Instructure Reports Third Quarter 2017 Financial Results
SALT LAKE CITY, Oct. 30, 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 third quarter ended September 30, 2017.
"We had a solid third quarter, delivering 42% revenue growth while posting continued improvements to our operating margin," said Josh Coates, CEO at Instructure. "Strong adoption of both Canvas and Bridge as well as exceptional customer satisfaction give us confidence in our ability to continue to expand our leadership position."
"Earlier this month we introduced our newest HCM module Bridge Perform, a platform for facilitating meaningful employee-manager interaction. We are excited about the positive response we have received to date and look forward to expanding our presence in the HCM market."
Third Quarter Financial Summary
(in thousands, except per share data)
Three Months
Ended September 30,
-------------------
2017 2016
---- ----
(unaudited) (unaudited)
Revenue $42,948 $30,145
------- -------
Gross Margin
GAAP 71.0% 71.3%
Non-GAAP(1) 71.8% 72.2%
---- ----
Operating Loss
GAAP (12,562) (12,267)
Non-GAAP(1) (8,295) (9,461)
------ ------
Operating Margin
GAAP -29.2% -40.7%
Non-GAAP(1) -19.3% -31.4%
----- -----
Net loss
GAAP (12,373) (12,317)
Non-GAAP(1) (8,091) (9,521)
------ ------
EPS
GAAP $(0.42) $(0.44)
Non-GAAP(1) $(0.27) $(0.34)
(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.
Third Quarter 2017 Business Highlights
-- Instructure continued to expand its customer base in the third quarter.
A few highlights include:
-- U.S. Higher Education and K-12 Schools - Canvas was selected as the
statewide LMS by the Utah Education and Telehealth Network for all
public K-12 school districts and charter schools, and by the Wyoming
Department of Education for over 100,000 K-12 and higher education
students. Within the U.S. higher education market, Canvas was chosen
by Tufts University for their 11,000 students. Additionally, the
Georgia Institute of Technology and the University of Colorado
Boulder chose Canvas as their LMS for their 25,000 and 29,000
students, respectively.
-- International - Canvas was chosen by the Centro de Integração
Empresa-Escola (CIEE) for their 36,000 learners and by the Swinburne
University of Technology for their 24,000 students. Additionally,
the Pontifical Catholic University of Minas Gerais, one of the top
private universities in Brazil and one of the largest Catholic
universities in the world, selected Canvas for their entire
e-learning department of 16,000 students.
-- Corporate - Bridge Learn was selected by Discovery Communications,
Clemson University, and Banco BTG Pactual, a global financial
company that specializes in Investment Banking, Wealth Management
and Asset Management.
Business Outlook
Today, Instructure issued financial guidance for the fourth quarter and full year 2017. The financial guidance discussed below is on a non-GAAP basis, except for revenue, 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 fourth quarter ending December 31, 2017, Instructure expects revenue of approximately $41.0 million to $41.6 million, a non-GAAP net loss of ($8.8) million to ($8.2) million, and non-GAAP net loss per share of ($0.29) to ($0.27) per common share.
For the full year ending December 31, 2017, Instructure expects revenue of approximately $156.0 million to $156.6 million, up from previously stated guidance of $152.9 million to $154.1 million, non-GAAP net loss of ($35.6) million to ($35.0) million, up from ($36.8) million to ($35.8) million, and non-GAAP net loss per share of ($1.21) to ($1.19) per common share, up from ($1.26) to ($1.23).
Conference Call Details:
Instructure will discuss its third quarter 2017 results today, October 30, 2017, via teleconference at 3:00 p.m. Mountain Time / 5:00 p.m. Eastern Time. The call may be accessed at (800) 967-7137, or outside the U.S. at (719) 325-2145, conference ID 5036293.
The live webcast of the call can be accessed at the Instructure Investor Relations website at ir.instructure.com. A replay of the call will be available at the same web address approximately two hours following the conclusion of the live event. You may register for the live webcast at bit.ly/INSTEarningsCall.
Non-GAAP Financial Measures
In this press release and related conference call, 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 to 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 fourth 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 June 30, 2017, which was filed with the Securities and Exchange Commission (the "SEC") on August 2, 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, Gauge, Arc 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:
Keaton Godfrey
Instructure
(866) 574-3127
kgodfrey@instructure.com
Becky Frost
Instructure
(801) 869-5017
press@instructure.com
INSTRUCTURE, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30, December 31,
2017 2016
---- ----
(unaudited)
Assets
Current assets:
Cash and cash equivalents $58,716 $44,539
Short term marketable securities 8,089 23,895
Accounts receivable-net of allowances
of $355 and $241 at September 30, 2017
and December 31, 2016 respectively 35,465 18,072
Prepaid expenses 6,935 5,434
Other current assets 918 936
--- ---
Total current assets 110,123 92,876
Property and equipment, net 20,907 14,733
Goodwill 989 989
Intangible assets, net 731 760
Noncurrent prepaid expenses 1,757 984
Other assets 974 994
--- ---
Total assets $135,481 $111,336
======== ========
Liabilities and stockholders' equity
(deficit)
Current liabilities:
Accounts payable $10,146 $5,374
Accrued liabilities 13,771 10,905
Deferred rent 897 773
Deferred revenue 109,280 72,747
------- ------
Total current liabilities 134,094 89,799
Deferred revenue, net of current
portion 3,942 3,144
Deferred rent, net of current portion 8,185 8,372
Warrant liability 123 25
Other long term liabilities - 32
--- ---
Total liabilities 146,344 101,372
------- -------
Commitments and contingencies
Stockholders' equity (deficit):
Common stock 3 3
Additional paid-in capital 223,957 206,442
Accumulated other comprehensive income (1) (12)
Accumulated deficit (234,822) (196,469)
-------- --------
Total stockholders' equity (deficit) (10,863) 9,964
------- -----
Total liabilities and stockholders'
equity (deficit) $135,481 $111,336
======== ========
INSTRUCTURE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three Months Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
2017 2016 2017 2016
---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (unaudited)
Revenue:
Subscription and support $37,427 $25,814 $100,590 $68,807
Professional services and other 5,521 4,331 14,381 10,527
----- ----- ------ ------
Total Net revenue 42,948 30,145 114,971 79,334
------ ------ ------- ------
Cost of Revenue:
Subscription and support 9,278 6,312 24,350 17,335
Professional services and other 3,192 2,326 8,729 6,287
----- ----- ----- -----
Total cost of revenue 12,470 8,638 33,079 23,622
------ ----- ------ ------
Gross profit 30,478 21,507 81,892 55,712
------ ------ ------ ------
Operating expenses:
Sales and marketing 22,129 17,788 62,429 51,989
Research and development 12,577 9,297 34,816 25,832
General and administrative 8,334 6,689 22,941 18,428
----- ----- ------ ------
Total operating expenses 43,040 33,774 120,186 96,249
------ ------ ------- ------
Loss from operations (12,562) (12,267) (38,294) (40,537)
------- ------- ------- -------
Other income (expense):
Interest income 84 104 199 236
Interest expense - (31) (18) (54)
Change in fair value of warrant
liability (15) (10) (98) 52
Other income (expense), net 191 (103) 318 (234)
--- ---- --- ----
Total other income (expense) 260 (40) 401 -
--- --- --- ---
Loss before income taxes (12,302) (12,307) (37,893) (40,537)
Income tax expense (71) (10) (207) (109)
--- --- ---- ----
Net loss $(12,373) $(12,317) $(38,100) $(40,646)
======== ======== ======== ========
Net loss per common share, basic and
diluted $(0.42) $(0.44) $(1.31) $(1.47)
====== ====== ====== ======
Weighted average shares used to
compute net loss per share, basic
and diluted 29,535 28,084 29,120 27,667
INSTRUCTURE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Nine Months Ended
Ended September 30, September 30,
------------------- -------------
2017 2016 2017 2016
---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (unaudited)
Operating Activities:
Net loss $(12,373) $(12,317) $(38,100) $(40,646)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation of property and equipment 1,629 946 4,322 2,832
Amortization of intangible assets 71 120 330 284
Amortization of deferred financing costs 8 11 24 34
Change in fair value of warrant liability 15 10 98 (52)
Stock-based compensation 4,267 2,804 11,707 7,701
Other 24 167 (42) 120
Changes in assets and liabilities:
Accounts receivable, net 37,485 18,091 (17,620) (13,887)
Prepaid expenses and other assets 51 716 (2,229) 849
Accounts payable and accrued liabilities 5,998 2,606 8,196 4,303
Deferred revenue 6,074 8,666 37,331 32,460
Deferred rent 351 (139) (63) (379)
Other liabilities (32) (31) (32) (361)
--- --- --- ----
Net cash provided by (used in) operating
activities 43,568 21,650 3,922 (6,742)
------ ------ ----- ------
Investing Activities:
Purchases of property and equipment (3,875) (1,512) (10,830) (4,922)
Purchases of intangible assets - (15) (301) (311)
Proceeds from disposal of property and equipment 12 5 50 23
Purchases of marketable securities (8,088) - (8,088) (24,363)
Maturities of marketable securities - (24,363) 23,900 325
--- ------- ------ ---
Net cash provided by (used in) investing
activities (11,951) (25,885) 4,731 (29,248)
------- ------- ----- -------
Financing Activities:
Proceeds from issuance of common stock from
employee equity plans 1,453 1,183 5,769 4,494
Shares repurchased for tax withholdings on vesting
of restricted stock (91) - (214) -
Payments of financing costs (7) - (31) -
--- --- --- ---
Net cash provided by financing activities 1,355 1,183 5,524 4,494
----- ----- ----- -----
Net increase (decrease) in cash 32,972 (3,052) 14,177 (31,496)
Cash, beginning of period 25,744 62,027 44,539 90,471
------ ------ ------ ------
Cash, end of period $58,716 $58,975 $58,716 $58,975
======= ======= ======= =======
INSTRUCTURE, INC.
RECONCILIATION OF NON-GAAP GROSS MARGIN
(in thousands, except percentages)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2017 2016 2017 2016
---- ---- ---- ----
GAAP gross profit $30,478 $21,507 $81,892 $55,712
Stock-based compensation 372 256 950 722
--- --- --- ---
Non-GAAP gross margin $30,850 $21,763 $82,842 $56,434
======= ======= ======= =======
GAAP gross margin % 71.0% 71.3% 71.2% 70.2%
Non-GAAP gross margin % 71.8% 72.2% 72.1% 71.1%
INSTRUCTURE, INC.
RECONCILIATION OF NON-GAAP OPERATING LOSS
(in thousands, except percentages)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2017 2016 2017 2016
---- ---- ---- ----
Loss from operations $(12,562) $(12,267) $(38,294) $(40,537)
Stock-based compensation 4,267 2,804 11,707 7,701
Reversal of payroll tax
expense on secondary stock
purchase transactions - - (534) (217)
Amortization of acquisition
related intangibles - 2 - 6
--- --- --- ---
Non-GAAP operating loss $(8,295) $(9,461) $(27,121) $(33,047)
======= ======= ======== ========
GAAP operating margin -29.2% -40.7% -33.3% -51%
Non-GAAP operating margin -19.3% -31.4% -23.6% -42%
INSTRUCTURE, INC.
RECONCILIATION OF NON-GAAP NET LOSS
(in thousands, except per share data)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2017 2016 2017 2016
---- ---- ---- ----
Net Loss $(12,373) $(12,317) $(38,100) $(40,646)
Stock-based compensation 4,267 2,804 11,707 7,701
Reversal of payroll tax
expense on secondary stock
purchase transactions - - (534) (217)
Amortization of acquisition
related intangibles - 2 - 6
Change in fair value of
warrant liability 15 (10) 98 (52)
--- --- --- ---
Non-GAAP net loss $(8,091) $(9,521) $(26,829) $(33,208)
======= ======= ======== ========
Non-GAAP net loss per common
share, basic and diluted $(0.27) $(0.34) $(0.92) $(1.20)
Weighted average common
shares used in computing
basic and diluted net loss
per common share 29,535 28,084 29,120 27,667
INSTRUCTURE, INC.
RECONCILIATION OF 12-MONTH BILLINGS
(in thousands)
(unaudited)
Trailing Twelve Months Ended
September 30,
-------------
2017 2016
---- ----
Total net revenue $146,517 $101,131
Current deferred
revenue
Beginning balance 81,563 53,754
Ending balance 109,280 81,563
------- ------
Net change in current
deferred revenue 27,717 27,809
Long term deferred
revenue
Beginning balance 3,222 3,996
Ending balance 3,942 3,222
----- -----
Net change in long term
deferred revenue 720 (774)
Total 12-month billings $174,954 $128,166
======== ========
INSTRUCTURE, INC.
RECONCILIATION OF NON-GAAP OPERATING EXPENSES
Three Months Ended September 30, 2017
(in thousands)
(unaudited)
Stock-based Reversal of
Compensation Payroll Tax
Expense Associated
with Equity
GAAP Transactions NON-GAAP
---- ------------ ------------ --------
Operating expenses:
Sales and marketing $22,129 (1,255) - $20,874
Research and development 12,577 (1,637) - 10,940
General and administrative 8,334 (1,003) - 7,331
----- ------ --- -----
Total operating expenses $43,040 (3,895) - $39,145
------- ------ --- -------
INSTRUCTURE, INC.
RECONCILIATION OF NON-GAAP OPERATING EXPENSES
Three Months Ended September 30, 2016
(in thousands)
(unaudited)
Stock-based Reversal of Amortization
Compensation Payroll Tax of acquired
Expense Associated intangibles
with Equity
GAAP Transactions NON-GAAP
---- ------------ ------------ ------------ --------
Operating expenses:
Sales and marketing $17,788 (775) - - $17,013
Research and development 9,297 (1,022) - (2) $8,273
General and administrative 6,689 (751) - - $5,938
----- ---- --- --- ------
Total operating expenses $33,774 (2,548) - (2) $31,224
------- ------ --- --- -------
INSTRUCTURE, INC.
RECONCILIATION OF NON-GAAP OPERATING EXPENSES
Nine Months Ended September 30, 2017
(in thousands)
(unaudited)
Stock-based Reversal of
Compensation Payroll Tax
Expense Associated
with Equity
GAAP Transactions NON-GAAP
---- ------------ ------------ --------
Operating expenses:
Sales and marketing $62,429 (3,405) 256 $59,280
Research and development $34,816 (4,375) 256 30,697
General and administrative $22,941 (2,977) 22 19,986
------- ------ --- ------
Total operating expenses $120,186 (10,757) 534 $109,963
-------- ------- --- --------
INSTRUCTURE, INC.
RECONCILIATION OF NON-GAAP OPERATING EXPENSES
Nine Months Ended September 30, 2016
(in thousands)
(unaudited)
Stock-based Reversal of Amortization
Compensation Payroll Tax of acquired
Expense Associated intangibles
with Equity
GAAP Transactions NON-GAAP
---- ------------ ------------ ------------ --------
Operating expenses:
Sales and marketing $51,989 (2,219) 57 - $49,827
Research and development 25,832 (2,742) 57 (6) 23,141
General and administrative 18,428 (2,018) 103 - 16,513
------ ------ --- --- ------
Total operating expenses $96,249 (6,979) 217 (6) $89,481
------- ------ --- --- -------
INSTRUCTURE, INC.
RECONCILIATION OF NON-GAAP NET LOSS GUIDANCE
(in thousands)
(unaudited)
Three Months Ending Full Year Ending
December 31, December 31,
------------ ------------
2017 2017 2017 2017
---- ---- ---- ----
LOW HIGH LOW HIGH
Net loss $(13,210) $(12,610) $(51,320) $(50,720)
Stock-based compensation 4,400 4,400 16,110 16,110
Reversal of payroll tax
expense on secondary stock
purchase transactions - - (530) (530)
Change in fair value of
warrant liability 50 50 150 150
--- --- --- ---
Non-GAAP net loss $(8,760) $(8,160) $(35,590) $(34,990)
======= ======= ======== ========
INSTRUCTURE, INC.
RECONCILIATION OF NON-GAAP NET LOSS PER COMMON SHARE GUIDANCE
(unaudited)
Three Months Ending Full Year Ending
December 31, December 31,
------------ ------------
2017 2017 2017 2017
---- ---- ---- ----
LOW HIGH LOW HIGH
Net loss per common share $(0.44) $(0.42) $(1.75) $(1.73)
Stock-based compensation 0.15 0.15 0.55 0.55
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 0.01 0.01
---- ---- ---- ----
Non-GAAP net loss per common
share, basic and diluted $(0.29) $(0.27) $(1.21) $(1.19)
====== ====== ====== ======
Non-GAAP weighted average
common shares used in
computing basic and diluted
net loss per common share
(in thousands) 29,900 29,900 29,300 29,300
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