Instructure Reports Second Quarter 2017 Financial Results
SALT LAKE CITY, July 31, 2017 /PRNewswire/ -- Instructure, Inc. (NYSE: INST), a leading software-as-a-service (SaaS) technology company that makes software that makes people smarter, today announced its financial results for the second quarter ended June 30, 2017.
"We delivered strong second quarter results - 47% year-over-year revenue growth, continued significant improvements to our operating margin and robust customer adoption for both Canvas and Bridge across the globe," said Josh Coates, CEO at Instructure.
"We are excited about the progress we made in the first half of 2017 and our outlook for the remainder of the year and beyond."
Second Quarter Financial Summary
(in thousands, except per share data)
Three Months
Ended June 30,
--------------
2017 2016
---- ----
(unaudited) (unaudited)
Revenue $38,044 $25,890
------- -------
Gross Margin
GAAP 71.1% 70.5%
Non-GAAP(1) 72.0% 71.6%
---- ----
Operating Loss
GAAP (12,941) (14,516)
Non-GAAP(1) (9,408) (12,069)
------ -------
Operating Margin
GAAP -34.0% -56.1%
Non-GAAP(1) -24.7% -46.6%
----- -----
Net loss
GAAP (12,996) (14,590)
Non-GAAP(1) (9,387) (12,143)
------ -------
EPS
GAAP $(0.45) $(0.53)
Non-GAAP(1) $(0.32) $(0.44)
(1) Non-GAAP financial measures
exclude stock-based compensation,
reversal of estimated accruals
related to payroll taxes on
secondary stock purchase
transactions, amortization of
acquisition related intangibles,
and the change in fair value of
the warrant liability.
Second Quarter 2017 Business Highlights
-- Instructure continued to expand its customer base in the second quarter.
A few highlights include:
-- US Higher Education and K-12 Schools - Canvas was selected by
Montgomery County Public Schools, the 17th largest school district
in the U.S. with over 200 schools and 150,000 students, and by the
Des Moines Independent Community School District for its 37,000
students. Within the U.S. higher education market, Canvas was
chosen by the University of Minnesota, the 7th largest public
university in the U.S., serving over 70,000 learners. Additionally,
Temple University and Iowa State University chose Canvas for their
respective 30,000 students.
-- International - Canvas was chosen by Erasmus University Rotterdam
for their 23,000 students and by the University of Twente for their
almost 10,000 students. Additionally, Canvas was selected by a
consortium of three universities, serving 50,000 students in the
Philippines. These universities are collaborating on joint research
and share a common vision around digital literacy.
-- Corporate - The Hartsfield-Jackson International Airport in Atlanta,
the world's busiest airport, will utilize Bridge to train more than
11,000 of their employees and contractors.
Business Outlook
Today, Instructure issued financial guidance for the third quarter and full year 2017. The financial guidance discussed below is on a non-GAAP basis, except for revenues, and excludes stock-based compensation expense, reversal of payroll tax expense on secondary stock purchase transactions, amortization of acquisition related intangibles, and the change in fair value of the warrant liability (see tables below that reconcile these non-GAAP financial measures to the related GAAP measures).
For the third quarter ending September 30, 2017, Instructure expects revenue of approximately $40.2 million to $40.8 million, a non-GAAP net loss of ($9.4) million to ($8.8) million, and non-GAAP net loss per share of ($0.32) to ($0.30) per common share.
For the full year ending December 31, 2017, Instructure expects revenue of approximately $152.9 million to $154.1 million, up from previously stated guidance of $150.7 million to $152.2 million, non-GAAP net loss of ($36.8) million to ($35.8) million, up from ($37.7) million to ($36.7) million, and non-GAAP net loss per share of ($1.26) to ($1.23) per common share, up from ($1.29) to ($1.26).
Conference Call Details:
Instructure will discuss its second quarter 2017 results today, July 31, 2017, via teleconference at 3:00 p.m. Mountain Time / 5:00 p.m. Eastern Time. The call may be accessed at (877) 879-6207 or (719) 457-2656, passcode 7182108. A live webcast, as well as replay, of the conference call will be accessible at Instructure's investor relations website, https://ir.instructure.com.
Non-GAAP Financial Measures
In this press release, Instructure's non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating loss, non-GAAP operating margin, non-GAAP net loss, non-GAAP net loss per share and 12-month billings are not presented in accordance with GAAP and are not intended to be used in lieu of GAAP presentations of results of operations.
Management presents these non-GAAP financial measures because it considers them to be important supplemental measures of performance. Management uses the non-GAAP financial measures for planning purposes, including analysis of the company's performance against prior periods, the preparation of operating budgets and to determine appropriate levels of operating and capital investments. Management also believes that the non-GAAP financial measures provide additional insight for analysts and investors in evaluating the company's financial and operational performance. However, these non-GAAP financial measures have limitations as an analytical tool and are not intended to be an alternative to financial measures prepared in accordance with GAAP. We intend to provide these non-GAAP financial measures as part of our future earnings discussions and, therefore, the inclusion of these non-GAAP financial measures will provide consistency in our financial reporting. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures. A reconciliation of our 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. Our definitions may differ from the definitions used by other companies and therefore comparability may be limited. In addition, other companies may not publish these or similar metrics.
Non-GAAP measures exclude stock-based compensation, payroll taxes related to secondary stock purchase transactions or the reversal of such expense due to the retirement of the liability, amortization of acquisition related intangibles, and the change in fair value of the warrant liability. We believe investors may want to exclude the effects of these items in order to compare our financial performance between time periods:
-- Stock-based compensation - Although stock-based compensation is an
important aspect of the compensation of our employees and executives,
management believes it is useful to exclude stock-based compensation in
order to better understand the long-term performance of our core
business. Unlike cash compensation, the value of equity awards is
determined using a complex formula that incorporates factors, such as
market volatility and forfeiture rates that are beyond our control.
-- Reversal of estimated accruals related to payroll taxes on secondary
stock purchase transactions - Prior to our IPO, operating expenses
included employer payroll tax-related items on employee sales of
securities to investors. The amount of employer payroll tax-related
items on these transactions was dependent on the fair market value of
our stock. Beginning in the second quarter of 2016, operating expenses
included the reversal of such payroll tax expense due to the reduction
of the estimated liability, which will continue occur in the second
quarter of each year.
-- Amortization of acquisition related intangibles - Expense for the
amortization of acquisition related intangibles is a non-cash item, and
we believe that the exclusion of this expense provides for a useful
comparison of our operating results to prior periods.
-- Change in fair value of the warrant liability - Under GAAP, we are
required to record mark-to-market adjustments for the change in fair
value of the liability for warrants issued in connection with term debt
and our credit facility. This expense or gain is excluded from
management's assessment of our operating performance because management
believes that these non-cash items are not indicative of ongoing
operating performance.
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 third quarter of 2017 and for the full year ending December 31, 2017, the company's growth, customer demand and application adoption, the company's research and development efforts and future application releases, 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: risks associated with anticipated growth in Instructure's addressable market; competitive factors, including changes in the competitive environment, pricing changes, sales cycle time and increased competition; Instructure's ability to build and expand its sales efforts; general economic and industry conditions; new application introductions and Instructure's ability to develop and deliver innovative applications and features; Instructure's ability to provide high-quality service and support offerings; risks associated with international operations; and macroeconomic conditions. These and other important risk factors are described more fully in the Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, which was filed with the Securities and Exchange Commission (the "SEC") on May 3, 2017 and other documents filed with the SEC 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.
About Instructure
Instructure, Inc. is a leading software-as-a-service (SaaS) technology company that makes software that makes people smarter. With a vision to help maximize the potential of people through technology, Instructure created Canvas and Bridge to enable organizations everywhere to easily develop, deliver and manage engaging face-to-face and online learning experiences. To date, Instructure has connected millions of instructors and learners at more than 3,000 educational institutions and corporations throughout the world. Learn more about Canvas for higher ed and K-12, and Bridge for the corporate market at www.Instructure.com.
Contacts:
Erin Kasenchak
Instructure
(866) 574-3127
ekasenchak@instructure.com
Becky Frost
Instructure
(801) 869-5017
press@instructure.com
INSTRUCTURE, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, December 31,
2017 2016
---- ----
(unaudited)
Assets
Current assets:
Cash and cash equivalents $25,744 $44,539
Short term marketable securities - 23,895
Accounts receivable-net of allowances
of $274 and $225 at June 30, 2017 and
December 31, 2016 respectively 72,970 18,072
Prepaid expenses 7,721 5,434
Other current assets 886 936
--- ---
Total current assets 107,321 92,876
Property and equipment, net 18,913 14,733
Goodwill 989 989
Intangible assets, net 802 760
Noncurrent prepaid expenses 978 984
Other assets 1,051 994
----- ---
Total assets $130,054 $111,336
======== ========
Liabilities and stockholders' equity
(deficit)
Current liabilities:
Accounts payable $4,850 $5,374
Accrued liabilities 13,303 10,905
Deferred rent 832 773
Deferred revenue 103,018 72,747
------- ------
Total current liabilities 122,003 89,799
Deferred revenue, net of current
portion 4,130 3,144
Deferred rent, net of current portion 7,899 8,372
Warrant liability 108 25
Other long term liabilities 32 32
--- ---
Total liabilities 134,172 101,372
------- -------
Commitments and contingencies
Stockholders' equity (deficit):
Common stock 3 3
Additional paid-in capital 218,328 206,442
Accumulated other comprehensive income - (12)
Accumulated deficit (222,449) (196,469)
-------- --------
Total stockholders' equity (deficit) (4,118) 9,964
------ -----
Total liabilities and stockholders'
equity (deficit) $130,054 $111,336
======== ========
INSTRUCTURE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
2017 2016 2017 2016
---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (unaudited)
Revenue:
Subscription and support $32,650 $22,416 $63,163 $42,993
Professional services and other 5,394 3,474 8,860 6,196
----- ----- ----- -----
Total Net revenue 38,044 25,890 72,023 49,189
------ ------ ------ ------
Cost of Revenue:
Subscription and support 7,967 5,586 15,072 11,023
Professional services and other 3,026 2,049 5,537 3,961
----- ----- ----- -----
Total cost of revenue 10,993 7,635 20,609 14,984
------ ----- ------ ------
Gross profit 27,051 18,255 51,414 34,205
------ ------ ------ ------
Operating expenses:
Sales and marketing 21,314 18,038 40,300 34,201
Research and development 11,057 8,730 22,239 16,535
General and administrative 7,621 6,003 14,607 11,739
----- ----- ------ ------
Total operating expenses 39,992 32,771 77,146 62,475
------ ------ ------ ------
Loss from operations (12,941) (14,516) (25,732) (28,270)
------- ------- ------- -------
Other income (expense):
Interest income 39 61 115 132
Interest expense (4) (12) (18) (23)
Change in fair value of warrant
liability (76) - (83) 62
Other income (expense), net 91 (56) 127 (131)
--- --- --- ----
Total other income (expense) 50 (7) 141 40
--- --- --- ---
Loss before income taxes (12,891) (14,523) (25,591) (28,230)
Income tax expense (105) (67) (136) (99)
---- --- ---- ---
Net loss $(12,996) $(14,590) $(25,727) $(28,329)
======== ======== ======== ========
Net loss per common share, basic and
diluted $(0.45) $(0.53) $(0.89) $(1.03)
====== ====== ====== ======
Weighted average shares used to
compute net loss per share, basic
and diluted 29,090 27,610 28,909 27,456
INSTRUCTURE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Six Months Ended
Ended June 30, June 30,
-------------- --------
2017 2016 2017 2016
---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (unaudited)
Operating Activities:
Net loss $(12,996) $(14,590) $(25,727) $(28,329)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation of property and equipment 1,456 974 2,693 1,886
Amortization of intangible assets 117 87 259 164
Amortization of deferred financing costs 10 11 16 23
Change in fair value of warrant liability 76 0 83 (62)
Stock-based compensation 4,067 2,662 7,440 4,897
Other (68) (75) (66) (47)
Changes in assets and liabilities:
Accounts receivable, net (60,378) (34,579) (55,105) (31,978)
Prepaid expenses and other assets 3,353 (2) (2,280) 133
Accounts payable and accrued liabilities 3,720 1,182 2,198 1,697
Deferred revenue 49,021 35,296 31,257 23,794
Deferred rent (275) (205) (414) (240)
Other liabilities - (303) - (330)
--- ---- --- ----
Net cash used in operating activities (11,897) (9,542) (39,646) (28,392)
------- ------ ------- -------
Investing Activities:
Purchases of property and equipment (3,810) (1,142) (6,955) (3,410)
Purchases of intangible assets (11) (145) (301) (296)
Proceeds from disposal of property and equipment 23 10 38 18
Maturities of marketable securities 10,000 - 23,900 325
Net cash provided by (used in) investing
activities 6,202 (1,277) 16,682 (3,363)
----- ------ ------ ------
Financing Activities:
Proceeds from issuance of common stock from
employee equity plans 3,278 3,188 4,316 3,311
Shares repurchased for tax withholdings on
vesting of restricted stock (81) - (123) -
Payments of financing costs (24) - (24) -
--- --- --- ---
Net cash provided by financing activities 3,173 3,188 4,169 3,311
----- ----- ----- -----
Net increase (decrease) in cash (2,522) (7,631) (18,795) (28,444)
Cash, beginning of period 28,266 69,658 44,539 90,471
------ ------ ------ ------
Cash, end of period $25,744 $62,027 $25,744 $62,027
======= ======= ======= =======
INSTRUCTURE, INC.
RECONCILIATION OF NON-GAAP GROSS MARGIN
(in thousands, except percentages)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2017 2016 2017 2016
---- ---- ---- ----
GAAP gross profit $27,051 $18,255 $51,414 $34,205
Stock-based compensation 347 273 578 466
--- --- --- ---
Non-GAAP gross margin $27,398 $18,528 $51,992 $34,671
======= ======= ======= =======
GAAP gross margin % 71.1% 70.5% 71.4% 69.5%
Non-GAAP gross margin % 72.0% 71.6% 72.2% 70.5%
INSTRUCTURE, INC.
RECONCILIATION OF NON-GAAP OPERATING LOSS
(in thousands, except percentages)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2017 2016 2017 2016
---- ---- ---- ----
Loss from operations $(12,941) $(14,516) $(25,732) $(28,270)
Stock-based compensation 4,067 2,662 7,440 4,897
Reversal of payroll tax
expense on secondary stock
purchase transactions (534) (217) (534) (217)
Amortization of acquisition
related intangibles - 2 - 4
--- --- --- ---
Non-GAAP operating loss $(9,408) $(12,069) $(18,826) $(23,586)
======= ======== ======== ========
GAAP operating margin -34.0% -56.1% -35.7% -57%
Non-GAAP operating margin -24.7% -46.6% -26.1% -48%
INSTRUCTURE, INC.
RECONCILIATION OF NON-GAAP NET LOSS
(in thousands, except per share data)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2017 2016 2017 2016
---- ---- ---- ----
Net Loss $(12,996) $(14,590) $(25,727) $(28,329)
Stock-based compensation 4,067 2,662 7,440 4,897
Reversal of payroll tax
expense on secondary stock
purchase transactions (534) (217) (534) (217)
Amortization of acquisition
related intangibles - 2 - 4
Change in fair value of
warrant liability 76 - 83 (62)
--- --- --- ---
Non-GAAP net loss $(9,387) $(12,143) $(18,738) $(23,707)
======= ======== ======== ========
Non-GAAP net loss per
common share, basic and
diluted $(0.32) $(0.44) $(0.65) $(0.86)
Weighted average common
shares used in computing
basic and diluted net loss
per common share 29,090 27,610 28,909 27,456
INSTRUCTURE, INC.
RECONCILIATION OF 12-MONTH BILLINGS
(in thousands)
(unaudited)
Trailing Twelve Months Ended
June 30,
--------
2017 2016
---- ----
Total net revenue $133,714 $91,880
Current deferred
revenue
Beginning balance 72,983 42,978
Ending balance 103,018 72,983
------- ------
Net change in current
deferred revenue 30,035 30,005
Long term deferred
revenue
Beginning balance 3,136 2,815
Ending balance 4,130 3,136
----- -----
Net change in long
term deferred
revenue 994 321
Total 12-month
billings $164,743 $122,206
======== ========
INSTRUCTURE, INC.
RECONCILIATION OF NON-GAAP OPERATING EXPENSES
Three Months Ended June 30, 2017
(in thousands)
(unaudited)
GAAP Stock-based Reversal of NON-GAAP
Compensation Payroll Tax
Expense Associated
with Equity
Transactions
------------
Operating expenses:
Sales and marketing $21,314 (1,195) 256 $20,375
Research and development 11,057 (1,506) 256 9,807
General and administrative 7,621 (1,019) 22 6,624
----- ------ --- -----
Total operating expenses $39,992 (3,720) 534 $36,806
------- ------ --- -------
INSTRUCTURE, INC.
RECONCILIATION OF NON-GAAP OPERATING EXPENSES
Three Months Ended June 30, 2016
(in thousands)
(unaudited)
GAAP Stock-based Reversal of Amortization NON-GAAP
Compensation Payroll Tax of acquired
Expense Associated intangibles
with Equity
Transactions
------------
Operating expenses:
Sales and marketing $18,038 (789) 57 - $17,306
Research and development 8,730 (935) 57 (2) $7,850
General and administrative 6,003 (665) 103 - $5,441
----- ---- --- --- ------
Total operating expenses $32,771 (2,389) 217 (2) $30,597
------- ------ --- --- -------
INSTRUCTURE, INC.
RECONCILIATION OF NON-GAAP OPERATING EXPENSES
Six Months Ended June 30, 2017
(in thousands)
(unaudited)
GAAP Stock-based Reversal of NON-GAAP
Compensation Payroll Tax
Expense Associated
with Equity
Transactions
------------
Operating expenses:
Sales and marketing $40,300 (2,150) 256 $38,406
Research and development $22,239 (2,738) 256 19,757
General and administrative $14,607 (1,974) 22 12,655
------- ------ --- ------
Total operating expenses $77,146 (6,862) 534 $70,818
------- ------ --- -------
INSTRUCTURE, INC.
RECONCILIATION OF NON-GAAP OPERATING EXPENSES
Six Months Ended June 30, 2016
(in thousands)
(unaudited)
GAAP Stock-based Reversal of Amortization of NON-GAAP
Compensation Payroll Tax acquired
Expense Associated intangibles
with Equity
Transactions
------------
Operating expenses:
Sales and marketing $34,201 (1,444) 57 - $32,814
Research and development 16,535 (1,720) 57 (4) 14,868
General and administrative 11,739 (1,267) 103 - 10,575
------ ------ --- --- ------
Total operating expenses $62,475 (4,431) 217 (4) $58,257
------- ------ --- --- -------
INSTRUCTURE, INC.
RECONCILIATION OF NON-GAAP NET LOSS GUIDANCE
(in thousands)
(unaudited)
Three Months Ending Full Year Ending
September 30, December 31,
------------- ------------
2017 2017 2017 2017
---- ---- ---- ----
LOW HIGH LOW HIGH
Net loss $(13,800) $(13,200) $(52,700) $(51,700)
Stock-based compensation 4,390 4,390 16,340 16,340
Reversal of payroll tax
expense on secondary stock
purchase transactions - - (540) (540)
Change in fair value of
warrant liability 10 10 100 100
--- --- --- ---
Non-GAAP net loss $(9,400) $(8,800) $(36,800) $(35,800)
======= ======= ======== ========
INSTRUCTURE, INC.
RECONCILIATION OF NON-GAAP NET LOSS PER COMMON SHARE GUIDANCE
(unaudited)
Three Months Ending Full Year Ending
September 30, December 31,
------------- ------------
2017 2017 2017 2017
---- ---- ---- ----
LOW HIGH LOW HIGH
Net loss per common share $(0.47) $(0.45) $(1.80) $(1.77)
Stock-based compensation 0.15 0.15 0.56 0.56
Reversal of payroll tax
expense on secondary stock
purchase transactions - - (0.02) (0.02)
Change in fair value of
warrant liability 0.00 0.00 0.00 0.00
---- ---- ---- ----
Non-GAAP net loss per
common share, basic and $(0.32) $(0.30) $(1.26) $(1.23)
diluted
Non-GAAP weighted average
common shares used in
computing basic and diluted
net loss per common share
(in thousands) 29,500 29,500 29,200 29,200
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SOURCE Instructure, Inc.
