Instructure Reports Fourth Quarter and Full Year 2018 Financial Results
SALT LAKE CITY, Feb. 19, 2019 /PRNewswire/ -- Instructure, Inc. (NYSE: INST), the leading software-as-a-service (SaaS) technology company that helps people learn and develop, from their first day of school to their last day of work, today announced its financial results for the fourth quarter and full year ended December 31, 2018.
"In 2018, we grew revenue 30% year over year, enhanced our operating structure, and defined and launched our growth initiatives," said Dan Goldsmith, CEO of Instructure. "With a strong management team in place and a clear focus on growth and operational excellence, Instructure is well-positioned for success in 2019 and beyond."
Fourth Quarter and Full Year Financial Summary
(in thousands, except per share data)
Three Months Year Ended December 31,
Ended December 31,
2018 2017 2018 2017
(unaudited) (unaudited)
Revenue $
56,251 $
44,755 $
209,544 $
160,975
Gross Margin
GAAP 69.6 70.3 70.5 71.1
% % % %
Non-GAAP(1) 71.3 71.5 72.2 72.0
% % % %
Operating Loss
GAAP (8,259) (10,411) (44,773) (43,802)
Non-GAAP(1) (1,012) (6,277) (21,898) (28,495)
Operating Margin
GAAP -14.7 -23.3 -21.4 -27.2
% % % %
Non-GAAP(1) -1.8 -14.0 -10.5 -17.7
% % % %
Net loss
GAAP (7,587) (9,744) (43,465) (43,084)
Non-GAAP(1) (340) (6,189) (20,712) (28,258)
EPS
GAAP $
(0.22) $
(0.32) $
(1.27) $
(1.47)
Non-GAAP(1) $
(0.01) $
(0.20) $
(0.60) $
(0.96)
__________
(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 mark-
to-market liabilities, the change
in fair value of the contingent
liability and the deferred income
tax benefit.
Fourth Quarter 2018 Business Highlights
-- Instructure continued to expand its customer base in the fourth quarter.
A few highlights include:
-- Corporate - ETQ, a leading provider of quality and compliance
management software, selected Bridge Learn to train their over
100,000 customers. Deloitte España will be using Bridge Learn not
only for internal employee training, but also to deliver cyber
security training to their clients. Chewy, the online pet retailer,
chose Bridge Learn for their customer success team of 10,000
employees. In Canada, lululemon athletica selected Bridge Learn and
Arc to assist them with employee training and development. And
finally, The Pacific Financial Group chose Bridge Learn and Practice
for their 3,000 financial representatives and clients.
-- U.S. Education - UC San Diego selected Canvas for their over 34,000
students and Harvard Medical School selected Practice in support of
their global training for clinical research programs.
-- International Education - In Mexico, Canvas was selected by
Tecnológico de Monterrey for their 200,000 learners. In Australia,
the University of Melbourne and the University of Technology Sydney
chose Canvas for their collective 80,000 students. Additionally, Our
Lady of Fatima University in the Philippines with 70,000 learners
and the Wine and Spirit Education Trust in the United Kingdom with
30,000 learners also selected Canvas.
Business Outlook
Today, Instructure issued financial guidance for the first quarter and full year 2019. 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 mark-to-market liabilities, the change in fair value of the contingent liability and the deferred income tax benefit (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 first quarter ending March 31, 2019, Instructure expects revenue of approximately $56.9 million to $57.5 million, a non-GAAP net loss of ($5.6) million to ($5.0) million, and non-GAAP net loss per common share of ($0.16) to ($0.14).
For the full year ending December 31, 2019, Instructure expects revenue of approximately $256 million to $260 million, non-GAAP net loss of ($23.5) million to ($21.5) million, and non-GAAP net loss per common share of ($0.65) to ($0.59).
Conference Call Details
Instructure will discuss its fourth quarter and full year 2018 results today, February 19, 2019, via teleconference at 3:00 p.m. Mountain Time / 5:00 p.m. Eastern Time. The call may be accessed at (877) 201-0168 or (647) 788-4901, passcode 8690028.
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_Q42018EarningsCall.
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 mark-to-market liabilities, the change in fair value of the contingent liability and the deferred income tax benefit. 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 mark-to-market liabilities - 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 liability - Under GAAP, we are
required to record mark-to-market adjustments for the change in the fair
value of the 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.
-- Deferred income tax benefit - The deferred income tax benefit is a
non-cash item created by the difference in the carrying amount and tax
basis of the assets and liabilities acquired. This taxable temporary
difference resulted in the recognition of a $0.6 million deferred tax
liability which was recorded as an adjustment to goodwill on the
consolidated balance sheets as of December 31, 2017. The creation of the
deferred tax liability represents a source of future taxable income
which supports the realization of a portion of the income tax benefit
associated with historical net operating losses. The deferred income tax
benefit is a non-cash item that is unique to the business combination,
and we believe the exclusion of this deferred tax benefit provides for a
useful comparison of our operating results to prior periods and our peer
companies.
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 first quarter of 2019 and for the full year ending December 31, 2019, 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 September 30, 2018, which was filed with the Securities and Exchange Commission (the "SEC") on October 31, 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 the leading software-as-a-service (SaaS) technology company that helps people learn and develop, from their first day of school to their last day of work. Its software solutions include Canvas, the learning platform that simplifies teaching and elevates learning, and Bridge, the employee development and engagement solution for people-focused companies. To date, Instructure has connected millions of educators and learners at more than 4,000 educational institutions and corporations throughout the world. Learn more about Canvas for higher ed and K-12 and Bridge for companies at www.Instructure.com.
Contacts:
Keaton Godfrey
Director, Investor Relations
Instructure
(866) 574-3127
godfrey@instructure.com
Becky Frost
Senior Director, Corporate Communications
Instructure
(801) 869-5017
press@instructure.com
INSTRUCTURE, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31, December 31,
2018 2017
Assets
Current assets:
Cash and cash equivalents $
94,320 $
35,693
Short term marketable securities 58,630 5,697
Accounts receivable-net of allowances of $1,092 and $318 at December 31, 2018 and 2017,
respectively 35,514 34,312
Prepaid expenses 13,918 11,492
Deferred commissions 8,226 7,086
Other current assets 2,019 2,419
Total current assets 212,627 96,699
Property and equipment, net 27,388 23,926
Goodwill 12,354 12,354
Intangible assets, net 6,262 9,048
Noncurrent prepaid expenses 3,516 2,939
Deferred commissions, net of current portion 11,404 11,160
Other assets 446 497
Total assets $
273,997 $
156,623
Liabilities and stockholders
'
equity
Current liabilities:
Accounts payable $
3,581 $
2,892
Accrued liabilities 9,809 13,702
Deferred rent 1,329 936
Deferred revenue 117,298 99,773
Total current liabilities 132,017 117,303
Deferred revenue, net of current portion 3,372 1,889
Deferred rent, net of current portion 10,150 9,201
Other long-term liabilities 20 1,286
Total liabilities 145,559 129,679
Commitments and contingencies
Stockholders' equity:
Common stock 3 3
Additional paid-in capital 395,865 250,899
Accumulated other comprehensive loss (8) (1)
Accumulated deficit (267,422) (223,957)
Total stockholders' equity 128,438 26,944
Total liabilities and stockholders
'
equity $
273,997 $
156,623
INSTRUCTURE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three Months
Year Ended
Ended December 31, December 31,
2018 2017 2018 2017
(unaudited) (unaudited)
Revenue:
Subscription and support $
50,962 $
40,551 $
188,501 $
144,108
Professional services and other 5,289 4,204 21,043 16,867
Total Net revenue 56,251 44,755 209,544 160,975
Cost of Revenue:
Subscription and support 13,382 10,001 46,706 34,351
Professional services and other 3,740 3,303 15,137 12,211
Total cost of revenue 17,122 13,304 61,843 46,562
Gross profit 39,129 31,451 147,701 114,413
Operating expenses:
Sales and marketing 23,811 20,130 97,481 78,726
Research and development 14,281 13,477 59,391 48,293
General and administrative 9,296 8,255 35,602 31,196
Total operating expenses 47,388 41,862 192,474 158,215
Loss from operations (8,259) (10,411) (44,773) (43,802)
Other income (expense):
Interest income 885 162 2,413 361
Interest expense (14) (37) (68) (55)
Other income (expense), net (167) 4 (698) 257
Total other income, net 704 129 1,647 563
Loss before income taxes (7,555) (10,282) (43,126) (43,239)
Income tax expense (benefit) (32) 538 (339) 155
Net loss $
(7,587) $
(9,744) $
(43,465) $
(43,084)
Net loss per common share, basic
and diluted $
(0.22) $
(0.32) $
(1.27) $
(1.47)
Weighted average shares used to
compute net loss per share, basic
and diluted 35,175 30,237 34,248 29,401
INSTRUCTURE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months
Year Ended
Ended December 31, December 31,
2018 2017 2018 2017
(unaudited) (unaudited)
Operating Activities:
Net loss $
(7,587) $
(9,744) $
(43,465) $
(43,084)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation of property and equipment 2,311 1,865 8,749 6,187
Amortization of intangible assets 674 242 2,786 572
Amortization of deferred financing costs 4 7 19 31
Change in fair value of mark-to-market
liabilities (1) (1,266) 97
Stock-based compensation 6,645 3,963 22,747 15,670
Other 320 25 (437) (17)
Changes in assets and liabilities:
Accounts receivable, net 11,368 2,388 (2,643) (14,882)
Prepaid expenses and other assets (2,385) (7,308) (2,553) (9,176)
Accounts payable and accrued liabilities (13,046) (7,457) (2,805) 740
Deferred revenue (18,003) (8,929) 19,008 26,763
Deferred rent (261) 1,055 1,342 992
Deferred commissions (212) (1,157) (1,384) (4,990)
Other liabilities (32)
Net cash provided by (used in) operating
activities (20,172) (25,051) 98 (21,129)
Investing Activities:
Purchases of property and equipment (2,244) (4,920) (11,132) (15,750)
Purchases of intangible assets (9) (310)
Proceeds from disposal of property and equipment 10 26 88 76
Purchases of marketable securities (21,690) (2,997) (113,860) (11,085)
Maturities of marketable securities 23,750 5,400 61,600 29,300
Net cash provided by (used in) investing
activities (174) (2,500) (63,304) 2,231
Financing Activities:
Proceeds from common stock offerings, net of
offering costs 109,789
Proceeds from issuance of common stock from
employee equity plans 3,707 4,606 12,467 10,375
Shares repurchased for tax withholdings on
vesting of restricted stock (72) (78) (405) (292)
Payments for financing costs (18) (31)
Net cash provided by financing activities 3,635 4,528 121,833 10,052
Net increase (decrease) in cash (16,711) (23,023) 58,627 (8,846)
Cash, beginning of period 111,031 58,716 35,693 44,539
Cash, end of period $
94,320 $
35,693 $
94,320 $
35,693
INSTRUCTURE, INC.
RECONCILIATION OF NON-GAAP GROSS MARGIN
(in thousands, except percentages)
(unaudited)
Three Months
Year Ended
Ended December 31, December 31,
2018 2017 2018 2017
GAAP gross profit $
39,129 $
31,451 $
147,701 $
114,413
Stock-based compensation 632 408 2,210 1,358
Amortization of acquisition
related intangibles 332 135 1,339 135
Reversal of payroll tax
expense on secondary stock
purchase transactions (49)
Non-GAAP gross margin $
40,093 $
31,994 $
151,201 $
115,906
GAAP gross margin % 69.6 70.3 70.5 71.1
% % % %
Non-GAAP gross margin % 71.3 71.5 72.2 72.0
% % % %
INSTRUCTURE, INC.
RECONCILIATION OF NON-GAAP OPERATING LOSS
(in thousands, except percentages)
(unaudited)
Three Months
Year Ended
Ended December 31, December 31,
2018 2017 2018 2017
Loss from operations $
(8,259) $
(10,411) $
(44,773) $
(43,802)
Stock-based compensation 6,645 3,963 22,747 15,670
Reversal of payroll tax
expense on secondary stock
purchase transactions (1,225) (534)
Amortization of acquisition
related intangibles 602 171 2,497 171
Change in fair value of
contingent liability (1,144)
Non-GAAP operating loss $
(1,012) $
(6,277) $
(21,898) $
(28,495)
GAAP operating margin -14.7 -23.3 -21.4 -27.2
% % % %
Non-GAAP operating margin -1.8 -14.0 -10.5 -17.7
% % % %
INSTRUCTURE, INC.
RECONCILIATION OF NON-GAAP NET LOSS
(in thousands, except per share data)
(unaudited)
Three Months
Year Ended
Ended December 31, December 31,
2018 2017 2018 2017
Net loss $
(7,587) $
(9,744) $
(43,465) $
(43,084)
Stock-based compensation 6,645 3,963 22,747 15,670
Reversal of payroll tax
expense on secondary stock
purchase transactions (1,225) (534)
Amortization of acquisition
related intangibles 602 171 2,497 171
Change in fair value of
mark-to-market
liabilities (1) (122) 97
Change in fair value of
contingent liability (1,144)
Deferred income tax benefit
from business combination (578) (578)
Non-GAAP net loss $
(340) $
(6,189) $
(20,712) $
(28,258)
Non-GAAP net loss per
common share, basic and
diluted $
(0.01) $
(0.20) $
(0.60) $
(0.96)
Weighted average common
shares used in computing
basic and diluted net loss
per common share 35,175 30,237 34,248 29,401
INSTRUCTURE, INC.
RECONCILIATION OF FREE CASH FLOW
(in thousands)
(unaudited)
Three Months
Year Ended
Ended December 31, December 31,
2018 2017 2018 2017
Net cash provided by
(used in) operating
activities $
(20,172) $
(25,051) $
98 $
(21,129)
Purchase of property
and equipment and
intangibles (2,244) (4,929) (11,132) (16,060)
Proceeds from
disposals of
property and
equipment 10 26 88 76
Free cash flow $
(22,406) $
(29,954) $
(10,946) $
(37,113)
INSTRUCTURE, INC.
RECONCILIATION OF 12-MONTH BILLINGS
(in thousands)
(unaudited)
Trailing Twelve Months Ended
December 31,
2018 2017
Total net revenue $
209,544 $
160,975
Total deferred revenue
Beginning balance 101,662 74,637
Ending balance 120,669 101,662
Net change in current deferred revenue 19,007 27,025
Total 12-month billings $
228,551 $
188,000
INSTRUCTURE, INC.
RECONCILIATION OF NON-GAAP OPERATING EXPENSES
Three Months Ended December 31, 2018
(in thousands)
(unaudited)
GAAP Stock-based Reversal of Amortization Change in NON-GAAP
Compensation Payroll Tax of acquired fair value of
Expense Associated intangibles contingent
with Equity earn-out
Transactions liability
Operating expenses:
Sales and marketing $
23,811 (1,618) (270) $
21,923
Research and development 14,281 (2,385) 11,896
General and administrative 9,296 (2,010) 7,286
Total operating expenses $
47,388 (6,013) (270) $
41,105
INSTRUCTURE, INC.
RECONCILIATION OF NON-GAAP OPERATING EXPENSES
Three Months Ended December 31, 2017
(in thousands)
(unaudited)
GAAP Stock-based Reversal of Amortization Change in NON-GAAP
Compensation Payroll Tax of acquired fair value of
Expense Associated intangibles contingent
with Equity earn-out
Transactions liability
Operating expenses:
Sales and marketing $
20,130 (926) (36) $
19,168
Research and development 13,477 (1,648) 11,829
General and administrative 8,255 (981) 7,274
Total operating expenses $
41,862 (3,555) (36) $
38,271
INSTRUCTURE, INC.
RECONCILIATION OF NON-GAAP OPERATING EXPENSES
Year Ended December 31, 2018
(in thousands)
(unaudited)
GAAP Stock-based Reversal of Amortization Change in NON-GAAP
Compensation Payroll Tax of acquired fair value of
Expense Associated intangibles contingent
with Equity earn-out
Transactions liability
Operating expenses:
Sales and marketing $
97,481 (6,022) 430 (1,158) $
90,731
Research and development 59,391 (8,338) 616 51,669
General and administrative 35,602 (6,177) 130 1,144 30,699
Total operating expenses $
192,474 (20,537) 1,176 (1,158) 1,144 $
173,099
INSTRUCTURE, INC.
RECONCILIATION OF NON-GAAP OPERATING EXPENSES
Year Ended December 31, 2017
(in thousands)
(unaudited)
GAAP Stock-based Reversal of Amortization Change in NON-GAAP
Compensation Payroll Tax of acquired fair value of
Expense Associated intangibles contingent
with Equity earn-out
Transactions liability
Operating expenses:
Sales and marketing $
78,726 (4,331) 256 (36) $
74,615
Research and development 48,293 (6,023) 256 42,526
General and administrative 31,196 (3,958) 22 27,260
Total operating expenses $
158,215 (14,312) 534 (36) $
144,401
INSTRUCTURE, INC.
RECONCILIATION OF NON-GAAP NET LOSS GUIDANCE
(in thousands)
(unaudited)
Three Months Ending Full Year Ending
March 31, December 31,
2019 2019 2019 2019
LOW HIGH LOW HIGH
Net loss $
(17,225) $
(16,625) $
(74,360) $
(72,330)
Stock-based compensation 11,025 11,025 49,775 49,775
Reversal of payroll tax
expense on secondary stock
purchase transactions (1,325) (1,325)
Amortization of acquisition
related intangibles 600 600 2,410 2,410
Non-GAAP net loss $
(5,600) $
(5,000) $
(23,500) $
(21,470)
INSTRUCTURE, INC.
RECONCILIATION OF NON-GAAP NET LOSS PER COMMON SHARE GUIDANCE
(unaudited)
Three Months Ending Full Year Ending
March 31, December 31,
2019 2019 2019 2019
LOW HIGH LOW HIGH
Net loss per common share $
(0.49) $
(0.47) $
(2.06) $
(2.00)
Stock-based compensation 0.31 0.31 1.38 1.38
Reversal of payroll tax
expense on secondary stock
purchase transactions (0.04) (0.04)
Amortization of acquisition
related intangibles 0.02 0.02 0.07 0.07
Non-GAAP net loss per
common share, basic and
diluted $
(0.16) $
(0.14) $
(0.65) $
(0.59)
Non-GAAP weighted average
common shares used in
computing basic and diluted
net loss per common share
(in thousands) 35,500 35,500 36,100 36,100
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