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Instructure Announces Second Quarter 2023 Financial Results

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Instructure Holdings, Inc. (NYSE: INST) reports a 14.4% year-over-year growth in GAAP revenue, reaching $131.1 million in the second quarter of 2023. CEO Steve Daly highlights solid results, double-digit top line growth, best-in-class margin performance, and strong free cash flow generation, attributing it to the dedication of their teams and innovative products and services.
Positive
  • Double-digit top line growth demonstrates strong financial performance
  • Best-in-class margin performance indicates efficient cost management
  • Strong free cash flow generation signifies financial stability and potential for future investments
Negative
  • None.

Second Quarter GAAP Revenue of $131.1 Million Grows 14.4% Year Over Year

SALT LAKE CITY, July 31, 2023 /PRNewswire/ -- Instructure Holdings, Inc. (Instructure) (NYSE: INST), the makers of the Canvas Learning Management System, today announced financial results for the second quarter ended June 30, 2023.

"Our second quarter results were solid with double-digit top line growth, best-in-class margin performance, and strong free cash flow generation," said Steve Daly, Instructure CEO. "Our teams continue to drive that performance with their dedication to our customers and the innovative products and services we deliver across our expanding platform. We're as optimistic as ever about our outlook for sustained growth and profitability."

Financial Highlights:

  • GAAP Revenue of $131.1 million, an increase of 14.4% year over year
  • Operating loss of $2.1 million, an improvement of $4.6 million compared with a loss of $6.6 million in the second quarter of 2022
  • Non-GAAP operating income* of $50.2 million, or 38.3% of revenue, up $11.5 million from the second quarter of 2022
  • GAAP net loss of $11.0 million, a $1.9 million improvement compared with a net loss of $12.9 million in the second quarter of 2022
  • Adjusted EBITDA* grew to $51.3 million for the quarter, or 39.1% of revenue, an increase of $11.5 million compared with the second quarter of 2022
  • Cash flow from operations of $25.1 million and Adjusted Unlevered Free Cash Flow* of $37.1 million, up $16.5 million and $20.9 million, respectively, compared with the second quarter of 2022
  • Remaining Performance Obligations (RPOs) were $853.6 million, the Company's best RPO level ever, driven by a significant number of successful renewals as we reached the three-year anniversary of COVID-19

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

Business and Operating Highlights:

  • Duke University selected Canvas learning management system ("LMS") to power innovative instruction and learning experiences across its learning institution. The decision represents a significant investment in the entire Instructure Learning Platform, with implementations of Canvas LMS, Impact, Canvas Studio and Canvas Credentials to transform teaching and learning at the university. Duke's Office of Teaching and Learning spearheaded this transition to bolster their vision of being a front-runner in life-long non-traditional education. With this deeper partnership with Duke, each of the top ten U.S. universities now use Canvas LMS.

  • Ohio University selected Canvas LMS as part of a major initiative to transform and modernize its learning experience and increase student success, switching from a legacy system. The university's main campus in Athens and five regional campuses will implement Canvas alongside Impact by Instructure, a data and analytics solution that improves adoption and evaluates the impact of edtech, as part of its migration to the Instructure Learning Platform.

  • The Charlotte-Mecklenburg Schools, a long-time Canvas and MasteryConnect customer, selected Mastery View Predictive Assessments in the quarter, helping fuel cross sales. Based in North Carolina, Charlotte-Mecklenburg selected Instructure's assessment tool because of the rigor and accuracy of the solution, which provides better insight into student growth.

  • Austrian-based University for Continuing Education Krems, the leading public university for continuing education in Europe, became a new customer in the second quarter, migrating its LMS platform from a legacy European-based provider. The institution recognized that demographics were creating a skills gap between the workforce and graduates, and that the average retirement age was increasing. Canvas LMS allows them to meet this challenge and serve traditional and non-traditional students alike. The relationship also provides Krems an advantage in meeting stringent privacy standards as a result of Instructure's commitment to protecting student data and reducing the regulatory burden.

Business Outlook

Based on information as of today, July 31, 2023, the Company is issuing the following financial guidance.

Third Quarter Fiscal 2023:

  • Revenue is expected to be in the range of $132.0 million to $133.0 million
  • Non-GAAP operating income* is expected to be in the range of $51.2 million to $52.2 million
  • Adjusted EBITDA* is expected to be in the range of $52.5 million to $53.5 million
  • Non-GAAP net income* is expected to be in the range of $29.1 million to $30.1 million

Full Year 2023:

  • Revenue is expected to be in the range of $524.0 million to $528.0 million
  • Non-GAAP operating income* is expected to be in the range of $198.5 million to $202.5 million
  • Adjusted EBITDA* is expected to be in the range of $203.5 million to $207.5 million
  • Non-GAAP net income* is expected to be in the range of $113.0 million to $117.0 million
  • Adjusted Unlevered Free Cash Flow* is expected to be in the range of $207.0 million to $211.0 million

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

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

Conference Call Information

Instructure's management team will hold a conference call to discuss our second quarter ended June 30, 2023 results today, July 31, 2023 at 5:00 p.m. ET. The conference call can be accessed by dialing (888) 330-2384 from the United States and Canada or (240) 789-2701 internationally with conference ID 1348899. A live webcast and replay of the conference call can be accessed from the investor relations page of Instructure's website at ir.instructure.com. An archived replay of the webcast will be available following the conclusion of the call.

About Instructure

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

Non-GAAP Financial Measures

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

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

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

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

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

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

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

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

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

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

Forward-Looking Statements

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

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

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

 

INSTRUCTURE HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

 



June 30,
2023



December 31,
2022

Assets


(unaudited)




Current assets:






Cash and cash equivalents


$

126,003



$

185,954

Accounts receivable—net



208,366




71,428

Prepaid expenses



31,781




11,120

Deferred commissions



14,590




13,390

Other current assets



3,502




3,144

Total current assets



384,242




285,036

Property and equipment, net



12,836




12,380

Right-of-use assets



11,272




13,575

Goodwill



1,266,402




1,266,402

Intangible assets, net



471,186




542,679

Noncurrent prepaid expenses



6,413




871

Deferred commissions, net of current portion



15,759




18,781

Deferred tax assets



8,126




8,143

Other assets



5,152




5,622

Total assets


$

2,181,388



$

2,153,489

Liabilities and stockholders' equity






Current liabilities:






Accounts payable


$

13,465



$

18,792

Accrued liabilities



32,020




28,483

Lease liabilities



7,167




7,205

Long-term debt, current



4,013




4,013

Deferred revenue



317,439




275,564

Total current liabilities



374,104




334,057

Long-term debt, net of current portion



484,382




486,471

Deferred revenue, net of current portion



13,299




13,816

Lease liabilities, net of current portion



12,897




16,610

Deferred tax liabilities



20,279




24,702

Other long-term liabilities



1,310




1,706

Total liabilities



906,271




877,362

Stockholders' equity:






Common stock



1,440




1,429

Additional paid-in capital



1,597,409




1,575,600

Accumulated deficit



(323,732)




(300,902)

Total stockholders' equity



1,275,117




1,276,127

Total liabilities and stockholders' equity                                                                                                               


$

2,181,388



$

2,153,489

 

INSTRUCTURE HOLDINGS, INC.


CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS


(in thousands, except per share data)

 




Three months
ended June 30,



Six months
ended June 30,




2023



2022



2023



2022




(unaudited)



(unaudited)


Revenue:













Subscription and support


$

118,569



$

102,905



$

237,049



$

206,397


Professional services and other



12,501




11,672




22,864




21,642


Total revenue



131,070




114,577




259,913




228,039


Cost of revenue:













Subscription and support



38,377




35,868




77,187




71,414


Professional services and other



6,912




6,530




13,934




11,995


Total cost of revenue



45,289




42,398




91,121




83,409


Gross profit



85,781




72,179




168,792




144,630


Operating expenses:













Sales and marketing



52,159




45,885




103,009




89,206


Research and development



21,482




18,669




45,184




35,870


General and administrative



14,218




14,253




28,591




29,869


Total operating expenses



87,859




78,807




176,784




154,945


Loss from operations



(2,078)




(6,628)




(7,992)




(10,315)


Other income (expense):













Interest income



320




27




1,661




63


Interest expense



(10,289)




(4,611)




(19,774)




(9,164)


Other income (expense)



402




(3,417)




478




(3,111)


Total other income (expense), net



(9,567)




(8,001)




(17,635)




(12,212)


Loss before income taxes



(11,645)




(14,629)




(25,627)




(22,527)


Income tax benefit



672




1,710




2,797




4,063


Net loss and comprehensive loss


$

(10,973)



$

(12,919)



$

(22,830)



$

(18,464)


Net loss per common share, basic and diluted


$

(0.08)



$

(0.09)



$

(0.16)



$

(0.13)


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



143,647




141,534




143,381




141,244


 

INSTRUCTURE HOLDINGS, INC.


CONSOLIDATED STATEMENTS OF CASH FLOWS


(in thousands)

 




Three months
ended June 30,



Six months
ended June 30,




2023



2022



2023



2022




(unaudited)



(unaudited)


Operating Activities:













Net loss


$

(10,973)



$

(12,919)



$

(22,830)



$

(18,464)


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













Depreciation of property and equipment



1,092




1,053




2,295




2,057


Amortization of intangible assets



35,744




34,193




71,493




67,934


Amortization of deferred financing costs



295




293




589




587


Stock-based compensation



11,676




8,158




21,311




15,971


Deferred income taxes



(1,347)




(2,011)




(4,406)




(5,422)


Other



(82)




3,173




184




2,599


Changes in assets and liabilities:













Accounts receivable, net



(144,963)




(130,095)




(137,334)




(115,316)


Prepaid expenses and other assets



12,877




13,557




(26,680)




(21,176)


Deferred commissions



878




(108)




1,822




196


Right-of-use assets



1,312




1,213




2,303




2,410


Accounts payable and accrued liabilities



5,459




2,615




(1,718)




(9,131)


Deferred revenue



115,016




91,781




41,358




25,080


Lease liabilities



(1,839)




(2,019)




(3,751)




(3,487)


Other liabilities



(72)




(265)




(396)




(1,378)


Net cash provided by (used in) operating activities



25,073




8,619




(55,760)




(57,540)


Investing Activities:













Purchases of property and equipment



(1,573)




(2,082)




(2,900)




(3,415)


Proceeds from sale of property and equipment



29




14




35




36


Business acquisitions, net of cash acquired






(19,484)







(19,484)


Net cash used in investing activities



(1,544)




(21,552)




(2,865)




(22,863)


Financing Activities:













Proceeds from issuance of common stock from employee equity plans









3,295




4,076


Shares repurchased for tax withholdings on vesting of restricted stock units



(1,709)




(425)




(2,988)




(1,688)


Repayments of long-term debt



(1,250)




(1,250)




(2,500)




(1,250)


Payments of financing costs



(84)







(84)





Net cash provided by (used in) financing activities



(3,043)




(1,675)




(2,277)




1,138


Foreign currency impacts on cash, cash equivalents and restricted cash



241




(3,095)




457




(2,291)


Net increase (decrease) in cash, cash equivalents and restricted cash



20,727




(17,703)




(60,445)




(81,556)


Cash, cash equivalents and restricted cash, beginning of period



109,094




105,299




190,266




169,152


Cash, cash equivalents and restricted cash, end of period


$

129,821



$

87,596



$

129,821



$

87,596


Supplemental cash flow disclosure:













Cash paid for taxes


$

1,638



$

2,706



$

1,819



$

2,775


Interest paid


$

9,578



$

4,342



$

17,674



$

5,766


Non-cash investing and financing activities:













Capital expenditures incurred but not yet paid


$

138



$

189



$

138



$

189


 

RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES 




INSTRUCTURE HOLDINGS, INC.


RECONCILIATION OF NON-GAAP ALLOCATED COMBINED RECEIPTS


(in thousands)


(unaudited)

 




Three months
ended June 30,



Six months
ended June 30,




2023



2022



2023



2022


Revenue


$

131,070



$

114,577



$

259,913



$

228,039


Fair value adjustments to deferred revenue in connection with
purchase accounting






331







830


Allocated combined receipts


$

131,070



$

114,908



$

259,913



$

228,869


 

INSTRUCTURE HOLDINGS, INC.


RECONCILIATION OF NON-GAAP OPERATING INCOME


(in thousands)


(unaudited)

 




Three months
ended June 30,



Six months
ended June 30,




2023



2022



2023



2022


Loss from operations


$

(2,078)



$

(6,628)



$

(7,992)



$

(10,315)


Stock-based compensation



11,856




9,387




21,866




18,863


Transaction costs(1)



2,317




927




6,153




2,351


Sponsor costs(2)



24




169




82




303


Other non-recurring costs(3)



2,292




292




5,741




1,204


Amortization of acquisition-related intangibles



35,744




34,191




71,492




67,930


Fair value adjustments to deferred revenue in connection with
purchase accounting






331







830


Non-GAAP operating income


$

50,155



$

38,669



$

97,342



$

81,166


 

INSTRUCTURE HOLDINGS, INC.


RECONCILIATION OF NON-GAAP ADJUSTED EBITDA


(in thousands)


(unaudited)

 




Three months
ended June 30,



Six months
ended June 30,




2023



2022



2023



2022


Net loss


$

(10,973)



$

(12,919)



$

(22,830)



$

(18,464)


Interest on outstanding debt



10,287




4,608




19,772




9,161


Benefit for taxes



(672)




(1,710)




(2,797)




(4,063)


Depreciation



1,092




1,053




2,295




2,058


Amortization






2




2




4


Stock-based compensation



11,856




9,387




21,866




18,863


Transaction costs(1)



2,317




927




6,153




2,351


Sponsor costs(2)



24




169




82




303


Other non-recurring costs(4)



2,298




292




5,848




1,204


Effects of foreign currency transaction (gains) and losses



(397)




3,477




(748)




3,185


Amortization of acquisition-related intangibles



35,744




34,191




71,492




67,930


Interest income



(316)







(1,617)





Fair value adjustments to deferred revenue in connection with
purchase accounting






331







830


Adjusted EBITDA


$

51,260



$

39,808



$

99,518



$

83,362















Net loss margin



(8.4)

%



(11.3)

%



(8.8)

%



(8.1)

%

Adjusted EBITDA margin



39.1

%



34.6

%



38.3

%



36.4

%

 

INSTRUCTURE HOLDINGS, INC.


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


(in thousands)


(unaudited)

 




Three months
ended June 30,



Six months
ended June 30,




2023



2022



2023



2022















Net cash used in operating activities


$

25,073



$

8,619



$

(55,760)



$

(57,540)


Purchases of property and equipment



(1,573)




(2,082)




(2,900)




(3,415)


Proceeds from disposals of property and equipment



29




14




35




36


Free cash flow


$

23,529



$

6,551



$

(58,625)



$

(60,919)


Cash paid for interest on outstanding debt



9,578




4,342




17,674




5,766


Cash settled stock-based compensation



183




1,228




557




2,892


Unlevered free cash flow


$

33,290



$

12,121



$

(40,394)



$

(52,261)


Transaction costs(1)



1,611




2,580




8,365




5,242


Sponsor costs(2)



32




191




89




241


Impaired leases



488




970




833




970


Other non-recurring costs(5)



1,641




292




4,810




1,458


Adjusted unlevered free cash flow


$

37,062



$

16,154



$

(26,297)



$

(44,350)


 

INSTRUCTURE HOLDINGS, INC.


RECONCILIATION OF NON-GAAP NET INCOME


(in thousands, except per share data)


(unaudited)

 




Three months
ended June 30,



Six months
ended June 30,




2023



2022



2023



2022


Net loss


$

(10,973)



$

(12,919)



$

(22,830)



$

(18,464)


Stock-based compensation



11,856




9,387




21,866




18,863


Amortization of acquisition-related intangibles



35,744




34,191




71,492




67,930


Fair value adjustments to deferred revenue in connection with
purchase accounting






331







830


Transaction costs(1)



2,317




927




6,153




2,351


Sponsor costs(2)



24




169




82




303


Other non-recurring costs(4)



2,298




292




5,848




1,204


Effects of foreign currency transaction (gains) and losses



(397)




3,477




(748)




3,185


Tax effects of adjustments(6)



(12,895)




(12,015)




(26,013)




(23,436)


Non-GAAP net income


$

27,974



$

23,840



$

55,850



$

52,766


Non-GAAP net income per common share, basic


$

0.19



$

0.17



$

0.39



$

0.37


Non-GAAP net income per common share, diluted


$

0.19



$

0.17



$

0.39



$

0.37


Weighted average common shares used in computing basic Non-
GAAP net income per common share



143,647




141,534




143,381




141,244


Weighted average common shares used in computing diluted Non-
GAAP net income per common share



145,150




142,847




144,979




142,844


 

INSTRUCTURE HOLDINGS, INC.


RECONCILIATION OF NON-GAAP GROSS PROFIT


(in thousands)


(unaudited)

 




Three months
ended June 30,



Six months
ended June 30,




2023



2022



2023



2022


Gross profit


$

85,781



$

72,179



$

168,792



$

144,630


Stock-based compensation



1,096




790




1,889




1,448


Transaction costs(1)



495




35




675




79


Other non-recurring costs



508




15




847




34


Amortization of acquisition-related intangibles



16,265




15,859




32,338




31,549


Fair value adjustments to deferred revenue in connection with
purchase accounting






331







830


Non-GAAP gross profit


$

104,145



$

89,209



$

204,541



$

178,570















GAAP gross margin



65.4

%



63.0

%



64.9

%



63.4

%

Non-GAAP gross margin



79.5

%



77.6

%



78.7

%



78.0

%

 

INSTRUCTURE HOLDINGS, INC.


RECONCILIATION OF NET DEBT


(in thousands)


(unaudited)

 

























June 30,
2023



December 31,
2022


Long-term debt, current























$

4,013



$

4,013


Long-term debt, net of current portion
























484,382




486,471


Cash, cash equivalents and restricted cash 
























(129,821)




(190,266)


Net debt























$

358,574



$

300,218


 

INSTRUCTURE HOLDINGS, INC.


RECONCILIATION OF TRAILING TWELVE MONTHS NON-GAAP ADJUSTED EBITDA


(in thousands)


(unaudited)

 




Three months
ended
June 30,



Three months
ended
March 31,



Three months
ended
December 31,



Three months
ended
September 30,




2023



2023



2022



2022


Net loss


$

(10,973)



$

(11,857)



$

(5,723)



$

(10,055)


Interest on outstanding debt



10,287




9,485




8,257




7,173


Benefit for taxes



(672)




(2,125)




(1,013)




(3,056)


Depreciation



1,092




1,203




1,346




1,087


Amortization






2




2




2


Stock-based compensation



11,856




10,010




10,856




10,060


Transaction costs(1)



2,317




3,836




4,206




2,565


Sponsor costs(2)



24




58




66




148


Other non-recurring costs(7)



2,298




3,550




630




1,531


Effects of foreign currency transaction (gains) and losses



(397)




(351)




(4,536)




3,865


Amortization of acquisition-related intangibles



35,744




35,748




34,520




34,260


Interest income



(316)




(1,301)








Fair value adjustments to deferred revenue in connection with
purchase accounting









13




25


Adjusted EBITDA


$

51,260



$

48,258



$

48,624



$

47,605


 

INSTRUCTURE HOLDINGS, INC.


RECONCILIATION OF NON-GAAP COST OF REVENUE


Three Months Ended June 30, 2023


(in thousands)


(unaudited)

 




GAAP



Stock-based
compensation
expense



Transaction
Costs



Other non-
recurring costs



Amortization
of acquired
intangibles



Non-GAAP


Cost of Revenue:



















Subscription and support


$

38,377



$

(474)



$

(487)



$

(502)



$

(16,265)



$

20,649


Professional services and other



6,912




(622)




(8)




(6)







6,276


Total cost of revenue


$

45,289



$

(1,096)



$

(495)



$

(508)



$

(16,265)



$

26,925


 

INSTRUCTURE HOLDINGS, INC.


RECONCILIATION OF NON-GAAP COST OF REVENUE


Three Months Ended June 30, 2022


(in thousands)


(unaudited)

 




GAAP



Stock-based
compensation
expense



Transaction
Costs



Other non-
recurring costs



Amortization
of acquired
intangibles



Non-GAAP


Cost of Revenue:



















Subscription and support


$

35,868



$

(325)



$



$

(9)



$

(15,859)



$

19,675


Professional services and other



6,530




(465)




(35)




(6)







6,024


Total cost of revenue


$

42,398



$

(790)



$

(35)



$

(15)



$

(15,859)



$

25,699


 

INSTRUCTURE HOLDINGS, INC.


RECONCILIATION OF NON-GAAP COST OF REVENUE


Six Months Ended June 30, 2023


(in thousands)


(unaudited)

 




GAAP



Stock-based
compensation
expense



Transaction
Costs



Other non-
recurring costs



Amortization
of acquired
intangibles



Non-GAAP


Cost of Revenue:



















Subscription and support


$

77,187



$

(853)



$

(647)



$

(636)



$

(32,338)



$

42,713


Professional services and other



13,934




(1,036)




(28)




(211)







12,659


Total cost of revenue


$

91,121



$

(1,889)



$

(675)



$

(847)



$

(32,338)



$

55,372


 

INSTRUCTURE HOLDINGS, INC.


RECONCILIATION OF NON-GAAP COST OF REVENUE


Six Months Ended June 30, 2022


(in thousands)


(unaudited)

 




GAAP



Stock-based
compensation
expense



Transaction
Costs



Other non-
recurring costs



Amortization
of acquired
intangibles



Non-GAAP


Cost of Revenue:



















Subscription and support


$

71,414



$

(607)



$



$

(18)



$

(31,549)



$

39,240


Professional services and other



11,995




(841)




(79)




(16)







11,059


Total cost of revenue


$

83,409



$

(1,448)



$

(79)



$

(34)



$

(31,549)



$

50,299


 

INSTRUCTURE HOLDINGS, INC.


RECONCILIATION OF NON-GAAP OPERATING EXPENSES


Three Months Ended June 30, 2023


(in thousands)


(unaudited)

 




GAAP



Stock-based
compensation
expense



Transaction
costs



Sponsor
costs



Other
non-
recurring
costs



Amortization
of acquired
intangibles



Non-
GAAP



GAAP %
of
revenue



Non-GAAP
% of
Revenue


Operating expenses:




























Sales and marketing


$

52,159



$

(3,469)



$

(1,138)



$



$

(472)



$

(19,475)



$

27,605




39.8

%



21.1

%

Research and development



21,482




(3,480)




(552)







(862)




(4)




16,584




16.4

%



12.7

%

General and administrative



14,218




(3,811)




(132)




(24)




(450)







9,801




10.8

%



7.5

%

Total operating expenses


$

87,859



$

(10,760)



$

(1,822)



$

(24)



$

(1,784)



$

(19,479)



$

53,990




67.0

%



41.3

%

 

INSTRUCTURE HOLDINGS, INC.


RECONCILIATION OF NON-GAAP OPERATING EXPENSES


Three Months Ended June 30, 2022


(in thousands)


(unaudited)

 




GAAP



Stock-based
compensation
expense



Transaction
costs



Sponsor
costs



Other
non-
recurring
costs



Amortization
of acquired
intangibles



Non-
GAAP



GAAP
% of
revenue



Non-GAAP
% of
Revenue


Operating expenses:




























Sales and marketing


$

45,885



$

(2,772)



$

(18)



$



$

(92)



$

(18,332)



$

24,671




40.0

%



21.5

%

Research and development



18,669




(2,686)




(437)







(65)







15,481




16.3

%



13.5

%

General and administrative



14,253




(3,139)




(438)




(169)




(119)







10,388




12.4

%



9.1

%

Total operating expenses


$

78,807



$

(8,597)



$

(893)



$

(169)



$

(276)



$

(18,332)



$

50,540




68.7

%



44.1

%

 

INSTRUCTURE HOLDINGS, INC.


RECONCILIATION OF NON-GAAP OPERATING EXPENSES


Six Months Ended June 30, 2023


(in thousands)


(unaudited)

 




GAAP



Stock-based
compensation
expense



Transaction
costs



Sponsor
costs



Other
non-
recurring
costs



Amortization
of acquired
intangibles



Non-
GAAP



GAAP
% of
revenue



Non-GAAP
% of
Revenue


Operating expenses:




























Sales and marketing


$

103,009



$

(5,997)



$

(1,766)



$



$

(1,603)



$

(39,145)



$

54,498




39.6

%



21.0

%

Research and development



45,184




(6,654)




(2,793)







(2,189)




(9)




33,539




17.4

%



12.9

%

General and administrative



28,591




(7,326)




(919)




(82)




(1,102)







19,162




11.0

%



7.4

%

Total operating expenses


$

176,784



$

(19,977)



$

(5,478)



$

(82)



$

(4,894)



$

(39,154)



$

107,199




68.0

%



41.3

%

 

INSTRUCTURE HOLDINGS, INC.


RECONCILIATION OF NON-GAAP OPERATING EXPENSES


Six Months Ended June 30, 2022


(in thousands)


(unaudited)

 




GAAP



Stock-based
compensation
expense



Transaction
costs



Sponsor
costs



Other
non-
recurring
costs



Amortization
of acquired
intangibles



Non-
GAAP



GAAP
% of
revenue



Non-GAAP
% of
Revenue


Operating expenses:




























Sales and marketing


$

89,206



$

(5,349)



$

(27)



$



$

(363)



$

(36,381)



$

47,086




39.1

%



20.6

%

Research and development



35,870




(5,226)




(534)







(258)







29,852




15.7

%



13.1

%

General and administrative



29,869




(6,840)




(1,711)




(303)




(549)







20,466




13.1

%



9.0

%

Total operating expenses


$

154,945



$

(17,415)



$

(2,272)



$

(303)



$

(1,170)



$

(36,381)



$

97,404




67.9

%



42.7

%

 

 FOOTNOTES


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


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


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


Three months
ended June 30,



Six months
ended June 30,




















2023



2022



2023



2022


















Contract modification fees



491







606




230


















Employee severance



526




265




2,385




330


















Workforce realignment costs



725







1,785




354


















Other insignificant non-recurring costs



550




27




965




290


















Total other non-recurring costs


$

2,292



$

292



$

5,741



$

1,204



















































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


Three months
ended June 30,



Six months
ended June 30,




















2023



2022



2023



2022


















Loss on exit of leased properties



6







107





















Contract modification fees



491







606




230


















Employee severance



526




265




2,385




330


















Workforce realignment costs



725







1,785




354


















Other insignificant non-recurring costs



550




27




965




290


















Total other non-recurring costs


$

2,298



$

292



$

5,848



$

1,204



















































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


Three months
ended June 30,



Six months
ended June 30,




















2023



2022



2023



2022


















Employee severance


$

506



$

254



$

2,175



$

319


















Workforce realignment costs



725







1,785




215


















Other insignificant non-recurring costs



410




38




850




924


















Total other non-recurring costs paid in cash


$

1,641



$

292



$

4,810



$

1,458



















































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











































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


Three months ended
June 30,



Three months ended
March 31,



Three months ended
December 31,



Three months ended
September 30,




















2023



2023



2022



2022


















Loss on exit of leased properties



6




101
























Contract modification fees



491




115
























Employee severance



526




1,859




195




219


















Workforce realignment costs



725




1,060




267




767


















Other insignificant non-recurring costs



550




415




168




545


















Total other non-recurring costs


$

2,298



$

3,550



$

630



$

1,531


















 

For More Information:

Media Relations: 
Brian Watkins
Corporate Communications
Instructure
(801) 610-9722
brian.watkins@instructure.com 

Investor Relations:
David Banks
Investor Relations
Instructure
(262) 825-8388
david.banks@instructure.com

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/instructure-announces-second-quarter-2023-financial-results-301889558.html

SOURCE Instructure Holdings, Inc.

FAQ

What is Instructure Holdings, Inc.'s GAAP revenue for the second quarter of 2023?

Instructure Holdings, Inc. (NYSE: INST) reports a 14.4% year-over-year growth in GAAP revenue, reaching $131.1 million.

What factors contributed to the solid second quarter results?

CEO Steve Daly attributes the solid results to double-digit top line growth, best-in-class margin performance, and strong free cash flow generation, driven by the dedication of their teams and innovative products and services.

What products does Instructure offer?

Instructure is the makers of the Canvas Learning Management System, delivering innovative products and services across their expanding platform.

Instructure Holdings, Inc.

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