Instructure Reports First Quarter 2018 Financial Results
Instructure Reports First Quarter 2018 Financial Results
Q1 2018 Revenue of $48.0 Million, Up 39% Year-Over-Year
SALT LAKE CITY, April 30, 2018 /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 first quarter ended March 31, 2018.
"We had a strong start to the year as we delivered 39% year-over-year revenue growth and continued substantial improvements to our operating margin," said Josh Coates, CEO at Instructure. "During the quarter we expanded our customer base across our products, experiencing solid traction with both new customers and cross selling to existing customers."
First Quarter Financial Summary
(in thousands, except per share data)
Three Months
Ended March 31,
---------------
2018 2017
---- ----
(unaudited) (unaudited)
Revenue $47,991 $34,472
------- -------
Gross Margin
GAAP 70.9% 71.9%
Non-GAAP(1) 72.5% 72.6%
---- ----
Operating Loss
GAAP (12,133) (11,603)
Non-GAAP(1) (7,085) (8,230)
------ ------
Operating Margin
GAAP -25.3% -33.7%
Non-GAAP(1) -14.8% -23.9%
----- -----
Net loss
GAAP (11,868) (11,601)
Non-GAAP(1) (6,942) (8,221)
------ ------
EPS
GAAP $(0.37) $(0.40)
Non-GAAP(1) $(0.21) $(0.29)
___________
(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,
the change in fair value of the
warrant liability and the change in
fair value of the contingent earn-
out liability.
First Quarter 2018 Business Highlights
-- Instructure continued to expand its customer base in the first quarter.
A few highlights include:
-- U.S. Higher Education and K-12 Schools - Within the U.S. higher
education market, Canvas was selected by Mississippi State
University for their 18,000 students. With the addition of four
schools and almost 45,000 students within the San Diego Community
College District, Canvas is used in 113 of the 114 community
colleges in California. Additionally, the Chesterfield County Public
Schools in Virginia chose Canvas and Gauge for their 60,000 K-12
students and educators.
-- International - Canvas was chosen by the University of Oxford for
their entire 44 university colleges and permanent private halls, and
their 24,000 students. Under Instructure's preferred supplier
agreement with SUNET, the organization responsible for Sweden's
University Computer Network, four additional universities selected
Canvas. Now, over 100,000 Swedish students will use Canvas as their
LMS.
-- Corporate - Bridge was selected by Ancestry.com, the largest
for-profit genealogy company, and Superion, a provider of public
sector software and services. Additionally, Optiv, a cyber security
solutions provider, selected Bridge Learn and Arc for a large
extended enterprise use case. Guardian Life, one of the largest
mutual life insurance companies, and FranklinCovey, a management
consultant firm, chose Practice to easily train their financial
representatives and their remotely distributed implementation and
sales groups, respectively.
Business Outlook
Today, Instructure issued financial guidance for the second quarter and full year 2018. 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, the change in fair value of the warrant liability, and the change in fair value of the contingent earn-out liability (see tables below that reconcile these non-GAAP financial measures to the related GAAP measures). On January 1, 2018, Instructure adopted Accounting Standards Codification (ASC) 606 "Revenue from Contracts with Customers" using the full retrospective transition method.
For the second quarter ending June 30, 2018, Instructure expects revenue of approximately $49.1 million to $49.7 million, a non-GAAP net loss of ($9.2) million to ($8.6) million, and non-GAAP net loss per common share of ($0.27) to ($0.25).
For the full year ending December 31, 2018, Instructure expects revenue of approximately $204.5 million to $209.5 million, as compared to previously stated guidance of $203.5 million to $209.5 million, non-GAAP net loss of ($32.0) million to ($30.0) million, up from ($32.3) million to ($30.3) million, and non-GAAP net loss per common share of ($0.94) to ($0.88), up from ($1.03) to ($0.97).
Conference Call Details:
Instructure will discuss its first quarter 2018 results today, April 30, 2018, via teleconference at 3:00 p.m. Mountain Time / 5:00 p.m. Eastern Time. The call may be accessed at (800) 289-0438 or (323) 794-2423, passcode 5736897.
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 http://bit.ly/INST_Q12018EarningsCall.
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, non-GAAP free cash flow 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, the change in fair value of the warrant liability, and the change in fair value of the contingent earn-out 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.
-- Change in fair value of the contingent earn-out liability - Under GAAP,
we are required to record mark-to-market adjustments for the change in
the fair value of the earn-out liability for contingent consideration
related to an acquisition. The expense or gain recognized 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 second quarter of 2018 and for the full year ending December 31, 2018, 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 Annual Report for the year ended December 31, 2017, which was filed with the Securities and Exchange Commission (the "SEC") on February 15, 2018, 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
Manager, Investor Relations
Instructure
(866) 574-3127
kgodfrey@instructure.com
Becky Frost
Senior Director, Public Relations
Instructure
(801) 869-5017
becky@instructure.com
INSTRUCTURE, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31, December 31,
2018 2017
---- ----
(unaudited) (unaudited)
Assets
Current assets:
Cash and cash equivalents $136,733 $35,693
Short term marketable securities - 5,697
Accounts receivable-net of
allowances of $322 and $318 at March
31, 2018 and December 31, 2017,
respectively 25,515 34,312
Prepaid expenses 9,493 11,492
Deferred commissions 6,994 7,086
Other current assets 1,616 2,419
----- -----
Total current assets 180,351 96,699
Property and equipment, net 27,115 23,926
Goodwill 12,354 12,354
Intangible assets, net 8,288 9,048
Noncurrent prepaid expenses 3,121 2,939
Deferred commissions, net of current
portion 11,040 11,160
Other assets 487 497
--- ---
Total assets $242,756 $156,623
======== ========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $6,439 $2,892
Accrued liabilities 12,501 13,702
Deferred rent 986 936
Deferred revenue 77,671 99,773
------ ------
Total current liabilities 97,597 117,303
Deferred revenue, net of current
portion 1,436 1,889
Deferred rent, net of current portion 10,523 9,201
Other long term liabilities 775 1,286
--- -----
Total liabilities 110,331 129,679
------- -------
Commitments and contingencies
Stockholders' equity:
Common stock 3 3
Additional paid-in capital 368,247 250,899
Accumulated other comprehensive
income - (1)
Accumulated deficit (235,825) (223,957)
-------- --------
Total stockholders' equity 132,425 26,944
------- ------
Total liabilities and stockholders'
equity $242,756 $156,623
======== ========
INSTRUCTURE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three Months
Ended March 31,
---------------
2018 2017
---- ----
(unaudited) (unaudited)
Revenue:
Subscription and support $43,200 $31,554
Professional services and other 4,791 2,918
----- -----
Total Net revenue 47,991 34,472
------ ------
Cost of Revenue:
Subscription and support 10,391 7,105
Professional services and other 3,594 2,575
----- -----
Total cost of revenue 13,985 9,680
------ -----
Gross profit 34,006 24,792
------ ------
Operating expenses:
Sales and marketing 23,188 18,227
Research and development 14,660 11,182
General and administrative 8,291 6,986
----- -----
Total operating expenses 46,139 36,395
------ ------
Loss from operations (12,133) (11,603)
------- -------
Other income (expense):
Interest income 238 76
Interest expense (9) (14)
Other income, net 175 23
--- ---
Total other income (expense), net 404 85
--- ---
Loss before income taxes (11,729) (11,518)
Income tax expense (139) (83)
---- ---
Net loss $(11,868) $(11,601)
======== ========
Net loss per common share, basic
and diluted $(0.37) $(0.40)
====== ======
Weighted average shares used to
compute net loss per share, basic
and diluted 32,370 28,727
INSTRUCTURE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months
Ended March 31,
---------------
2018 2017
---- ----
(unaudited) (unaudited)
Operating Activities:
Net loss $(11,868) $(11,601)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation of property and equipment 2,013 1,237
Amortization of intangible assets 763 142
Amortization of deferred financing costs 7 6
Change in fair value of warrant liability (122) 7
Stock-based compensation 4,744 3,373
Other 65 2
Changes in assets and liabilities:
Accounts receivable, net 8,720 5,297
Prepaid expenses and other assets 2,623 (5,518)
Accounts payable and accrued liabilities 2,068 (1,522)
Deferred revenue (22,555) (18,274)
Deferred rent 1,372 (139)
Deferred commissions 212 (759)
Other liabilities (389) -
---- ---
Net cash used in operating activities (12,347) (27,749)
------- -------
Investing Activities:
Purchases of property and equipment (4,847) (3,145)
Purchases of intangible assets - (290)
Proceeds from disposal of property and equipment 26 15
Maturities of marketable securities 5,700 13,900
----- ------
Net cash provided by investing activities 879 10,480
--- ------
Financing Activities:
Proceeds from common stock offerings, net of
offering costs 109,803 -
Proceeds from issuance of common stock from
employee equity plans 2,832 1,038
Shares repurchased for tax withholdings on
vesting of restricted stock (127) (42)
Net cash provided by financing activities 112,508 996
------- ---
Net increase (decrease) in cash 101,040 (16,273)
Cash, beginning of period 35,693 44,539
------ ------
Cash, end of period $136,733 $28,266
======== =======
INSTRUCTURE, INC.
RECONCILIATION OF NON-GAAP GROSS MARGIN
(in thousands, except percentages)
(unaudited)
Three Months Ended
March 31,
---------
2018 2017
---- ----
GAAP gross profit $34,006 $24,792
Stock-based compensation 422 231
Amortization of
acquisition related
intangibles 342 -
--- ---
Non-GAAP gross margin $34,770 $25,023
======= =======
GAAP gross margin % 70.9% 71.9%
Non-GAAP gross margin % 72.5% 72.6%
INSTRUCTURE, INC.
RECONCILIATION OF NON-GAAP OPERATING LOSS
(in thousands, except percentages)
(unaudited)
Three Months Ended
March 31,
---------
2018 2017
---- ----
Loss from
operations $(12,133) $(11,603)
Stock-based
compensation 4,744 3,373
Amortization of
acquisition
related
intangibles 692 -
Change in fair
value of
contingent earn-
out liability (388) -
---- ---
Non-GAAP operating
loss $(7,085) $(8,230)
======= =======
GAAP operating
margin -25.3% -33.7%
Non-GAAP operating
margin -14.8% -23.9%
INSTRUCTURE, INC.
RECONCILIATION OF NON-GAAP NET LOSS
(in thousands, except per share data)
(unaudited)
Three Months Ended
March 31,
---------
2018 2017
---- ----
Net Loss $(11,868) $(11,601)
Stock-based
compensation 4,744 3,373
Amortization of
acquisition related
intangibles 692 -
Change in fair value
of warrant liability (122) 7
Change in fair value
of contingent earn-
out liability (388) -
---- ---
Non-GAAP net loss $(6,942) $(8,221)
======= =======
Non-GAAP net loss
per common share,
basic and diluted $(0.21) $(0.29)
Weighted average
common shares used
in computing basic
and diluted net loss
per common share 32,370 28,727
INSTRUCTURE, INC.
RECONCILIATION OF FREE CASH FLOW
(in thousands)
(unaudited)
Three Months Ended
March 31,
---------
2018 2017
---- ----
Net cash used in
operating activities $(12,347) $(27,749)
Purchase of property
and equipment and
intangibles (4,847) (3,435)
Proceeds from
disposals of
property and
equipment 26 15
--- ---
Free cash flow $(17,168) $(31,169)
======== ========
INSTRUCTURE, INC.
RECONCILIATION OF 12-MONTH BILLINGS
(in thousands)
(unaudited)
Trailing Twelve Months Ended
March 31,
---------
2018 2017
---- ----
Total net revenue $174,493 $123,840
Total Deferred revenue
Beginning balance 56,362 41,540
Ending balance 79,107 56,362
------ ------
Net change in current
deferred revenue 22,745 14,822
Total 12-month
billings $197,238 $138,662
======== ========
INSTRUCTURE, INC.
RECONCILIATION OF NON-GAAP OPERATING EXPENSES
Three Months Ended March 31, 2018
(in thousands)
(unaudited)
GAAP Stock-based Amortization Change in NON-GAAP
Compensation of acquired fair value
Expense intangibles of
contingent
earn-out
liability
---------
Operating expenses:
Sales and marketing $23,188 (1,348) (350) - $21,490
Research and development 14,660 (1,894) - - $12,766
General and administrative 8,291 (1,080) - 388 $7,599
----- ------ --- --- ------
Total operating expenses $46,139 (4,322) (350) 388 $41,855
------- ------ ---- --- -------
INSTRUCTURE, INC.
RECONCILIATION OF NON-GAAP OPERATING EXPENSES
Three Months Ended March 31, 2017
(in thousands)
(unaudited)
GAAP Stock-based Amortization Change in NON-GAAP
Compensation of acquired fair value
Expense intangibles of
contingent
earn-out
liability
---------
Operating expenses:
Sales and marketing $18,227 (955) - - $17,272
Research and development 11,182 (1,232) - - $9,950
General and administrative 6,986 (955) - - $6,031
----- ---- --- --- ------
Total operating expenses $36,395 (3,142) - - $33,253
------- ------ --- --- -------
INSTRUCTURE, INC.
RECONCILIATION OF NON-GAAP NET LOSS GUIDANCE
(in thousands)
(unaudited)
Three Months Ending Full Year Ending
June 30, December 31,
-------- ------------
2018 2018 2018 2018
---- ---- ---- ----
LOW HIGH LOW HIGH
Net loss $(14,475) $(13,875) $(57,000) $(55,000)
Stock-based compensation 5,900 5,900 24,185 24,185
Reversal of payroll tax
expense on secondary stock
purchase transactions (1,225) (1,225) (1,225) (1,225)
Amortization of acquisition
related intangibles 600 600 2,550 2,550
Change in fair value of
warrant liability - - (120) (120)
Change in fair value of
contingent earn-out
liability - - (390) (390)
--- --- ---- ----
Non-GAAP net loss $(9,200) $(8,600) $(32,000) $(30,000)
======= ======= ======== ========
INSTRUCTURE, INC.
RECONCILIATION OF NON-GAAP NET LOSS PER COMMON SHARE GUIDANCE
(unaudited)
Three Months Ending Full Year Ending
June 30, December 31,
-------- ------------
2018 2018 2018 2018
---- ---- ---- ----
LOW HIGH LOW HIGH
Net loss per common share $(0.42) $(0.40) $(1.67) $(1.61)
Stock-based compensation 0.17 0.17 0.71 0.71
Reversal of payroll tax
expense on secondary stock
purchase transactions (0.04) (0.04) (0.04) (0.04)
Amortization of acquisition
related intangibles 0.02 0.02 0.07 0.07
Change in fair value of
warrant liability - - (0.00) (0.00)
Change in fair value of
contingent earn-out
liability - - (0.01) (0.01)
--- --- ----- -----
Non-GAAP net loss per
common share, basic and
diluted $(0.27) $(0.25) $(0.94) $(0.88)
====== ====== ====== ======
Non-GAAP weighted average
common shares used in
computing basic and
diluted net loss per
common share (in
thousands) 34,500 34,500 34,200 34,200
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