INST Instructure Holdings Inc

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 08, 2024

 

 

INSTRUCTURE HOLDINGS, INC.

(Exact name of Registrant as Specified in Its Charter)

 

 

Delaware			001-40647	84-4325548
(State or Other Jurisdiction of Incorporation)			(Commission File Number)	(IRS Employer Identification No.)
6330 SOUTH 3000 EAST SUITE 700
SALT LAKE CITY, Utah				84121
(Address of Principal Executive Offices)				(Zip Code)

 

Registrant’s Telephone Number, Including Area Code: 800 203-6755

 

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.01 per share		INST		The New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

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Item 2.02 Results of Operations and Financial Condition.

The following are the unaudited results of operations of Instructure Holdings, Inc. (the “Company” or “Instructure”) as of and for the three and nine months ended September 30, 2024.

 

Key Financials:
(Dollars in millions)

		Three months ended September 30,												Nine months ended September 30,
		2024				2023				Year-over-Year (% or bps)				2024				2023				Year-over-Year (% or bps)
Revenue		$	173.2			$	134.9				28.3	%		$	499.1			$	394.8				26.4	%
Income (loss) from Operations		$	(11.9	)		$	4.6				(361.2	)%		$	(19.2	)		$	(3.4	)			(456.5	)%
Non-GAAP Operating Income*		$	68.6			$	57.0				20.3	%		$	204.1			$	154.4				32.2	%
GAAP Net Loss		$	(24.7	)		$	(5.5	)			350.6	%		$	(66.8	)		$	(28.3	)			135.8	%
GAAP Net Loss Margin			(14.3	)%			(4.1	)%		(1,020) bps					(13.4	)%			(7.2	)%		(620) bps
Adjusted EBITDA*		$	70.1			$	58.2				20.5	%		$	208.4			$	157.7				32.1	%
Adjusted EBITDA Margin*			40.5	%			43.2	%		(270) bps					41.8	%			40.0	%		180 bps
Cash Flow from Operations		$	203.9			$	182.6				11.6	%		$	102.5			$	127.0				(19.4	)%
Adjusted Unlevered Free Cash Flow*		$	244.8			$	200.1				22.4	%		$	204.4			$	173.9				17.5	%
Remaining Performance Obligations ("RPO")		$	944.6			$	862.9				9.5	%		$	944.6			$	862.9				9.5	%

*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 report.

Balance Sheet and Cash Flow

As of September 30, 2024, cash, cash equivalents, restricted cash, and funds held on behalf of customers were $203.2 million and total debt was $1,167.3 million; compared to cash, cash equivalents, and restricted cash of $344.2 million and total debt of $491.3 million as of December 31, 2023. The decrease in cash, cash equivalents, restricted cash, and funds held on behalf of customers and increase in debt since December 31, 2023 is primarily driven by cash spent and debt incurred in connection with the Parchment and Scribbles acquisitions. As of September 30, 2024, Instructure’s total leverage ratio is 4.4x (which represents Total Debt to trailing twelve month Adjusted EBITDA) and net leverage ratio is 3.6x (which represents Net Debt to trailing twelve month Adjusted EBITDA). This calculation includes twelve months of historical Instructure Adjusted EBITDA and eight months of Parchment contribution to Adjusted EBITDA. Net cash provided by operating activities was $203.9 million for the three months ended September 30, 2024, compared to $182.6 million net cash provided by operating activities in the prior year period. This increase was primarily driven by increased cash collections from customer billings, including the impact of Parchment. Adjusted Unlevered Free Cash Flow was $244.8 million for the three months ended September 30, 2024, compared to $200.1 million in the prior year period.

Transaction with KKR

Given the announcement made on July 25, 2024, regarding Instructure’s entry into a definitive agreement to be acquired by affiliates of investment funds managed by Kohlberg Kravis Roberts & Co. L.P. (“KKR”), a leading global investment firm, Instructure will not host an earnings conference call or provide financial guidance in conjunction with this report. For further detail on quarterly performance, please refer to Instructure’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, filed today with the SEC.

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.

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Non-GAAP Financial Measures

Instructure has provided in this report 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.

Instructure has updated the grouping of the presentation of the adjustments to Non-GAAP Operating Income, Adjusted EBITDA, Non-GAAP Net Income, Adjusted Unlevered Free Cash Flow, Non-GAAP Cost of Revenue, Non-GAAP Operating Expenses, and Non-GAAP Gross Profit to more closely conform to the Company’s strategies and initiatives. These measures are not being recasted.

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 report, and investors are encouraged to review the reconciliation.

Non-GAAP Operating Income; Non-GAAP Operating Income Margin. We define non-GAAP operating income as loss or income from operations excluding the impact of stock-based compensation, transaction costs, globalization costs, restructuring costs, technology modernization costs, other non-recurring costs, and amortization of acquisition-related intangibles. 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 operating income margin is defined as non-GAAP operating income divided by revenue.

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, globalization costs, restructuring costs, technology modernization costs, other non-recurring costs, effects of foreign currency transaction (gains) and losses, and amortization of acquisition-related intangibles. 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 revenue.

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, loss on extinguishment of debt, transaction costs, globalization costs, restructuring costs, technology modernization 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 is computed by dividing non-GAAP net income by the weighted-average number of common shares outstanding for the period. Diluted non-GAAP net income per common share is computed by giving effect to all potentially dilutive common stock equivalents outstanding for the period.

Free Cash Flow, Unlevered Free Cash Flow and Adjusted Unlevered Free Cash Flow. We define free cash flow as net cash provided by 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, globalization costs, restructuring costs, technology modernization costs, 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, globalization costs, restructuring costs, technology modernization 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.

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Non-GAAP Gross Profit; Non-GAAP Gross Margin. We define non-GAAP gross profit as gross profit excluding the impact of stock-based compensation, transaction costs, globalization costs, restructuring costs, technology modernization costs, and amortization of acquisition-related intangibles. Non-GAAP Gross Margin is defined as Non-GAAP gross profit divided by revenue.

Subscription and Support Non-GAAP Gross Profit; Subscription and Support Non-GAAP Gross Margin. We define subscription and support Non-GAAP gross profit as subscription and support gross profit excluding the impact of stock-based compensation, transaction costs, globalization costs, restructuring costs, technology modernization costs, and amortization of acquisition-related intangibles. Subscription and support non-GAAP gross margin is defined as subscription and support non-GAAP gross profit divided by subscription and support revenue.

Net Debt; Net Leverage Ratio. We define net debt as total outstanding debt, less cash, cash equivalents, restricted cash, and funds held on behalf of customers. Management uses this supplemental non-GAAP measure to evaluate the Company’s leverage. Net leverage ratio is computed by dividing net debt by adjusted EBITDA.

Forward-Looking Statements

This report contains “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 expectations relating to the proposed merger and related transactions, the Company’s growth, customer demand and application adoption, the Company’s research and development efforts and future application releases, and the Company’s business strategy.

These statements are not guarantees of future performance, but are based on management’s expectations as of the date of this report 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: the risk that the proposed merger may not be completed in a timely manner or at all, which may adversely affect the Company’s business and the price of the common stock; the failure to satisfy any of the conditions to the consummation of the proposed merger, including the receipt of certain regulatory approvals; the occurrence of any event, change or other circumstance or condition that could give rise to the termination of the merger agreement related to the proposed merger, including any circumstances requiring the Company to pay a termination fee; the effect of the pendency of the proposed merger on the Company’s business relationships, operating results and business generally; risks that the proposed merger disrupts the Company’s current plans and operations; the Company’s ability to retain, hire, and integrate skilled personnel including the Company’s senior management team and maintain relationships with key business partners and customers, and others with whom it does business, in light of the proposed merger; risks related to diverting management’s attention from the Company’s ongoing business operations; unexpected costs, charges or expenses resulting from the proposed merger; the ability to obtain the necessary financing arrangements set forth in the commitment letters received in connection with the proposed merger; litigation relating to the proposed merger instituted against the parties to the merger agreement related to the proposed merger or their respective directors, managers or officers, including the effects of any outcomes related thereto; the impact of adverse general and industry-specific economic and market conditions; certain restrictions during the pendency of the merger that may impact the Company’s ability to pursue certain business opportunities or strategic transactions; risks caused by delays in upturns or downturns being reflected in the Company’s financial position and results of operations; the impact of inflation, high interest rates, and global conflicts; uncertainty as to timing of completion of the proposed merger; risks that the benefits of the proposed merger are not realized when and as expected; the effects of increased usage of, or interruptions or performance problems associated with, our learning platform; our history of losses and expectation that we will not be profitable for the foreseeable future; or ability to acquire new customers and successfully retain existing customers; failure of the markets for our applications to develop at anticipated rates; 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 Reports 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 report is as of the date hereof and Instructure undertakes no duty to update this information except as required by law.

 

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INSTRUCTURE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
		September 30, 2024				December 31, 2023
Assets		(unaudited)
Current assets:
Cash and cash equivalents		$	187,512			$	341,047
Funds held on behalf of customers			14,783				—
Accounts receivable—net			98,894				67,193
Prepaid expenses			38,630				12,082
Deferred commissions			14,644				13,705
Other current assets			9,200				4,797
Total current assets			363,663				438,824
Property and equipment, net			16,002				13,479
Right-of-use assets			8,314				9,002
Goodwill			1,909,041				1,265,316
Intangible assets, net			609,983				399,712
Noncurrent prepaid expenses			1,905				4,182
Deferred commissions, net of current portion			14,099				13,816
Deferred tax assets			5,624				6,739
Other assets			5,395				6,908
Total assets		$	2,934,026			$	2,157,978
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable		$	25,576			$	23,589
Customer fund deposits			14,783				—
Accrued liabilities			36,051				23,760
Lease liabilities			5,335				7,513
Long-term debt, current			6,525				4,013
Deferred revenue			374,431				291,784
Total current liabilities			462,701				350,659
Long-term debt, net of current portion			1,138,510				482,387
Deferred revenue, net of current portion			9,611				10,876
Lease liabilities, net of current portion			9,842				9,246
Deferred tax liabilities			45,678				14,420
Other long-term liabilities			4,431				4,898
Total liabilities			1,670,773				872,486
Stockholders’ equity:
Common stock			1,471				1,452
Additional paid-in capital			1,663,532				1,619,020
Accumulated deficit			(401,750	)			(334,980	)
Total stockholders’ equity			1,263,253				1,285,492
Total liabilities and stockholders’ equity		$	2,934,026			$	2,157,978

 

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INSTRUCTURE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except per share data)
		Three months ended September 30,								Nine months ended September 30,
		2024				2023				2024				2023
		(unaudited)				(unaudited)				(unaudited)				(unaudited)
Revenue:
Subscription and support		$	160,193			$	123,110			$	462,419			$	360,159
Professional services and other			12,971				11,811				36,644				34,675
Total revenue			173,164				134,921				499,063				394,834
Cost of revenue:
Subscription and support			49,827				40,345				145,566				117,532
Professional services and other			8,955				7,082				26,009				21,016
Total cost of revenue			58,782				47,427				171,575				138,548
Gross profit			114,382				87,494				327,488				256,286
Operating expenses:
Sales and marketing			67,673				46,734				187,899				149,743
Research and development			31,874				20,688				90,650				65,872
General and administrative			26,719				15,522				68,094				44,113
Total operating expenses			126,266				82,944				346,643				259,728
Income (loss) from operations			(11,884	)			4,550				(19,155	)			(3,442	)
Other income (expense):
Interest income			1,284				1,360				4,301				3,021
Interest expense			(26,627	)			(10,868	)			(75,636	)			(30,642	)
Other income (expense)			2,681				(2,443	)			328				(1,965	)
Loss on extinguishment of debt			—				—				(189	)			—
Total other income (expense), net			(22,662	)			(11,951	)			(71,196	)			(29,586	)
Loss before income tax benefit			(34,546	)			(7,401	)			(90,351	)			(33,028	)
Income tax benefit			9,850				1,920				23,581				4,717
Net loss and comprehensive loss		$	(24,696	)		$	(5,481	)		$	(66,770	)		$	(28,311	)
Net loss per common share, basic and diluted		$	(0.17	)		$	(0.04	)		$	(0.46	)		$	(0.20	)
Weighted-average common shares used in computing basic and diluted net loss per common share			146,670				144,222				146,079				143,665

 

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INSTRUCTURE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
		Three months ended September 30,								Nine months ended September 30,
		2024				2023				2024				2023
		(unaudited)				(unaudited)				(unaudited)				(unaudited)
Operating Activities:
Net loss		$	(24,696	)		$	(5,481	)		$	(66,770	)		$	(28,311	)
Adjustments to reconcile net loss to net cash provided (used in) by operating activities:
Depreciation of property and equipment			1,481				1,186				4,223				3,481
Amortization of intangible assets			45,905				35,744				132,129				107,237
Amortization of deferred financing costs			1,411				300				3,863				889
Stock-based compensation			14,353				11,675				42,350				32,986
Deferred income taxes			(10,569	)			(3,387	)			(25,197	)			(7,793	)
Non-cash operating lease expense			847				1,045				1,063				3,348
Other			(1,520	)			2,489				(174	)			2,853
Changes in assets and liabilities:
Accounts receivable, net			124,499				114,737				(22,684	)			(22,597	)
Prepaid expenses and other assets			12,772				11,430				(26,010	)			(15,250	)
Deferred commissions			(308	)			1,074				(1,222	)			2,896
Accounts payable and accrued liabilities			(571	)			(5,847	)			2,991				(7,565	)
Deferred revenue			43,312				16,366				63,177				57,724
Lease liabilities			(1,705	)			(1,619	)			(2,012	)			(5,370	)
Other liabilities			(1,316	)			2,916				(3,274	)			2,520
Net cash provided by operating activities			203,895				182,628				102,453				127,048
Investing Activities:
Purchases of property and equipment			(2,433	)			(1,808	)			(6,179	)			(4,708	)
Proceeds from sale of property and equipment			8				7				30				42
Business acquisitions, net of cash acquired			(79,823	)			—				(901,562	)			—
Net cash used in investing activities			(82,248	)			(1,801	)			(907,711	)			(4,666	)
Financing Activities:
Proceeds from issuance of common stock from employee equity plans			2,755				2,723				5,983				6,018
Shares repurchased for tax withholdings on vesting of restricted stock units			(1,075	)			(1,961	)			(4,325	)			(4,949	)
Proceeds from issuance of term debt, net of discount			—				—				663,892				—
Repayments of long-term debt			(2,993	)			(1,250	)			(8,979	)			(3,750	)
Advances from revolving credit facility			—				—				70,000				—
Repayment of advances from revolving credit facility			(70,000	)			—				(70,000	)			—
Payments for financing costs			—				—				—				(84	)
Changes in customer fund deposits			6,052				—				6,441				—
Net cash provided by (used in) financing activities			(65,261	)			(488	)			663,012				(2,765	)
Foreign currency impacts on cash, cash equivalents, restricted cash, and funds held on behalf of customers			1,696				(1,523	)			1,287				(1,246	)
Net increase (decrease) in cash, cash equivalents, restricted cash, and funds held on behalf of customers			58,082				178,816				(140,959	)			118,371
Cash, cash equivalents, restricted cash, and funds held on behalf of customers, beginning of period			145,167				129,821				344,208				190,266
Cash, cash equivalents, restricted cash, and funds held on behalf of customers, end of period		$	203,249			$	308,637			$	203,249			$	308,637
Supplemental cash flow disclosure:
Cash paid for taxes		$	939			$	838			$	3,987			$	2,657
Cash paid for interest on outstanding debt		$	25,725			$	13,781			$	65,849			$	31,455
Non-cash investing and financing activities:
Capital expenditures incurred but not yet paid		$	110			$	75			$	110			$	75

 

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The following provides a reconciliation of cash, cash equivalents, restricted cash, and funds held on behalf of customers to the amounts reported on the consolidated balance sheets. Restricted cash has been disclosed in Other assets as it is associated with letters of credit obtained to secure office space from our various lease agreements and other contractual cash collateral arrangements.

 

INSTRUCTURE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
		As of September 30,
		2024				2023
Cash and cash equivalents		$	187,512			$	304,858
Restricted cash			954				3,779
Funds held on behalf of customers			14,783				—
Total cash, cash equivalents, restricted cash, and funds held on behalf of customers		$	203,249			$	308,637

 

RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES

 

INSTRUCTURE HOLDINGS, INC.
RECONCILIATION OF NON-GAAP OPERATING INCOME
(in thousands)
(unaudited)
		Three months ended September 30,								Nine months ended September 30,
		2024				2023				2024				2023
Income (loss) from operations		$	(11,884	)		$	4,550			$	(19,155	)		$	(3,442	)
Stock-based compensation			14,351				11,755				42,348				33,621
Transaction costs(1)			13,092				3,502				24,971				9,655
Globalization costs(2)			3,846				381				8,217				473
Restructuring costs(3)			1,328				541				8,982				5,282
Technology modernization costs(4)			1,944				543				6,456				1,453
Other non-recurring costs(5)			64				31				188				111
Amortization of acquisition-related intangibles			45,905				35,744				132,129				107,236
Non-GAAP operating income		$	68,646			$	57,047			$	204,136			$	154,389
GAAP operating margin			(6.9	)%			3.4	%			(3.8	)%			(0.9	)%
Non-GAAP operating margin			39.6	%			42.3	%			40.9	%			39.1	%

 

 

INSTRUCTURE HOLDINGS, INC.
RECONCILIATION OF NON-GAAP ADJUSTED EBITDA
(in thousands)
(unaudited)
		Three months ended September 30,								Nine months ended September 30,
		2024				2023				2024				2023
Net loss		$	(24,696	)		$	(5,481	)		$	(66,770	)		$	(28,311	)
Interest on outstanding debt and loss on debt extinguishment			26,627				10,868				75,825				30,640
Income tax benefit			(9,850	)			(1,920	)			(23,581	)			(4,717	)
Depreciation			1,481				1,186				4,223				3,481
Amortization			—				—				—				2
Stock-based compensation			14,351				11,755				42,348				33,621
Transaction costs(1)			13,092				3,502				24,971				9,655
Globalization costs(2)			3,846				381				8,217				473
Restructuring costs(3)			1,328				541				8,982				5,389
Technology modernization costs(4)			1,944				543				6,456				1,453
Other non-recurring costs(5)			64				31				188				111
Effects of foreign currency transaction (gains) and losses			(2,690	)			2,420				(343	)			1,672
Amortization of acquisition-related intangibles			45,905				35,744				132,129				107,236
Interest income			(1,271	)			(1,346	)			(4,232	)			(2,963	)
Adjusted EBITDA		$	70,131			$	58,224			$	208,413			$	157,742
Net loss margin			(14.3	)%			(4.1	)%			(13.4	)%			(7.2	)%
Adjusted EBITDA margin			40.5	%			43.2	%			41.8	%			40.0	%

 

 

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INSTRUCTURE HOLDINGS, INC.
RECONCILIATION OF NON-GAAP NET INCOME
(in thousands, except per share data)
(unaudited)
		Three months ended September 30,								Nine months ended September 30,
		2024				2023				2024				2023
Net loss		$	(24,696	)		$	(5,481	)		$	(66,770	)		$	(28,311	)
Stock-based compensation			14,351				11,755				42,348				33,621
Amortization of acquisition-related intangibles			45,905				35,744				132,129				107,236
Loss on extinguishment of debt			—				—				189				—
Transaction costs(1)			13,092				3,502				24,971				9,655
Globalization costs(2)			3,846				381				8,217				473
Restructuring costs(3)			1,328				541				8,982				5,389
Technology modernization costs(4)			1,944				543				6,456				1,453
Other non-recurring costs(5)			64				31				188				111
Effects of foreign currency transaction (gains) and losses			(2,690	)			2,420				(343	)			1,672
Tax effects of adjustments(6)			(19,259	)			(13,680	)			(55,362	)			(39,693	)
Non-GAAP net income		$	33,885			$	35,756			$	101,005			$	91,606
Non-GAAP net income per common share, basic		$	0.23			$	0.25			$	0.69			$	0.64
Non-GAAP net income per common share, diluted		$	0.23			$	0.25			$	0.69			$	0.63
Weighted average common shares used in computing basic Non-GAAP net income per common share			146,670				144,222				146,079				143,665
Weighted average common shares used in computing diluted Non-GAAP net income per common share			147,647				145,638				146,722				145,190

 

 

INSTRUCTURE HOLDINGS, INC.
RECONCILIATION OF NON-GAAP GROSS PROFIT
(in thousands)
(unaudited)
		Three months ended September 30,								Nine months ended September 30,
		2024				2023				2024				2023
Gross profit		$	114,382			$	87,494			$	327,488			$	256,286
Stock-based compensation			1,614				1,062				4,558				2,951
Transaction costs(1)			112				336				548				1,011
Globalization costs(2)			1,160				—				2,427				—
Restructuring costs(3)			307				5				1,597				246
Technology modernization costs(4)			1,043				422				3,393				1,028
Amortization of acquisition-related intangibles			18,780				16,265				55,243				48,603
Non-GAAP gross profit		$	137,398			$	105,584			$	395,254			$	310,125
GAAP gross margin			66.1	%			64.8	%			65.6	%			64.9	%
Non-GAAP gross margin			79.3	%			78.3	%			79.2	%			78.5	%

 

 

INSTRUCTURE HOLDINGS, INC.
RECONCILIATION OF NON-GAAP SUBSCRIPTION AND SUPPORT GROSS PROFIT
(in thousands)
(unaudited)
		Three months ended September 30,								Nine months ended September 30,
		2024				2023				2024				2023
Subscription and support gross profit		$	110,366			$	82,765			$	316,853			$	242,627
Stock-based compensation			750				459				2,107				1,312
Transaction costs(1)			78				337				401				984
Globalization costs(2)			873				—				1,548				—
Restructuring costs(3)			205				8				969				38
Technology modernization costs(4)			1,043				422				3,315				1,028
Amortization of acquisition-related intangibles			18,780				16,265				55,243				48,603
Non-GAAP subscription and support gross profit		$	132,095			$	100,256			$	380,436			$	294,592
GAAP subscription and support gross margin			68.9	%			67.2	%			68.5	%			67.4	%
Non-GAAP subscription and support gross margin			82.5	%			81.4	%			82.3	%			81.8	%

 

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INSTRUCTURE HOLDINGS, INC.
RECONCILIATION OF FREE CASH FLOW, UNLEVERED FREE CASH FLOW & ADJUSTED UNLEVERED FREE CASH FLOW
(in thousands)
(unaudited)
		Three months ended September 30,								Nine months ended September 30,
		2024				2023				2024				2023
Net cash provided by operating activities		$	203,895			$	182,628			$	102,453			$	127,048
Purchases of property and equipment			(2,433	)			(1,808	)			(6,179	)			(4,708	)
Proceeds from disposals of property and equipment			8				7				30				42
Free cash flow		$	201,470			$	180,827			$	96,304			$	122,382
Cash paid for interest on outstanding debt			25,725				13,781				65,849				31,455
Cash settled stock-based compensation			—				81				—				638
Unlevered free cash flow		$	227,195			$	194,689			$	162,153			$	154,475
Transaction costs(7)			10,630				1,509				20,943				9,874
Globalization costs(7)			3,907				281				8,848				373
Restructuring costs(7)			2,321				903				8,982				6,212
Technology modernization costs(7)			689				29				3,336				260
Other non-recurring costs(7)			66				2,649				184				2,749
Adjusted unlevered free cash flow		$	244,808			$	200,060			$	204,446			$	173,943

 

 

INSTRUCTURE HOLDINGS, INC.
RECONCILIATION OF NET DEBT
(in thousands)
(unaudited)
		September 30, 2024
Long-term principal, current		$	11,972
Long-term principal, net of current portion			1,155,299
Cash, cash equivalents, restricted cash, and funds held on behalf of customers			(203,249	)
Net debt		$	964,022
Gross leverage ratio			4.4
Net leverage ratio			3.6

 

 

INSTRUCTURE HOLDINGS, INC.
RECONCILIATION OF TRAILING TWELVE MONTHS NON-GAAP ADJUSTED EBITDA
(in thousands)
(unaudited)
		Three months ended September 30,				Three months ended June 30,				Three months ended March 31,				Three months ended December 31
		2024				2024				2024				2023
Net loss		$	(24,696	)		$	(20,949	)		$	(21,125	)		$	(5,767	)
Interest on outstanding debt and loss on debt extinguishment			26,627				26,413				22,785				11,382
Income tax (benefit) expense			(9,850	)			(6,664	)			(7,067	)			459
Depreciation			1,481				1,399				1,343				1,305
Stock-based compensation			14,351				15,552				12,445				10,575
Transaction costs(1)			13,092				6,264				5,615				5,857
Globalization costs(2)			3,846				3,481				890				54
Restructuring costs(3)			1,328				2,724				4,930				2,085
Technology modernization costs(4)			1,944				2,246				2,266				817
Other non-recurring costs(5)			64				22				102				34
Effects of foreign currency transaction (gains) and losses			(2,690	)			515				1,832				(3,343	)
Amortization of acquisition-related intangibles			45,905				42,898				43,326				35,731
Interest income			(1,271	)			(563	)			(2,398	)			(2,716	)
Adjusted EBITDA		$	70,131			$	73,338			$	64,944			$	56,473

 

 

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INSTRUCTURE HOLDINGS, INC.
RECONCILIATION OF NON-GAAP COST OF REVENUE
Three Months Ended September 30, 2024
(in thousands)
(unaudited)
		GAAP				Stock-based compensation expense				Transaction Costs				Globalization costs				Restructuring costs				Technology Modernization costs				Amortization of acquired intangibles				Non-GAAP
Cost of Revenue:
Subscription and support		$	49,827			$	(750	)		$	(78	)		$	(873	)		$	(205	)		$	(1,043	)		$	(18,780	)		$	28,098
Professional services and other			8,955				(864	)			(34	)			(287	)			(102	)			—				—				7,668
Total cost of revenue		$	58,782			$	(1,614	)		$	(112	)		$	(1,160	)		$	(307	)		$	(1,043	)		$	(18,780	)		$	35,766

 

 

INSTRUCTURE HOLDINGS, INC.
RECONCILIATION OF NON-GAAP COST OF REVENUE
Three Months Ended September 30, 2023
(in thousands)
(unaudited)
		GAAP				Stock-based compensation expense				Transaction Costs				Globalization costs				Restructuring costs				Technology Modernization costs				Amortization of acquired intangibles				Non-GAAP
Cost of Revenue:
Subscription and support		$	40,345			$	(459	)		$	(337	)		$	—			$	(8	)		$	(422	)		$	(16,265	)		$	22,854
Professional services and other			7,082				(603	)			1				—				3				—				—				6,483
Total cost of revenue		$	47,427			$	(1,062	)		$	(336	)		$	—			$	(5	)		$	(422	)		$	(16,265	)		$	29,337

 

 

INSTRUCTURE HOLDINGS, INC.
RECONCILIATION OF NON-GAAP COST OF REVENUE
Nine Months Ended September 30, 2024
(in thousands)
(unaudited)
		GAAP				Stock-based compensation expense				Transaction Costs				Globalization costs				Restructuring costs				Technology Modernization costs				Amortization of acquired intangibles				Non-GAAP
Cost of Revenue:
Subscription and support		$	145,566			$	(2,107	)		$	(401	)		$	(1,548	)		$	(969	)		$	(3,315	)		$	(55,243	)		$	81,983
Professional services and other			26,009				(2,451	)			(147	)			(879	)			(628	)			(78	)			—				21,826
Total cost of revenue		$	171,575			$	(4,558	)		$	(548	)		$	(2,427	)		$	(1,597	)		$	(3,393	)		$	(55,243	)		$	103,809

 

 

INSTRUCTURE HOLDINGS, INC.
RECONCILIATION OF NON-GAAP COST OF REVENUE
Nine Months Ended September 30, 2023
(in thousands)
(unaudited)
		GAAP				Stock-based compensation expense				Transaction Costs				Globalization costs				Restructuring costs				Technology Modernization costs				Amortization of acquired intangibles				Non-GAAP
Cost of Revenue:
Subscription and support		$	117,532			$	(1,312	)		$	(984	)		$	—			$	(38	)		$	(1,028	)		$	(48,603	)		$	65,567
Professional services and other			21,016				(1,639	)			(27	)			—				(208	)			—				—				19,142
Total cost of revenue		$	138,548			$	(2,951	)		$	(1,011	)		$	—			$	(246	)		$	(1,028	)		$	(48,603	)		$	84,709

 

 

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INSTRUCTURE HOLDINGS, INC.
RECONCILIATION OF NON-GAAP OPERATING EXPENSES
Three Months Ended September 30, 2024
(in thousands)
(unaudited)
		GAAP				Stock-based compensation expense				Transaction costs				Globalization costs				Restructuring costs				Technology Modernization costs				Other non-recurring costs				Amortization of acquired intangibles				Non-GAAP				GAAP % of revenue				Non-GAAP % of revenue
Operating expenses:
Sales and marketing		$	67,673			$	(4,170	)		$	(1,152	)		$	(368	)		$	(208	)		$	—							$	(27,120	)		$	34,655				39.1	%			20.0	%
Research and development			31,874				(4,469	)			(926	)			(2,105	)			(257	)			(901	)							(5	)			23,211				18.4	%			13.4	%
General and administrative			26,719				(4,098	)			(10,902	)			(213	)			(556	)			—				(64	)			—				10,886				15.4	%			6.3	%
Total operating expenses		$	126,266			$	(12,737	)		$	(12,980	)		$	(2,686	)		$	(1,021	)		$	(901	)		$	(64	)		$	(27,125	)		$	68,752				72.9	%			39.7	%

 

 

INSTRUCTURE HOLDINGS, INC.
RECONCILIATION OF NON-GAAP OPERATING EXPENSES
Three Months Ended September 30, 2023
(in thousands)
(unaudited)
		GAAP				Stock-based compensation expense				Transaction costs				Globalization costs				Restructuring costs				Technology Modernization costs				Other non-recurring costs				Amortization of acquired intangibles				Non-GAAP				GAAP % of revenue				Non-GAAP % of revenue
Operating expenses:
Sales and marketing		$	46,734			$	(3,145	)		$	(179	)		$	—			$	(212	)		$	—			$	—			$	(19,475	)		$	23,723				34.6	%			17.6	%
Research and development			20,688				(3,792	)			(1,216	)			(368	)			(126	)			(35	)			—				(4	)			15,147				15.3	%			11.2	%
General and administrative			15,522				(3,756	)			(1,767	)			(13	)			(203	)			(85	)			(31	)			—				9,667				11.5	%			7.2	%
Total operating expenses		$	82,944			$	(10,693	)		$	(3,162	)		$	(381	)		$	(541	)		$	(120	)		$	(31	)		$	(19,479	)		$	48,537				61.4	%			36.0	%

 

 

INSTRUCTURE HOLDINGS, INC.
RECONCILIATION OF NON-GAAP OPERATING EXPENSES
Nine Months Ended September 30, 2024
(in thousands)
(unaudited)
		GAAP				Stock-based compensation expense				Transaction costs				Globalization costs				Restructuring costs				Technology Modernization costs				Other non-recurring costs				Amortization of acquired intangibles				Non-GAAP				GAAP % of revenue				Non-GAAP % of revenue
Operating expenses:
Sales and marketing		$	187,899			$	(11,612	)		$	(2,786	)		$	(1,136	)		$	(2,644	)		$	—			$	—			$	(76,873	)		$	92,848				37.7	%			18.6	%
Research and development			90,650				(13,047	)			(2,700	)			(3,851	)			(1,539	)			(2,726	)			—				(13	)			66,774				18.2	%			13.4	%
General and administrative			68,094				(13,131	)			(18,937	)			(803	)			(3,202	)			(337	)			(188	)			—				31,496				13.6	%			6.3	%
Total operating expenses		$	346,643			$	(37,790	)		$	(24,423	)		$	(5,790	)		$	(7,385	)		$	(3,063	)		$	(188	)		$	(76,886	)		$	191,118				69.5	%			38.3	%

 

 

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INSTRUCTURE HOLDINGS, INC.
RECONCILIATION OF NON-GAAP OPERATING EXPENSES
Nine Months Ended September 30, 2023
(in thousands)
(unaudited)
		GAAP				Stock-based compensation expense				Transaction costs				Globalization costs				Restructuring costs				Technology Modernization costs				Other non-recurring costs				Amortization of acquired intangibles				Non-GAAP				GAAP % of revenue				Non-GAAP % of revenue
Operating expenses:
Sales and marketing		$	149,743			$	(9,142	)		$	(1,946	)		$	—			$	(1,814	)		$	—			$	—			$	(58,620	)		$	78,221				37.9	%			19.7	%
Research and development			65,872				(10,446	)			(4,009	)			(451	)			(2,104	)			(165	)			2				(13	)			48,686				16.7	%			12.3	%
General and administrative			44,113				(11,082	)			(2,686	)			(21	)			(1,124	)			(258	)			(113	)			—				28,829				11.2	%			7.3	%
Total operating expenses		$	259,728			$	(30,670	)		$	(8,641	)		$	(472	)		$	(5,042	)		$	(423	)		$	(111	)		$	(58,633	)		$	155,736				65.8	%			39.3	%

 

FOOTNOTES

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

			Instructure Holdings, Inc.
Date:	November 8, 2024	By:	/s/ Matthew A. Kaminer
			Matthew A. Kaminer Chief Legal Officer

 

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v3.24.3

Document And Entity Information	Nov. 08, 2024
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Nov. 08, 2024
Entity Registrant Name	INSTRUCTURE HOLDINGS, INC.
Entity Central Index Key	0001841804
Entity Emerging Growth Company	false
Entity File Number	001-40647
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	84-4325548
Entity Address, Address Line One	6330 SOUTH 3000 EAST
Entity Address, Address Line Two	SUITE 700
Entity Address, City or Town	SALT LAKE CITY
Entity Address, State or Province	UT
Entity Address, Postal Zip Code	84121
City Area Code	800
Local Phone Number	203-6755
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, par value $0.01 per share
Trading Symbol	INST
Security Exchange Name	NYSE

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