8

%





39.4

%

 

INSTRUCTURE HOLDINGS, INC.



RECONCILIATION OF NON-GAAP OPERATING EXPENSES



Nine Months Ended September 30, 2022



(in thousands)



(unaudited)

 







GAAP





Stock-based compensation expense





Transaction costs





Sponsor costs





Other non-recurring costs





Amortization of acquired intangibles





Non-GAAP





GAAP % of revenue





Non-GAAP % of Revenue



Operating expenses:























































Sales and marketing



$

134,943





$

(8,162)





$

(173)





$





$

(629)





$

(54,756)





$

71,223







38.5

%





20.3

%

Research and development





56,466







(8,261)







(1,856)













(920)













45,429







16.1

%





13.0

%

General and administrative





44,277







(10,243)







(2,658)







(451)







(1,127)













29,798







12.6

%





8.5

%

Total operating expenses



$

235,686





$

(26,666)





$

(4,687)





$

(451)





$

(2,676)





$

(54,756)





$

146,450







67.2

%





41.8

%

 

FOOTNOTES



































































(1) Represents expenses incurred with third parties as part of the Company's merger and acquisition activity, including due diligence, closing and post-closing integration activities.



































































(2) Represents expenses incurred for services provided by Thoma Bravo and their affiliates.



































































(3) Includes other non-recurring costs as follows (in thousands):



Three months

ended September 30,





Nine months

ended September 30,





































2023





2022





2023





2022

































Contract modification fees





422













1,028







230

































Employee severance





203







219







2,588







549

































Workforce realignment costs





385







767







2,170







1,230

































Other insignificant non-recurring costs





455







545







1,420







726

































Total other non-recurring costs



$

1,465





$

1,531





$

7,206





$

2,735













































































(4) Includes other non-recurring costs as follows (in thousands):



Three months

ended September 30,





Nine months

ended September 30,





































2023





2022





2023





2022

































Loss on exit of leased properties

















107







































Contract modification fees





422













1,028







230

































Employee severance





203







219







2,588







549

































Workforce realignment costs





385







767







2,170







1,230

































Other insignificant non-recurring costs





455







545







1,420







726

































Total other non-recurring costs



$

1,465





$

1,531





$

7,313





$

2,735













































































(5) Includes other non-recurring costs paid in cash as follows (in thousands):



Three months

ended September 30,





Nine months

ended September 30,





































2023





2022





2023





2022

































Employee severance



$

243





$

192





$

2,418





$

511

































Workforce realignment costs





308







420







2,093







635

































Contract modification fees





2,613







186







2,613







186

































Other insignificant non-recurring costs





389







342







1,239







1,266

































Total other non-recurring costs paid in cash



$

3,553





$

1,140





$

8,363





$

2,598







































(6)
During the fourth quarter of 2022, we revised the methodology for calculating Non-GAAP Net Income. The table above includes the tax effects of the adjustments calculated by using the statutory tax rate, taking into consideration the nature of the item and the relevant taxing jurisdiction.









(7) Includes other non-recurring costs as follows (in thousands):



Three months

ended

September 30,





Three months

ended

June 30,





Three months

ended

March 31,





Three months

ended

December 31,





































2023





2023





2023





2022

































Loss on exit of leased properties











6







101







































Contract modification fees





422







491







115







































Employee severance





203







526







1,859







195

































Workforce realignment costs





385







725







1,060







267

































Other insignificant non-recurring costs





455







550







415







168

































Total other non-recurring costs



$

1,465





$

2,298





$

3,550





$

630

































 

For More Information:



Media Relations:

Brian Watkins

Corporate Communications

Instructure

(801) 610-9722

brian.watkins@instructure.com

Investor Relations:

David Banks

Investor Relations

Instructure

(262) 825-8388

david.banks@instructure.com

 

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/instructure-announces-third-quarter-2023-financial-results-301971784.html

SOURCE Instructure Holdings, Inc.

Every question you ask will be answered
Scan the QR code to contact us
whatsapp
Also you can contact us via