Instructure Reports First Quarter 2017 Financial Results

05/01/2017

Q1 2017 Revenue of $34.0 Million, Up 46% Year-Over-Year

SALT LAKE CITY, May 1, 2017 /PRNewswire/ -- Instructure, Inc. (NYSE: INST), a leading software-as-a-service (SaaS) technology company that makes software that makes people smarter, today announced its financial results for the first quarter ended March 31, 2017.

"We had a great start to the year as we delivered strong results across the board," said Josh Coates, CEO at Instructure. "First quarter revenue grew 46% on a year-over-year basis and we made continued substantial improvements to our operating margin.  Throughout the quarter we continued to enhance the features and functionality of both Canvas and Bridge, resulting in strong customer adoption."

"Given our business momentum, we remain encouraged by our prospects for the remainder of 2017 and beyond."

First Quarter Financial Summary


(in thousands, except per share data)




Three Months
Ended March 31,




2017



2016




(unaudited)



(unaudited)


Revenue


$

33,979



$

23,299


Gross Margin









GAAP



71.7

%



68.5

%

Non-GAAP(1)



72.4

%



69.3

%

Operating Loss









GAAP



(12,791)




(13,754)


Non-GAAP(1)



(9,418)




(11,517)


Operating Margin









GAAP



-37.6

%



-59.0

%

Non-GAAP(1)



-27.7

%



-49.4

%

Net loss









GAAP



(12,731)




(13,739)


Non-GAAP(1)



(9,351)




(11,564)


EPS









GAAP


$

(0.44)



$

(0.50)


Non-GAAP(1)


$

(0.33)



$

(0.42)




















(1)

Non-GAAP financial measures exclude stock-based compensation, accrual or reversal of payroll taxes related to secondary stock purchase transactions, amortization of acquisition related intangibles, and the change in fair value of the warrant liability.

First Quarter 2017 Business Highlights

  • Instructure continued to expand its customer base in the first quarter. A few highlights include:
    • US Higher Education and K-12 Schools – Canvas was selected by Austin Independent School District as the learning management system solution for their over 80,000 students across 130 schools. Within the U.S. higher education market, Canvas was chosen by Florida State University, one of Florida's designated preeminent universities, with its 39,000 students, and The University of Southern Mississippi, which serves 13,000 students.
    • International – The University of Sydney, Australia's first and highly prominent university, selected Canvas for their 44,000 students. Additionally, UNINETT, the organization responsible for Norway's National Research and Education Network, selected Canvas as a preferred supplier for their member schools. Already, three-quarters of higher education universities in Norway, representing over 100,000 students, have signed up for Canvas.
    • Corporate – Bridge was selected by Sony Music Entertainment, Southern Glazer's Wine and Spirits, and Timex Group USA.

Business Outlook

Today, Instructure issued financial guidance for the second quarter and full year 2017. The financial guidance discussed below is on a non-GAAP basis, except for revenues, and excludes stock-based compensation expense, reversal of payroll tax expense on secondary stock purchase transactions, amortization of acquisition related intangibles, and the change in fair value of the warrant liability (see table below which reconciles these non-GAAP financial measures to the related GAAP measures).

For the second quarter ending June 30, 2017, Instructure expects revenue of approximately $36.8 million to $37.4 million, a non-GAAP net loss of ($10.5) million to ($9.9) million, and non-GAAP net loss per share of ($0.36) to ($0.34) per common share.

For the full year ending December 31, 2017, Instructure expects revenue of approximately $150.7 million to $152.2 million, up from previously stated guidance of $149.3 million to $150.8 million, non-GAAP net loss of ($37.7) million to ($36.7) million, up from ($39.2) million to ($38.2) million, and non-GAAP net loss per share of ($1.29) to ($1.26) per common share, up from ($1.35) to ($1.31).

Conference Call Details:

Instructure will discuss its first quarter 2017 results today, May 1, 2017, via teleconference at 3:00 p.m. Mountain Time / 5:00 p.m. Eastern Time. The call may be accessed at 719-325-2308, passcode 9005361.  A live webcast, as well as replay, of the conference call will be accessible at Instructure's investor relations website, https://ir.instructure.com.

Non-GAAP Financial Measures

In this press release, Instructure's non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating loss, non-GAAP operating margin, non-GAAP net loss, and 12-month billings are not presented in accordance with GAAP and are not intended to be used in lieu of GAAP presentations of results of operations.

Management presents these non-GAAP financial measures because it considers them to be important supplemental measures of performance. Management uses the non-GAAP financial measures for planning purposes, including analysis of the company's performance against prior periods, the preparation of operating budgets and to determine appropriate levels of operating and capital investments. Management also believes that the non-GAAP financial measures provide additional insight for analysts and investors in evaluating the company's financial and operational performance. However, these non-GAAP financial measures have limitations as an analytical tool and are not intended to be an alternative to financial measures prepared in accordance with GAAP. We intend to provide these non-GAAP financial measures as part of our future earnings discussions and, therefore, the inclusion of these non-GAAP financial measures will provide consistency in our financial reporting. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures. A reconciliation of our non-GAAP financial measures to their most directly comparable GAAP measures has been provided in the financial statement tables included below in this press release.  Our definitions may differ from the definitions used by other companies and therefore comparability may be limited. In addition, other companies may not publish these or similar metrics.

Non-GAAP measures exclude stock-based compensation, payroll taxes related to secondary stock purchase transactions or the reversal of such expense due to the retirement of the liability, amortization of acquisition related intangibles, and the change in fair value of the warrant liability. We believe investors may want to exclude the effects of these items in order to compare our financial performance between time periods:

  • Stock-based compensation - Although stock-based compensation is an important aspect of the compensation of our employees and executives, management believes it is useful to exclude stock-based compensation in order to better understand the long-term performance of our core business. Unlike cash compensation, the value of equity awards is determined using a complex formula that incorporates factors, such as market volatility and forfeiture rates that are beyond our control.
  • Accrual or reversal of payroll taxes related to secondary stock purchase transactions - In prior periods, operating expenses included employer payroll tax-related items on employee sales of securities to investors prior to our IPO. The amount of employer payroll tax-related items on these transactions was dependent on the fair market value of our stock. Going forward, operating expenses will include the reversal of such payroll tax expense due to the reduction of the estimated liability, which will occur in the second quarter of each year. Thus, there was no reversal of payroll taxes related to secondary stock purchase transactions in the current period.
  • Amortization of acquisition related intangibles - Expense for the amortization of acquisition related intangibles is a non-cash item, and we believe that the exclusion of this expense provides for a useful comparison of our operating results to prior periods.
  • Change in fair value of the warrant liability - Under GAAP, we are required to record mark-to-market adjustments for the change in fair value of the liability for warrants issued in connection with term debt and our credit facility. This expense or gain is excluded from management's assessment of our operating performance because management believes that these non-cash items are not indicative of ongoing operating performance.

Forward-Looking Statements

This press release contains, and statements made during the above referenced conference call will contain, "forward-looking" statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding the company's financial guidance for the second quarter of 2017 and for the full year ending December 31, 2017, the company's growth, customer demand and application adoption, the company's research and development efforts and future application releases, and the company's expectations regarding future revenue, expenses, cash flows and net income or loss.  These statements are not guarantees of future performance, but are based on management's expectations as of the date of this press release and assumptions that are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements. Important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements include the following: risks associated with anticipated growth in Instructure's addressable market; competitive factors, including changes in the competitive environment, pricing changes, sales cycle time and increased competition; Instructure's ability to build and expand its sales efforts; general economic and industry conditions; new application introductions and Instructure's ability to develop and deliver innovative applications and features; Instructure's ability to provide high-quality service and support offerings; risks associated with international operations; and macroeconomic conditions.  These and other important risk factors are described more fully in the Annual Report for the year ended December 31, 2016, which was filed with the Securities and Exchange Commission (the "SEC") on February 10, 2017 and other documents filed with the SEC and could cause actual results to vary from expectations. All information provided in this press release and in the conference call is as of the date hereof and Instructure undertakes no duty to update this information except as required by law.

About Instructure

Instructure, Inc. is a leading software-as-a-service (SaaS) technology company that makes software that makes people smarter. With a vision to help maximize the potential of people through technology, Instructure created Canvas and Bridge to enable organizations everywhere to easily develop, deliver and manage engaging face-to-face and online learning experiences. To date, Instructure has connected millions of instructors and learners at more than 2,000 educational institutions and corporations throughout the world. Learn more about Canvas for higher ed and K-12, and Bridge for the corporate market at www.Instructure.com.

Contacts:
Erin Kasenchak
Instructure
(866) 574-3127
ekasenchak@instructure.com

Heather Erickson
Instructure
(866) 718-6488
press@instructure.com

INSTRUCTURE, INC.


CONSOLIDATED BALANCE SHEETS


(in thousands)






March 31,
2017



December 31,
2016




(unaudited)






Assets









Current assets:









Cash and cash equivalents


$

28,266



$

44,539


Short term marketable securities



9,997




23,895


Accounts receivable—net of allowances of $229 and $225 at March 31, 2017 and December 31, 2016 respectively



12,803




18,072


Prepaid expenses



10,978




5,434


Other current assets



881




936


Total current assets



62,925




92,876


Property and equipment, net



16,912




14,733


Goodwill



989




989


Intangible assets, net



908




760


Noncurrent prepaid expenses



1,094




984


Other assets



1,022




994


Total assets


$

83,850



$

111,336


Liabilities and stockholders' equity









Current liabilities:









Accounts payable


$

4,436



$

5,374


Accrued liabilities



10,605




10,905


Deferred rent



823




773


Deferred revenue



54,736




72,747


Total current liabilities



70,600




89,799


Deferred revenue, net of current portion



3,391




3,144


Deferred rent, net of current portion



8,183




8,372


Warrant liability



32




25


Other long term liabilities



32




32


Total liabilities



82,238




101,372


Commitments and contingencies









Stockholders' equity:









Common stock



3




3


Treasury stock







Additional paid-in capital



211,064




206,442


Accumulated other comprehensive income



(2)




(12)


Accumulated deficit



(209,453)




(196,469)


Total stockholders' equity



1,612




9,964


Total liabilities and stockholders' equity


$

83,850



$

111,336


 

INSTRUCTURE, INC.


CONSOLIDATED STATEMENTS OF OPERATIONS


(in thousands, except per share data)






Three Months
Ended March 31,




2017



2016




(unaudited)



(unaudited)


Revenue:









Subscription and support


$

30,513



$

20,577


Professional services and other



3,466




2,722


Total Net revenue



33,979




23,299


Cost of Revenue:









Subscription and support



7,105




5,437


Professional services and other



2,511




1,912


Total cost of revenue



9,616




7,349


Gross profit



24,363




15,950


Operating expenses:









Sales and marketing



18,986




16,163


Research and development



11,182




7,805


General and administrative



6,986




5,736


Total operating expenses



37,154




29,704


Loss from operations



(12,791)




(13,754)


Other income (expense):









Interest income



76




71


Interest expense



(14)




(11)


Change in fair value of warrant liability



(7)




62


Other income (expense), net



36




(75)


Total other income (expense)



91




47


Loss before income taxes



(12,700)




(13,707)


Income tax expense



(31)




(32)


Net loss


$

(12,731)



$

(13,739)


Net loss per common share, basic and diluted


$

(0.44)



$

(0.50)


Weighted average shares used to compute net loss per share, basic and diluted



28,727




27,301


 

INSTRUCTURE, INC.


CONSOLIDATED STATEMENTS OF CASH FLOWS


(in thousands)






Three Months
Ended March 31,




2017



2016




(unaudited)



(unaudited)


Operating Activities:









Net loss


$

(12,731)



$

(13,739)


Adjustments to reconcile net loss to net cash used in operating activities:









Depreciation of property and equipment



1,237




912


Amortization of intangible assets



142




77


Amortization of deferred financing costs



6




12


Change in fair value of warrant liability



7




(62)


Stock-based compensation



3,373




2,235


Other



2




28


Changes in assets and liabilities:









Accounts receivable, net



5,273




2,601


Prepaid expenses and other assets



(5,633)




135


Accounts payable and accrued liabilities



(1,522)




515


Deferred revenue



(17,764)




(11,502)


Deferred rent



(139)




(35)


Other liabilities



0




(27)


Net cash used in operating activities



(27,749)




(18,850)


Investing Activities:









Purchases of property and equipment



(3,145)




(2,268)


Purchases of intangible assets



(290)




(151)


Proceeds from disposal of property and equipment



15




8


Maturities of marketable securities






325


Maturities of available-for-sale securities



13,900





Net cash provided by (used in) investing activities



10,480




(2,086)


Financing Activities:









Proceeds from issuance of common stock from employee equity plans



1,038




123


Shares repurchased for tax withholdings on vesting of restricted stock



(42)





Net cash provided by financing activities



996




123


Net increase (decrease) in cash



(16,273)




(20,813)


Cash, beginning of period



44,539




90,471


Cash, end of period


$

28,266



$

69,658


 

INSTRUCTURE, INC.


RECONCILIATION OF NON-GAAP GROSS MARGIN


(in thousands, except percentages)


(unaudited)






Three Months Ended

March 31,




2017



2016


GAAP gross profit


$

24,363



$

15,950


Stock-based compensation



231




193


Non-GAAP gross margin


$

24,594



$

16,143











GAAP gross margin %



71.7

%



68.5

%

Non-GAAP gross margin %



72.4

%



69.3

%



INSTRUCTURE, INC.


RECONCILIATION OF NON-GAAP OPERATING LOSS


(in thousands, except percentages)


(unaudited)






Three Months Ended

March 31,




2017



2016


Loss from operations


$

(12,791)



$

(13,754)


Stock-based compensation



3,373




2,235


Amortization of acquisition related intangibles






2


Non-GAAP operating loss


$

(9,418)



$

(11,517)











GAAP operating margin



-37.6

%



-59.0

%

Non-GAAP operating margin



-27.7

%



-49.4

%



INSTRUCTURE, INC.


RECONCILIATION OF NON-GAAP NET LOSS


(in thousands, except per share data)


(unaudited)






Three Months Ended

March 31,




2017



2016


Net Loss


$

(12,731)



$

(13,739)


Stock-based compensation



3,373




2,235


Amortization of acquisition related intangibles



-




2


Change in fair value of warrant liability



7




(62)


Non-GAAP net loss


$

(9,351)



$

(11,564)


Non-GAAP net loss per common share, basic and diluted


$

(0.33)



$

(0.42)


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



28,727




27,301


 

INSTRUCTURE, INC.


RECONCILIATION OF 12-MONTH BILLINGS


(in thousands)


(unaudited)






Trailing Twelve Months Ended
March 31,




2017



2016


Total net revenue


$

121,560



$

81,867











Current deferred revenue









Beginning balance



38,144




22,631


Ending balance



54,736




38,144


Net change in current deferred revenue



16,592




15,513











Long term deferred revenue









Beginning balance



2,679




2,529


Ending balance



3,391




2,679


Net change in long term deferred revenue



712




150











Total 12-month billings


$

138,864



$

97,530


 

INSTRUCTURE, INC.


RECONCILIATION OF NON-GAAP OPERATING EXPENSES


Three Months Ended March 31, 2017


(in thousands)


(unaudited)






GAAP



Stock-based
Compensation
Expense



NON-GAAP


Operating expenses:













Sales and marketing


$

18,986




(955)



$

18,031


Research and development



11,182




(1,232)




9,950


General and administrative



6,986




(955)




6,031


Total operating expenses


$

37,154




(3,142)



$

34,012


 

INSTRUCTURE, INC.


RECONCILIATION OF NON-GAAP OPERATING EXPENSES


Three Months Ended March 31, 2016


(in thousands)


(unaudited)






GAAP



Stock-based
Compensation
Expense



Amortization
of acquired
intangibles



NON-GAAP


Operating expenses:

















Sales and marketing


$

16,163




(655)






$

15,508


Research and development



7,805




(785)




(2)




7,018


General and administrative



5,736




(602)







5,134


Total operating expenses


$

29,704




(2,042)




(2)



$

27,660


 

INSTRUCTURE, INC.


RECONCILIATION OF NON-GAAP NET LOSS GUIDANCE


(in thousands)


(unaudited)






Three Months Ending
June 30,



Full Year Ending
December 31,




2017



2017



2017



2017




LOW



HIGH



LOW



HIGH


Net loss


$

(14,200)



$

(13,600)



$

(53,500)



$

(52,500)


Stock-based compensation



4,230




4,230




16,320




16,320


Reversal of payroll tax expense on secondary stock purchase transactions



(540)




(540)




(540)




(540)


Change in fair value of warrant liability



10




10




20




20


Non-GAAP net loss


$

(10,500)



$

(9,900)



$

(37,700)



$

(36,700)




INSTRUCTURE, INC.


RECONCILIATION OF NON-GAAP NET LOSS PER COMMON SHARE GUIDANCE


(unaudited)






Three Months Ending
June 30,



Full Year Ending
December 31,




2017



2017



2017



2017




LOW



HIGH



LOW



HIGH


Net loss per common share


$

(0.49)



$

(0.47)



$

(1.83)



$

(1.80)


Stock-based compensation



0.15




0.15




0.56




0.56


Reversal of payroll tax expense on secondary stock purchase transactions



(0.02)




(0.02)




(0.02)




(0.02)


Change in fair value of warrant liability



0.00




0.00




0.00




0.00


Non-GAAP net loss per common share, basic and diluted


$

(0.36)



$

(0.34)



$

(1.29)



$

(1.26)


Non-GAAP weighted average common shares used in computing basic and diluted net loss per common share (in thousands)



29,000




29,000




29,200




29,200


 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/instructure-reports-first-quarter-2017-financial-results-300448806.html

SOURCE Instructure, Inc.

Email Alerts

Email Address *
Mailing Lists *
 
Enter the code shown above.

Investor Contact

6330 SOUTH 3000 EAST, SUITE 700
SALT LAKE CITY, UT 84121
INVESTORS@INSTRUCTURE.COM
1-866-574-3127

Contact

6330 South 3000 East, Suite 700
Salt Lake City, UT 84121
info@instructure.com
1.800.203.6755

Change Region

Copyright © 2017, Instructure, Inc.
All rights reserved.