10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

OR

 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-40647

Instructure Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware	84-4325548
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

6330 South 3000 East, Suite 700

Salt Lake City, UT 84121

(Address of principal executive offices, including zip code)

(800) 203-6755

(Registrant’s telephone number, including area code)

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	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer		Accelerated filer	
Non-accelerated filer		Smaller reporting company	
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. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No 

As of August 1, 2022, there were 141,914,344 shares of the registrant’s common stock outstanding.

Instructure Holdings, Inc.

Quarterly Report on Form 10-Q

For the Quarter Ended June 30, 2022

INDEX

		Page
	PART I. FINANCIAL INFORMATION (Unaudited)
Item 1.	Condensed Consolidated Financial Statements (unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss	4
	Condensed Consolidated Statements of Stockholders’ Equity	5
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40
Item 4.	Controls and Procedures	41
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 3.	Default Upon Senior Securities	42
Item 4.	Mine Safety Disclosures	42
Item 5.	Other Information	42
Item 6.	Exhibits	42
SIGNATURES		44

In this Quarterly Report on Form 10-Q, “we,” “our,” “us,” “Instructure,” and the “Company” refer to Instructure Holdings, Inc. and its wholly-owned subsidiaries.

2

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

INSTRUCTURE HOLDINGS, INC.

Condensed Consolidated Balance Sheets

(in thousands, except per share amounts)

	June 30,			December 31,
	2022			2021
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	83,234		$	164,928
Accounts receivable—net		167,646			51,607
Prepaid expenses		37,941			15,475
Deferred commissions		12,374			11,418
Other current assets		2,887			3,384
Total current assets		304,082			246,812
Property and equipment, net		12,203			10,792
Right-of-use assets		15,765			18,175
Goodwill		1,203,979			1,194,221
Intangible assets, net		574,812			629,746
Noncurrent prepaid expenses		1,127			1,553
Deferred commissions, net of current portion		18,953			20,105
Deferred tax assets		8,561			6,477
Other assets		5,689			5,901
Total assets	$	2,145,171		$	2,133,782
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	16,128		$	18,324
Accrued liabilities		23,204			28,408
Lease liabilities		6,998			6,666
Long-term debt, current		4,013			2,763
Deferred revenue		269,655			240,936
Total current liabilities		319,998			297,097
Long-term debt, net of current portion		488,493			490,500
Deferred revenue, net of current portion		13,667			14,740
Lease liabilities, net of current portion		19,859			23,678
Deferred tax liabilities		26,513			29,851
Other long-term liabilities		2,153			3,531
Total liabilities		870,683			859,397
Stockholders’ equity:
Common stock, par value $0.01 per share; 500,000 shares authorized as of June 30, 2022 (unaudited) and December 31, 2021; 141,914 and 140,741 shares issued and outstanding as of June 30, 2022 (unaudited) and December 31, 2021, respectively.		1,419			1,407
Additional paid-in capital		1,558,193			1,539,638
Accumulated deficit		(285,124	)		(266,660	)
Total stockholders’ equity		1,274,488			1,274,385
Total liabilities and stockholders’ equity	$	2,145,171		$	2,133,782

See accompanying notes.

3

INSTRUCTURE HOLDINGS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except per share amounts)

(unaudited)

	Three months ended June 30,						Six months ended June 30,
	2022			2021			2022			2021
Revenue:
Subscription and support	$	102,905		$	84,257		$	206,397		$	170,611
Professional services and other		11,672			9,310			21,642			16,936
Total revenue		114,577			93,567			228,039			187,547
Cost of revenue:
Subscription and support		35,868			36,163			71,414			76,047
Professional services and other		6,530			4,811			11,995			10,561
Total cost of revenue		42,398			40,974			83,409			86,608
Gross profit		72,179			52,593			144,630			100,939
Operating expenses:
Sales and marketing		45,885			39,083			89,206			80,305
Research and development		18,669			14,279			35,870			31,368
General and administrative		14,253			11,196			29,869			24,547
Impairment on disposal group		—			—			—			1,218
Total operating expenses		78,807			64,558			154,945			137,438
Loss from operations		(6,628	)		(11,965	)		(10,315	)		(36,499	)
Other income (expense):
Interest income		27			—			63			16
Interest expense		(4,611	)		(15,670	)		(9,164	)		(32,930	)
Other expense		(3,417	)		(108	)		(3,111	)		(742	)
Total other income (expense), net		(8,001	)		(15,778	)		(12,212	)		(33,656	)
Loss before income taxes		(14,629	)		(27,743	)		(22,527	)		(70,155	)
Income tax benefit		1,710			6,050			4,063			15,391
Net loss and comprehensive loss	$	(12,919	)	$	(21,693	)	$	(18,464	)	$	(54,764	)
Net loss per common share, basic and diluted	$	(0.09	)	$	(0.17	)	$	(0.13	)	$	(0.43	)
Weighted average common shares used in computing basic and diluted net loss per common share		141,534			126,049			141,244			126,083

Share amounts and per share data give retroactive effect to the forward stock split described in the Description of Business and Basis of Presentation footnote effective July 9, 2021.

See accompanying notes.

4

INSTRUCTURE HOLDINGS, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except per share amounts)

(unaudited)

	Common
	Stock, $0.01					Additional						Total
	Par Value					Paid-In			Accumulated			Stockholders'
	Shares			Amount		Capital			Deficit			Equity
Balances at March 31, 2022		141,347		$	1,413	$	1,550,318		$	(272,205	)	$	1,279,526
Vesting of restricted stock units		589			6		(6	)		—			—
Shares withheld for tax withholding on vesting of restricted stock units		(22	)		—		(425	)		—			(425	)
Stock-based compensation		—			—		8,306			—			8,306
Net loss		—			—		—			(12,919	)		(12,919	)
Balances at June 30, 2022		141,914		$	1,419	$	1,558,193		$	(285,124	)	$	1,274,488

	Common
	Stock, $0.01						Additional						Total
	Par Value						Paid-In			Accumulated			Stockholders'
	Shares			Amount			Capital			Deficit			Equity
Balances at March 31, 2021		126,086		$	1,261		$	1,266,807		$	(211,052	)	$	1,057,016
Repurchase of TopCo Units		(85	)		(1	)		(359	)		—			(360	)
Stock-based compensation		—			—			2,235			—			2,235
Net loss		—			—			—			(21,693	)		(21,693	)
Balances at June 30, 2021		126,001		$	1,260		$	1,268,683		$	(232,745	)	$	1,037,198

5

INSTRUCTURE HOLDINGS, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except per share amounts)

(unaudited)

	Common
	Stock, $0.01						Additional						Total
	Par Value						Paid-In			Accumulated			Stockholders’
	Shares			Amount			Capital			Deficit			Equity
Balances at December 31, 2021		140,741		$	1,407		$	1,539,638		$	(266,660	)	$	1,274,385
Vesting of restricted stock units		1,014			10			(10	)		—			—
Purchase of ESPP shares		240			3			4,073			—			4,076
Shares withheld for tax withholding on vesting of restricted stock units		(81	)		(1	)		(1,687	)		—			(1,688	)
Stock-based compensation		—			—			16,179			—			16,179
Net loss		—			—			—			(18,464	)		(18,464	)
Balances at June 30, 2022		141,914		$	1,419		$	1,558,193		$	(285,124	)	$	1,274,488

	Common
	Stock, $0.01						Additional						Total
	Par Value						Paid-In			Accumulated			Stockholders’
	Shares			Amount			Capital			Deficit			Equity
Balances at December 31, 2020		126,219		$	1,262		$	1,264,703		$	(177,981	)	$	1,087,984
Repurchase of TopCo units		(218	)		(2	)		(921	)		—			(923	)
Stock-based compensation		—			—			4,901			—			4,901
Net loss		—			—			—			(54,764	)		(54,764	)
Balances at June 30, 2021		126,001		$	1,260		$	1,268,683		$	(232,745	)	$	1,037,198

Share amounts and per share data give retroactive effect to the forward stock split described in the Description of Business and Basis of Presentation footnote effective July 9, 2021.

See accompanying notes.

6

INSTRUCTURE HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	Six months ended June 30,
	2022			2021
Operating activities:
Net loss	$	(18,464	)	$	(54,764	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation of property and equipment		2,057			1,818
Amortization of intangible assets		67,934			66,728
Amortization of deferred financing costs		587			1,218
Impairment on disposal group		—			1,218
Stock-based compensation		15,971			4,823
Deferred income taxes		(5,422	)		(15,402	)
Other		2,599			1,405
Changes in assets and liabilities:
Accounts receivable, net		(115,316	)		(96,913	)
Prepaid expenses and other assets		(21,176	)		(6,970	)
Deferred commissions		196			(2,375	)
Right-of-use assets		2,410			6,380
Accounts payable and accrued liabilities		(9,131	)		(195	)
Deferred revenue		25,080			44,058
Lease liabilities		(3,487	)		(3,050	)
Other liabilities		(1,378	)		(346	)
Net cash used in operating activities		(57,540	)		(52,367	)
Investing activities:
Purchases of property and equipment		(3,415	)		(1,607	)
Proceeds from sale of property and equipment		36			24
Proceeds from sale of Bridge		—			46,018
Business acquisitions, net of cash received		(19,484	)		(16,030	)
Net cash provided by (used in) investing activities		(22,863	)		28,405
Financing activities:
Proceeds from issuance of common stock from employee equity plans		4,076			—
Shares repurchased for tax withholdings on vesting of restricted stock units		(1,688	)		—
Distributions to stockholders		—			(923	)
Repayments on long-term debt		(1,250	)		(51,534	)
Net cash provided by (used in) financing activities		1,138			(52,457	)
Foreign currency impacts on cash, cash equivalents, and restricted cash		(2,291	)		—
Net decrease in cash, cash equivalents, and restricted cash		(81,556	)		(76,419	)
Cash, cash equivalents, and restricted cash, beginning of period		169,152			150,953
Cash, cash equivalents, and restricted cash, end of period	$	87,596		$	74,534
Supplemental cash flow disclosure:
Cash paid for taxes	$	2,775		$	403
Interest paid	$	5,766		$	31,749
Non-cash investing and financing activities:
Capital expenditures incurred but not yet paid	$	189		$	65

See accompanying notes.

7

INSTRUCTURE HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

The following provides a reconciliation of cash, cash equivalents and restricted cash to the amounts reported on the condensed 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 arrangements (in thousands):

	Six months ended June 30,
	2022		2021
Cash and equivalents	$	83,234	$	70,200
Restricted cash		4,362		4,334
Total cash, cash equivalents, and restricted cash	$	87,596	$	74,534

See accompanying notes.

8

INSTRUCTURE HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

1. Description of Business and Basis of Presentation

Organization

On March 24, 2020, Instructure Parent, L.P. (“TopCo”) acquired 100 percent of Instructure, Inc.’s equity. Instructure Intermediate Holdings I, Inc. was a wholly-owned subsidiary of TopCo and was formed on January 14, 2020 by Thoma Bravo Fund XIII, L.P. (“Thoma Bravo”) for the purpose of purchasing (the “Take-Private Transaction”) Instructure, Inc. and had no operations prior to the Take-Private Transaction. On May 26, 2021, Instructure Intermediate Holdings I, Inc. changed its name to Instructure Holdings, Inc. (the “Company” or “Instructure”).

Instructure, Inc. was incorporated in the state of Delaware in September 2008. We are headquartered in Salt Lake City, Utah, and have wholly-owned subsidiaries in the United Kingdom, Australia, the Netherlands, Hong Kong, Sweden, Brazil, Mexico, Hungary, and Singapore.

2021 Stock Split and Initial Public Offering (“IPO”)

On July 9, 2021, the Company effected a 126,239.815-for-1 stock split of its issued and outstanding shares of common stock and made comparable and equitable adjustments to its equity awards in accordance with the terms of the awards. The par value of the common stock was not adjusted as a result of the stock split. Accordingly, all share and per share amounts for all periods presented in the accompanying condensed consolidated financial statements and notes thereto have been adjusted retrospectively, where applicable, to reflect this stock split. In connection with the stock split, on July 9, 2021, the Company’s board of directors and stockholders approved the Certificate of Amendment to the Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock from 2,000 shares to 500,000,000 shares and to increase the number of authorized shares of preferred stock from zero shares to 50,000,000 shares. No preferred stock has been issued or outstanding.

On July 26, 2021, the Company completed its IPO of 12,500,000 shares of common stock at an offering price of $20.00 per share. The Company received net proceeds of $234.0 million after deducting underwriting discounts and commissions. On August 19, 2021, the underwriters partially exercised their over-allotment option and purchased an additional 1,675,000 shares of common stock at the offering price of $20.00 per share. The Company received additional net proceeds of $31.4 million after deducting underwriting discounts and commissions.

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) applicable to interim periods, under the rules and regulations of the United States Securities and Exchange Commission (“SEC”). In the opinion of management, we have prepared the accompanying unaudited condensed consolidated financial statements on a basis substantially consistent with the audited consolidated financial statements of the Company as of and for the fiscal year ended December 31, 2021, and these condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of the interim periods presented. All intercompany balances and transactions have been eliminated in consolidation. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for any subsequent quarter or for the entire year ending December 31, 2022. The year-end balance sheet data was derived from audited financial statements, but the interim condensed consolidated balance sheet included in this Form 10-Q does not include all disclosures required under U.S. GAAP. Certain information and note disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP have been omitted under the rules and regulations of the SEC.

These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 23, 2022 (the "2021 10-K").

9

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Such estimates, which we evaluate on an on-going basis, include provisions for credit losses, useful lives for property and equipment and intangible assets, valuation allowances for net deferred income tax assets, valuation of stock-based compensation and common stock, acquisition-related estimates, our assessment for impairment of goodwill, intangible assets, and other long-lived assets, the standalone selling price of performance obligations and the determination of the period of benefit for deferred commissions. We base our estimates on historical experience and on various other assumptions which we believe to be reasonable.

Operating Segments

We operate in a single operating segment, cloud-based learning management, assessment and performance systems. Operating segments are defined as components of an enterprise for which separate financial information is regularly evaluated by the chief operating decision makers (“CODMs”), which are our chief executive officer and chief financial officer, in deciding how to allocate resources and assess performance. Our CODMs evaluate our financial information and resources and assess the performance of these resources on a consolidated basis. Since we operate in one operating segment, all required financial segment information can be found in the condensed consolidated financial statements.

2. Summary of Significant Accounting Policies

The Company’s significant accounting policies are discussed in “Note 1 – Description of Business and Summary of Significant Accounting Policies” of the 2021 10-K. There have been no significant changes to these policies during the unaudited six months ended June 30, 2022.

Recent Accounting Pronouncements

Adopted accounting pronouncements

Effective January 1, 2021, the Company adopted Accounting Standards Update (“ASU”) No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify the accounting for income taxes by removing certain exceptions to the general principles and also simplification of areas such as franchise taxes, step up in tax basis goodwill, separate entity financial statements and interim recognition of enactment of tax laws or rate changes. During the second quarter of 2022, a wholly-owned foreign subsidiary had year-to-date pretax book loss in excess of full year forecasted loss due to unrealized losses on foreign currency. Under the Year-to-Date Loss Limitation in Interim-Period Tax Accounting section of ASU 2019-12, the benefit recorded related to this entity is no longer limited to the forecasted full year benefit. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements and related notes.

Effective January 1, 2022, the Company adopted ASU No. 2021-05, Leases (Topic 842): Lessors—Certain Leases with Variable Lease Payments, to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing transactions. Upon adoption a lessor will be required to classify a lease with variable lease payments (that do not depend on a rate or index) as an operating lease on commencement date if classifying the lease as a sales-type or direct financing lease would result in a selling loss. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements and related notes.

Effective January 1, 2022, the Company adopted ASU No. 2021-01, Reference Rate Reform (Topic 848), which refined the scope of Topic 848 and clarified some of its provisions. The amendments permit entities to elect certain optional expedients and exceptions when accounting for derivative contracts and certain hedging relationships affected by the discounting transition. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements and related notes.

Effective January 1, 2022, the Company 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 Topic 606. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements and related notes.

Issued accounting pronouncements

There have been no recent accounting pronouncements issued which are expected to have a material effect on the Company's condensed consolidated financial statements. Management continues to monitor and review recently issued accounting guidance upon issuance.

10

3. Net Loss Per Share

A reconciliation of the denominator used in the calculation of basic and diluted net loss per share is as follows (in thousands, except per share amounts):

	Three months ended June 30,						Six months ended June 30,
	2022			2021			2022			2021
	(unaudited)
Numerator:
Net loss	$	(12,919	)	$	(21,693	)	$	(18,464	)	$	(54,764	)
Denominator:
Weighted-average common shares outstanding—basic		141,534			126,049			141,244			126,083
Dilutive effect of share equivalents resulting from unvested restricted stock units and shares for issuance under employee stock purchase plan		—			—			—			—
Weighted-average common shares outstanding—diluted		141,534			126,049			141,244			126,083
Net loss per common share, basic and diluted	$	(0.09	)	$	(0.17	)	$	(0.13	)	$	(0.43	)

For the unaudited three and six months ended June 30, 2022, we incurred net losses and, therefore, the effect of our restricted stock units (“RSUs”) and employee stock purchase plan were not included in the calculation of diluted net loss per share as the effect would be anti-dilutive. We also incurred losses in the unaudited three and six months ended June 30, 2021. The following table contains share totals with a potentially dilutive impact (in thousands):

	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
	(unaudited)
Restricted stock units		5,722		—		5,722		—
Shares for issuance under employee stock purchase plan		126		—		126		—
Total		5,848		—		5,848		—

4. Property and Equipment

Property and equipment consisted of the following (in thousands):

	June 30,			December 31,
	2022			2021
	(unaudited)
Computer and office equipment	$	4,806		$	2,668
Capitalized software development costs		6,569			4,591
Furniture and fixtures		1,615			1,325
Leasehold improvements and other		6,917			4,330
Total property and equipment		19,907			12,914
Less accumulated depreciation and amortization		(7,704	)		(2,122	)
Total	$	12,203		$	10,792

Accumulated amortization for capitalized software development costs was $1.4 million and $0.8 million at June 30, 2022 (unaudited) and December 31, 2021, respectively. Amortization expense for capitalized software development costs for the unaudited three and six months ended June 30, 2022 was $0.3 million and $0.6 million, respectively, and $46.7 thousand and $0.3 million for the unaudited three and six months ended June 30, 2021, respectively, and is recorded within subscription and support cost of revenue on the condensed consolidated statements of operations and comprehensive loss.

11

5. Acquisitions

2022 Acquisitions

On April 13, 2022, we acquired all outstanding shares of Concentric Sky, Inc. (“Concentric Sky” which was rebranded to “Canvas Credentials” subsequent to acquisition) for the purpose of our continued commitment to building the education industry’s most integrated teaching and learning platform to support lifelong learning. $0.5 million of the purchase price was held back for a period of 90 days following the acquisition for working capital adjustments. The acquisition did not have a material effect on our revenue or earnings in the condensed consolidated statements of operations and comprehensive loss for the reporting periods presented. For tax purposes, a 338(h)(10) election was filed to step up the tax basis of assets acquired to fair market value.
 

The following table summarizes the preliminary estimated fair values of the consideration transferred, assets acquired and liabilities assumed as of the date of the Canvas Credentials acquisition (in thousands):

Consideration transferred
Cash paid	$	20,814
Holdback amount		500
Total purchase consideration	$	21,314
Identifiable assets acquired
Cash	$	1,330
Accounts receivable		1,018
Prepaid expenses and other assets		109
Intangible assets: developed technology		3,900
Intangible assets: customer relationships		9,100
Total assets acquired	$	15,457
Liabilities assumed
Accounts payable and accrued liabilities	$	1,335
Deferred revenue		2,566
Total liabilities assumed	$	3,901
Goodwill		9,758
Total purchase consideration	$	21,314

12

2021 Acquisitions

On June 28, 2021, we acquired all outstanding shares of Eesysoft Software International B.V. (“Eesysoft” which was rebranded to “Impact by Instructure” or “Impact” subsequent to acquisition) for the purpose of enhancing our ability to help our customers more effectively use our core products. $1.5 million of the purchase price is being paid over a period of 18 months following the closing of the transaction. The acquisition did not have a material effect on our revenue or earnings in the condensed consolidated statements of operations and comprehensive loss for the reporting periods presented. On June 28, 2021, the Company recorded an increase to the Impact deferred tax liability of $0.7 million in purchase accounting due to a step up in book basis of intangible assets as a result of the stock acquisition. We expect the net deferred tax liability to decrease as book amortization expense is recognized on the acquisition-related intangible assets.

The final allocation of the purchase price was as follows (in thousands):
 

Consideration transferred
Cash paid	$	17,472
Deferred consideration		1,500
Total purchase consideration	$	18,972
Identifiable assets acquired
Cash	$	586
Accounts receivable		624
Deposits		9
Intangible assets: developed technology		3,300
Intangible assets: customer relationships		1,700
Total assets acquired	$	6,219
Liabilities assumed
Accounts payable and accrued liabilities	$	49
Deferred revenue		692
Payroll tax liability		91
Deferred tax liability		672
Lease liability		24
Total liabilities assumed	$	1,528
Goodwill		14,281
Total purchase consideration	$	18,972

13

On November 5, 2021, we acquired all outstanding shares of Kimono LLC (“Kimono” which was rebranded to “Elevate Data Sync” subsequent to acquisition) for the purpose of enhancing our ability to help our customers more effectively synchronize data between our core product applications and student information systems (“SIS”). $0.4 million of the purchase price was held back for a period of 90 days following the acquisition for working capital adjustments. The acquisition did not have a material effect on our revenue or earnings in the condensed consolidated statements of operations and comprehensive loss for the reporting periods presented. For tax purposes, a 338(h)(10) election was filed to step up the tax basis of assets acquired to fair market value.

The final allocation of the purchase price was as follows (in thousands):

Consideration transferred
Cash paid	$	11,021
Holdback amount		350
Total purchase consideration	$	11,371
Identifiable assets acquired
Cash and cash equivalents	$	1,324
Accounts receivable, net		336
Prepaid expenses		66
Intangible assets: developed technology		2,200
Intangible assets: customer relationships		1,200
Total assets acquired	$	5,126
Liabilities assumed
Accounts payable and accrued liabilities	$	174
Deferred revenue		515
Other liabilities		25
Total liabilities assumed	$	714
Goodwill		6,959
Total purchase consideration	$	11,371

For all periods presented, the excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill, of which $16.7 million is expected to be deductible for tax purposes. The goodwill generated from these transactions is attributable to the expected synergies to be achieved upon consummation of the business combinations and the assembled workforce values. The fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions. Developed technology represents the estimated fair value of the acquired existing technology and is being amortized over its estimated remaining useful life of five years. Amortization of developed technology is included in subscription and support cost of revenue expenses in the accompanying condensed consolidated statements of operations and comprehensive loss. Customer relationships represent the estimated fair value of the acquired customer bases and are amortized over the estimated remaining useful life of seven years. Amortization of customer relationships is included in sales and marketing expenses in the accompanying condensed consolidated statements of operations and comprehensive loss.

Sale of getBridge LLC (“Bridge”)

On February 26, 2021, the Company sold Bridge, its corporate learning platform and wholly-owned subsidiary, for a total purchase price of $47.0 million. We received cash proceeds net of transaction costs of $46.0 million. The proceeds from this sale were used to pay down the balance of our then outstanding Term Loan (as defined in Note 7—Credit Facility). During the unaudited six months ended June 30, 2021, we recognized a pretax loss on this divestiture of $1.2 million, which is included in operating expenses in the accompanying condensed consolidated statements of operations and comprehensive loss.

6. Goodwill and Intangible Assets

Goodwill activity was as follows (in thousands):

	Total
Balance as of December 31, 2021	$	1,194,221
Additions (Note 5—Acquisitions)		9,758
Balance as of June 30, 2022 (unaudited)	$	1,203,979

14

Intangible assets consisted of the following (in thousands):

	Weighted-Average Remaining Useful Life	June 30, 2022							December 31, 2021
		Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
				(unaudited)
Software	8 Months	$	21	$	(16	)	$	5	$	21	$	(13	)	$	8
Trade names	90 Months		125,800		(29,366	)		96,434		125,800		(22,809	)		102,991
Developed technology	34 Months		317,700		(135,765	)		181,935		313,800		(104,215	)		209,585
Customer relationships	58 Months		422,700		(126,262	)		296,438		413,600		(96,438	)		317,162
Total		$	866,221	$	(291,409	)	$	574,812	$	853,221	$	(223,475	)	$	629,746

Amortization expense for intangible assets was $34.2 million and $67.9 million for the unaudited three and six months ended June 30, 2022, respectively, and $33.4 million and $66.7 million for the unaudited three and six months ended June 30, 2021, respectively.

Based on the recorded intangible assets at June 30, 2022 (unaudited), estimated amortization expense is expected to be as follows (in thousands):

	Amortization
	Expense
Years Ending December 31,	(unaudited)
Remainder of 2022	$	68,523
2023		137,041
2024		136,806
2025		94,093
2026		74,005
2027 and thereafter		64,344
Total	$	574,812

7. Credit Facility

On March 24, 2020, we entered into a credit agreement with a syndicate of lenders and Golub Capital Markets LLC, as administrative agent and collateral agent, and Golub Capital Markets LLC and Owl Rock Capital Advisors LLC, as joint bookrunners and joint lead arrangers (the “Credit Agreement”). The Credit Agreement provided for a senior secured term loan facility (the “Initial Term Loan”) in an original aggregate principal amount of $775.0 million, which was supplemented by an incremental term loan pursuant to the First Incremental Amendment and Waiver to Credit Agreement, dated as of December 22, 2020, in a principal amount of $70.0 million (the “Incremental Term Loan” and, together with the Initial Term Loan, the “Term Loan”). The maturity date for the Term Loan was March 24, 2026, with the remaining principal due in full on the maturity date. The Credit Agreement also provided for a senior secured revolving credit facility in an aggregate principal amount of $50.0 million (the “Revolving Credit Facility” and, together with the Term Loan, the “Credit Facilities”). The Revolving Credit Facility included a $10.0 million sublimit for the issuance of letters of credit.

The Credit Agreement required us to repay the principal of the Term Loan in equal quarterly repayments equal to 0.25% of the aggregate original principal amount of the Term Loan, reduced as a result of the application of prepayments. Further, until the last day of the quarter ending June 30, 2021, the Credit Facilities bore interest at a rate equal to (i) 6.00% plus the highest of (x) the prime rate (as determined by reference to the Wall Street Journal), (y) the Federal funds open rate plus 0.50% per annum, and (z) a daily Eurodollar rate based on an interest period of one month plus 1.00% per annum or (ii) the Eurodollar rate plus 7.00% per annum, subject to a 1.00% Eurodollar floor. Thereafter, on the last day of each of the five full fiscal quarters, we had the option (a “Pricing Grid Election”) to (i) retain the aforementioned applicable margins or (ii) switch to the applicable margins set forth on a pricing grid which, subject to certain pro forma total net leverage ratio limits, provided for applicable margins ranging from 5.50% to 7.00%, in the case of Eurodollar loans, and 4.50% to 6.00% in the case of ABR Loans (as defined in the Credit Agreement). The applicable margins set forth on the pricing grid would become mandatory beginning on the last day of the tenth full fiscal quarter ending after March 24, 2020. Interest payments were due quarterly, or more frequently, based on the terms of the Credit Agreement.

15

On May 27, 2021, the Company exercised its option to make a Pricing Grid Election. As a result, the Company’s applicable margin for Eurodollar loans under the Credit Facilities from May 27, 2021 onward was 5.5%. In connection with the Company's IPO, the Company made a principal prepayment in August 2021 of $224.3 million on its outstanding Term Loan. In connection with the underwriters' exercise of their over-allotment option in August 2021, the Company made an additional principal prepayment in August 2021 of $30.8 million on its outstanding Term Loan. The Company also incurred a 1.5% prepayment premium in conjunction with each principal prepayment.

The Company incurred fees with respect to the Revolving Credit Facility, including a commitment fee of 0.50% per annum of unused commitments under the Revolving Credit Facility.

On October 29, 2021, we entered into a credit agreement with JPMorgan Chase Bank, N.A. (“JPMorgan”), as administrative agent, (the “2021 Credit Agreement”) governing our senior secured credit facilities (the “Senior Secured Credit Facilities”), consisting of a $500.0 million senior secured term loan facility (the “Senior Term Loan”) and a $125.0 million senior secured revolving credit facility (the “Senior Revolver”). The proceeds from the Senior Secured Credit Facilities were used, in addition to cash on hand, (1) to refinance, in full, all existing indebtedness under the Credit Agreement (the “Refinancing”), (2) to pay certain fees and expenses incurred in connection with the entry into the 2021 Credit Agreement and the Refinancing, and (3) to finance working capital needs of the Company and its subsidiaries for general corporate purposes.

All of the Company's obligations under the Senior Secured Credit Facilities are guaranteed by the subsidiary guarantors named therein (the “Subsidiary Guarantors”). The Senior Revolver includes a $10.0 million sublimit for the issuance of letters of credit. Any issuance of letters of credit will reduce the amount available under the Senior Revolver. As of June 30, 2022 (unaudited), we had no outstanding borrowings under our Senior Revolver.

The Senior Term Loan has a seven-year maturity and the Senior Revolver has a five-year maturity. Commencing June 30, 2022, we were required to repay the Senior Term Loan portion of the Senior Secured Credit Facilities in quarterly principal installments of 0.25% of the aggregate original principal amount of the Senior Term Loan at closing, with the balance payable at maturity. Borrowings under the Senior Secured Credit Facilities bear interest, at the Company's option, at: (i) Base Rate equal to the greater of (a) the Federal Funds Rate plus 1/2 of 1.00%, (b) the rate of interest in effect for such day as publicly announced from time to time by the administrative agent as its "prime rate," (c) a Eurocurrency Rate for such date plus 1.00% and (d) 1.00%; or (ii) the Eurocurrency Rate (provided that the Eurocurrency Rate applicable to the Senior Term Loan shall not be less than 0.50% per annum). The Applicable Rate for the Senior Term Loan with respect to Eurocurrency Rate Loans is 2.75% per annum and 1.75% per annum for Base Rate Loans. The Applicable Rate for the Senior Revolver with respect to Eurocurrency Rate Loans, SONIA Loans, and Alternative Currency Term Rate Loans ranges from 2.00% to 2.5% subject to the Company's Consolidated First Lien Net Leverage Ratio, while the Applicable Rate for Base Rate Loans ranges from 1.00% to 1.50% subject to the Company's Consolidated First Lien Net Leverage Ratio. We are also required to pay an unused commitment fee to the lenders under the Senior Revolver at the Applicable Commitment Fee of the average daily unutilized commitments. The Applicable Commitment Fee ranges from 0.40% to 0.50% subject to the Company's Consolidated First Lien Never Leverage Ratio.

The 2021 Credit Agreement contains a financial covenant solely with respect to the Senior Revolver. If the outstanding amounts under the Senior Revolver exceed 35% of the aggregate amount of the Senior Revolver commitments, we are required to maintain at the end of each fiscal quarter, commencing with the quarter ending June 30, 2022, a Consolidated Net Leverage Ratio of not more than 7.75 to 1.00. As of June 30, 2022 (unaudited), there was no amount outstanding under the Senior Revolver. The Company had $125.0 million of availability under the Senior Revolver as of June 30, 2022 (unaudited).

Debt discount costs of $13.6 million were incurred in connection with the Term Loan. An additional $3.8 million of debt discount costs were incurred after the IPO in August 2021 in connection with the prepayment premium associated with the Term Loan as the prepayments were treated as modifications for accounting purposes. These debt discount costs were being amortized into interest expense over the contractual term of the Term Loan. As a result of the Refinancing in the fourth quarter of 2021, the Company wrote off the remaining $13.8 million of debt discount costs related to the Credit Facilities to loss on debt extinguishment in the condensed consolidated statements of operations and comprehensive loss. Additionally, as a result of the Refinancing, the Company capitalized $1.0 million and $5.9 million of debt discount costs incurred in connection with the Senior Term Loan in long-term debt, current and long-term debt, net of current portion, respectively, on the condensed consolidated balance sheets. The Company recognized $0.3 million and $0.5 million of amortization of debt discount costs for the unaudited three and six months ended June 30, 2022, respectively, and $0.6 million and $1.2 million for the unaudited three and six months ended June 30, 2021, respectively, which is recorded as interest expense in the accompanying condensed consolidated statements of operations and comprehensive loss. At June 30, 2022 (unaudited) and December 31, 2021 the Company had an aggregate principal amount outstanding of $498.8 million and $500.0 million, respectively, under the Senior Term Loan, bearing interest at 3.27% and 3.25%, respectively. The Company had $6.2 million and $6.7 million of unamortized debt discount costs at June 30, 2022 (unaudited) and December 31, 2021, respectively, which is recorded as a reduction of the debt balance on the Company’s condensed consolidated balance sheets.

16

Debt issuance costs of $0.7 million were incurred in connection with the Revolving Credit Facility. These debt issuance costs were being amortized into interest expense over the contractual term of the Revolving Credit Facility. As a result of the Refinancing, the Company wrote off the remaining $0.5 million of debt issuance costs related to the Credit Facilities to loss on debt extinguishment in the condensed consolidated statements of operations and comprehensive loss. Additionally, as a result of the Refinancing, the Company capitalized $0.2 million and $0.8 million of deferred issuance costs incurred in connection with the Senior Revolver in other current assets and other assets, respectively, on the condensed consolidated balance sheets. The Company recognized $47.0 thousand and $0.1 million of amortization of debt issuance costs for the unaudited three and six months ended June 30, 2022, respectively, and $30.0 thousand and $0.1 million for the unaudited three and six months ended June 30, 2021, respectively, which is recorded as interest expense in the accompanying condensed consolidated statements of operations and comprehensive loss. The Company had $0.8 million and $0.9 million of unamortized debt issuance costs at June 30, 2022 (unaudited) and December 31, 2021, respectively, which were included in other current assets and other assets on the Company’s condensed consolidated balance sheets.

The Senior Secured Credit Facilities contain customary negative covenants. At June 30, 2022 (unaudited), the Company was in compliance with all applicable covenants pertaining to the Senior Secured Credit Facilities. The Company also maintained compliance with all applicable covenants pertaining to the Credit Facilities prior to the Refinancing.

The maturities of outstanding debt, as of June 30, 2022 (unaudited), are as follows (in thousands):

	Amount
Years Ending December 31,	(unaudited)
Remainder of 2022	$	2,500
2023		5,000
2024		5,000
2025		5,000
2026		5,000
Thereafter		476,250
Total	$	498,750

8. Revenue

We have one operating segment, which is our cloud-based learning, assessment, development and engagement systems. Historically, we had primarily generated revenues from two customer bases, Education and Corporate. Education customers consist of K-12 and Higher Education institutions that purchase our Canvas Learning Management System (“LMS”), which includes assessments, analytics and learning content. On February 26, 2021, the Company sold Bridge and no longer receives revenues from Corporate customers. Corporate customers purchased Bridge-related product, the Company's corporate learning platform, which included a learning management system and performance platform that helped employees and managers transform their organization through connection, alignment, and growth. The following tables present the Company’s disaggregated revenues based on its two customer bases and by geographic region, based on the physical location of the customer (in thousands):

	Three months ended June 30,						Six months ended June 30,
	2022			2021			2022			2021
	(unaudited)
Education	$	114,577		$	93,567		$	228,039		$	183,885
Corporate		—			—			—			3,662
Total revenue	$	114,577		$	93,567		$	228,039		$	187,547
Percentage of revenue generated by Education		100	%		100	%		100	%		98	%

	Three months ended June 30,						Six months ended June 30,
	2022			2021			2022			2021
	(unaudited)
United States	$	90,957		$	75,127		$	181,064		$	150,698
Foreign		23,620			18,440			46,975			36,849
Total revenue	$	114,577		$	93,567		$	228,039		$	187,547
Percentage of revenue generated outside of the United States		21	%		20	%		21	%		20	%

17

Deferred Revenue and Performance Obligations

During the unaudited three and six months ended June 30, 2022, 89% and 84% of revenue recognized was included in our deferred revenue balance at March 31, 2022 (unaudited), and December 31, 2021, respectively. During the unaudited three and six months ended June 30, 2021, 89% and 82%, respectively, of revenue recognized was included in our deferred revenue balance at March 31, 2021 (unaudited), and December 31, 2020, respectively.

Transaction Price Allocated to the Remaining Performance Obligations

As of June 30, 2022 (unaudited), approximately $783.7 million of revenue is expected to be recognized from remaining performance obligations. We expect to recognize revenue on approximately 74% of our remaining performance obligations over the next 24 months, with the balance recognized thereafter.

Concentration of Credit Risk, Significant Customers and Provision for Credit Losses

There were no customers with revenue as a percentage of total revenue exceeding 10% for the periods presented.

As of June 30, 2022 and 2021 (unaudited) there were no customers with outstanding net accounts receivable balances as a percentage of total outstanding net accounts receivable greater than 10%. As of December 31, 2021, our largest customer's outstanding net accounts receivable balance as a percentage of total outstanding net accounts receivable represented 10.5%. There were no other customers with outstanding net accounts receivable balances as a percentage of total outstanding net accounts receivable greater than 10% as of December 31, 2021.

Our provisions for credit loss balances at June 30, 2022 (unaudited) and December 31, 2021 were $1.3 million and $0.8 million, respectively.

9. Deferred Commissions

Deferred commissions primarily consist of sales commissions that are capitalized as incremental contract origination costs and were $31.3 million and $31.5 million as of June 30, 2022 (unaudited) and December 31, 2021, respectively. Amortization expense for deferred commissions was $3.8 million and $7.2 million for the unaudited three and six months ended June 30, 2022, respectively, and $2.4 million and $4.8 million for the unaudited three and six months ended June 30, 2021, respectively. There was no impairment of deferred commissions during these periods.

10. Stockholders’ Equity

The TopCo Amended and Restated Partnership Agreement (“Partnership Agreement”) set forth the terms, rights, powers, qualifications, limitations and restrictions of the partnership. In accordance with the Partnership Agreement, there was an unlimited number of authorized Class A Units and Class B Units (collectively, the “Units”) and issuance of such Units was determined by the board of managers.

In connection with the Take-Private Transaction, TopCo issued 1,250,000 Class A Units and 90,000,000 Class B Units, with no par values, for the cash paid by Thoma Bravo and its affiliated funds. Units shared in distributions according to a “waterfall” which provided for distributions to be made in the following order and priority: (1) first, to the holders of Class A Units until they received a 9% annual return on their remaining unreturned capital contributions, compounded quarterly; (2) second, to the holders of Class A Units until they received an amount equal to their respective capital contributions on a pro rata basis; and (3) third, to the holders of the remaining Class B Units based on their percentage of ownership, taking into account any applicable vesting terms and participation threshold on the Class B Units. A participation threshold in respect of a Class B Unit was determined at the time of issuance or grant and was equal to or greater than the amount payable in respect of a Class B Unit having a participation threshold of zero pursuant to the waterfall in a hypothetical liquidation of TopCo at the value of TopCo as of immediately prior to such issuance or grant. No conversion or redemption rights are associated with Class A or Class B Units. In connection with the IPO, TopCo effected a series of transactions that resulted in TopCo’s equityholders holding shares of our common stock directly, and then TopCo being liquidated and dissolved.

In connection with the Take-Private Transaction, the Company's board of directors authorized 2,000 shares of common stock with a par value of $0.01. Common stock issued and outstanding prior to the stock split as of July 9, 2021 (unaudited) and December 31, 2020 were 998.10 and 999.84, respectively. No other shares were issued. Subsequently, on July 9, 2021, the Company effected a 126,239.815-for-1 stock split of its issued and outstanding shares of common stock and made comparable and equitable adjustments to its equity awards in accordance with the terms of the awards. The par value of the common stock was not adjusted as a result of the stock split. Accordingly, all share and per share amounts for all periods presented in the accompanying condensed consolidated financial statements and notes thereto have been adjusted retrospectively, where applicable, to reflect this stock split.

18

As of June 30, 2022 (unaudited) and December 31, 2021, there were 500,000,000 shares of common stock authorized. As of June 30, 2022 (unaudited) and December 31, 2021, there were 141,914,344 and 140,740,569 shares of common stock issued and outstanding, respectively.

11. Stock-Based Compensation

Employee Equity Plans

In April 2020, as part of the Take-Private Transaction, the board of managers approved the Instructure Parent, LP Incentive Equity Plan (the “2020 Plan”) and the Instructure Co-Invest Agreement (the “Co-Invest Agreement”) to incentivize employees and to align the employees and management with the owners of the business. The 2020 Plan provided for the grant of incentive stock options, profits interest, equity appreciation rights and other forms of awards to employees and non-employees granted or denominated in TopCo Units. Under the 2020 Plan, 10,000,000 Class B Units (“Incentive Units”) were reserved for issuance (“Incentive Carry”) and did not have a contractual life. Incentive Carry grants were subject to a service and a performance vesting condition based on the achievement of an EBITDA target as established by the Company’s board of managers, over a performance period of four years. Additionally, TopCo granted 480,000 Incentive Units to certain members of the board of managers that were only subject to service-based vesting conditions over four years (“Board Carry”). These Incentive Units were not included in the Incentive Carry pool previously discussed and there was no contractual life. The Co-Invest Agreement offered employees the one-time opportunity to co-invest in TopCo by purchasing Units directly from the Company for cash. Under the Co-Invest agreement, the purchase price for one Class A unit and 72 Class B units was $1,000, which was the same investment allocation between the two unit classes as the investment made by existing investors at the time of the Take-Private Transaction.

The 2020 Plan was terminated in July 2021 in connection with the IPO. No further equity awards were granted under the 2020 Plan subsequent to the IPO. As of the IPO date, 2,271,698 vested Incentive Units converted to 1,305,738 shares of the Company's common stock and were released to the Unit holders, and 6,126,802 unvested Incentive Units were exchanged for 3,496,739 RSUs under the 2021 Plan. The RSUs generally vest in 11 equal quarterly installments commencing on September 1, 2021.

In July 2021, our board of directors adopted the 2021 Omnibus Incentive Plan (the “2021 Plan”), which serves as the successor to 2020 Plan. Accordingly, no shares remain available for issuance under the 2020 Plan. A total of 18,000,000 shares of the Company's common stock were initially reserved for issuance under the 2021 Plan. Pursuant to the terms of the 2021 Plan, the share reserve increased by 5,629,623 shares in January 2022. As of June 30, 2022, we had 16,257,713 shares of common stock available for future grants under the 2021 Plan.

In July 2021, our board of directors adopted, and our stockholders approved the 2021 Employee Stock Purchase Plan (the "2021 ESPP"), which allows eligible employees to purchase shares of our common stock at a discount through payroll deductions of up to 15% of their eligible compensation, subject to any plan limitations. The initial offering period ended on February 28, 2022. Each new offering period begins on or about March 1 and September 1 and is approximately six months in duration. On each purchase date, eligible employees will purchase our common stock at a price per share equal to 85% of the lesser of (1) the fair market value of our common stock on the offering date or (2) the fair market value of our common stock on the purchase date. A total of 1,900,000 shares of the Company’s common stock were initially reserved for issuance under the 2021 ESPP. Pursuant to the terms of the 2021 ESPP, the share reserve increased by 1,407,406 shares in January 2022. As of June 30, 2022 (unaudited), 3,067,546 shares of common stock were available for purchase under the 2021 ESPP.

During the unaudited three months ended June 30, 2022, we granted 626,686 RSUs to employees under the 2021 Plan. Each RSU entitles the recipient to receive one share of the Company's common stock upon vesting. The RSUs are subject to time-based service requirements and generally vest over a four-year service period. The grant date fair values of the RSUs granted during the unaudited three months ended June 30, 2022 ranged from $17.59 to $21.88, which represent the closing stock price for the underlying common stock on the respective grant dates, with an aggregate fair value of $12.8 million.

The following two tables present stock-based compensation by award type and where the stock-based compensation expense was recorded in our condensed consolidated statements of operations and comprehensive loss (in thousands):

	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
	(unaudited)
Options	$	2	$	28	$	21	$	76
Restricted stock units		8,848		1,495		17,711		4,367
Shares for issuance under employee stock purchase plan		537		—		1,131		—
Class A and Class B Units		—		2,235		—		4,900
Total stock-based compensation	$	9,387	$	3,758	$	18,863	$	9,343

19

	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
	(unaudited)
Subscription and support cost of revenue	$	325	$	171	$	607	$	395
Professional services and other cost of revenue		465		110		841		287
Sales and marketing		2,772		1,093		5,349		2,675
Research and development		2,686		934		5,226		2,604
General and administrative		3,139		1,450		6,840		3,382
Total stock-based compensation	$	9,387	$	3,758	$	18,863	$	9,343

In connection with the Take-Private Transaction on March 31, 2020, and except for certain executives, outstanding stock options and restricted stock units, and together with the stock options, “equity awards”, whether vested or unvested, were cancelled and replaced with the right to receive $49.00 per share in cash, less the applicable exercise price per share and applicable withholding taxes (the “per share price”), with respect of each share of common stock underlying such award (“Cash Replacement Awards”). The per share price attributed to the unvested equity awards vest and are payable at the same time such equity awards would have vested pursuant to their original terms prior to the replacement. During the unaudited three and six months ended June 30, 2022 the Company recognized $1.2 million and $2.9 million of stock-based compensation expense associated with Cash Replacement Awards, respectively, and $1.5 million and $4.4 million for the unaudited three and six months ended June 30, 2021, respectively.

Restricted Stock Units

The following table summarizes the activity of RSUs for the unaudited six months ended June 30, 2022 (in thousands, except per unit amounts):

	RSUs			Weighted Average Grant Date Fair Value Per Unit
Unvested and outstanding at December 31, 2021		1,987		$	21.00
Granted		2,509			21.51
Vested		(440	)		20.61
Forfeited or cancelled		(318	)		21.53
Unvested and outstanding at June 30, 2022		3,738		$	21.35

As of June 30, 2022 (unaudited), total unrecognized compensation cost related to unvested RSUs amounted to $75.4 million, which is expected to be recognized over a weighted average period of 3.5 years.

The following table summarizes the activity of the Incentive Carry and Board Carry, subsequent to their conversion into RSUs under the 2021 Plan, for the unaudited six months ended June 30, 2022 (in thousands, except per unit amounts):

	RSUs			Weighted Average Grant Date Fair Value Per Unit
Unvested and outstanding at December 31, 2021		2,736		$	10.75
Vested		(575	)		10.81
Forfeited or cancelled		(177	)		11.07
Unvested and outstanding at June 30, 2022		1,984		$	10.73

20

There were no Incentive Units granted subsequent to December 31, 2021. As of June 30, 2022 (unaudited) and December 31, 2021, we had $20.4 million and $28.3 million of unrecognized stock-based compensation expense related to unvested Incentive Units exchanged for RSUs, that are expected to be recognized over a weighted-average period of 1.8 and 2.3 years, respectively.

2021 ESPP

The following table summarizes the assumptions relating to 2021 ESPP purchase rights used in a Black-Scholes option pricing model for the three months ended June 30, 2022 and 2021 (unaudited):

	Three months ended June 30,
	2022	2021
Dividend yield	None	None
Volatility	41%	None
Risk-free interest rate	0.06	None
Expected life (years)	0.5	None

12. Income Taxes

Utilization of the net operating loss carryforwards and credits may be subject to substantial annual limitation due to the ownership change limitations provided by Section 382 of the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization.

We file tax returns in the United States, the United Kingdom, Australia, the Netherlands, Hong Kong, Sweden, Brazil, Mexico, Hungary, China, Singapore and various state jurisdictions. All of our tax years remain open to examination by major taxing jurisdictions to which we are subject, as carryforward attributes generated in past years may still be adjusted upon examination by the Internal Revenue Service or state and foreign tax authorities if they have or will be used in future periods.

We believe that we have provided adequate reserves for our income tax uncertainties in all open tax years. We do not expect our gross unrecognized tax benefits to change significantly in the next 12 months.

13. Fair Value of Financial Instruments

The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked to offer prices. Fair value measurements do not include transaction costs. The fair value hierarchy prioritizes the quality and reliability of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined into the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

There were no transfers between Level 1 and Level 2 of the fair value measurement hierarchy during the period ended June 30, 2022 (unaudited) and December 31, 2021. Assets measured at fair value on a recurring basis as of June 30, 2022 (unaudited) were as follows (in thousands):

	June 30, 2022
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	3,346	$	—	$	—	$	3,346
Total assets	$	3,346	$	—	$	—	$	3,346

Assets measured at fair value on a recurring basis as of December 31, 2021 were as follows (in thousands):

	December 31, 2021
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	3,343	$	—	$	—	$	3,343
Total assets	$	3,343	$	—	$	—	$	3,343

21

Instruments Not Recorded at Fair Value on a Recurring Basis.

We estimate the fair value of our Senior Term Loan carried at face value, less unamortized discount costs, quarterly for disclosure purposes. The estimated fair value of our Senior Term Loan is determined by Level 2 inputs, observable market based inputs or unobservable inputs that are corroborated by market data. As of June 30, 2022 (unaudited), the fair value of our Senior Term Loan was $493.0 million. The carrying amounts of our cash, prepaid expenses, other current assets, and accrued liabilities approximate their current fair value because of their nature and relatively short maturity dates or durations.

14. Leases

The Company leases office space under non-cancelable operating leases with lease terms ranging from one to seven years. These leases require monthly lease payments that may be subject to annual increases throughout the lease term. Certain of these leases also include early termination options. The Company has elected to exercise its early termination rights. All related operating leases have been impaired to reflect this early termination option. The Company subleases four of its locations. As of June 30, 2022, the first, second, third, and fourth sublease term has 12 months, 78 months, 43 months, and 22 months remaining, respectively. None of the above subleases have an option for renewal.
 

Operating lease right-of-use assets and operating lease liabilities are recognized at the lease commencement date based on the present value of the lease payments over the lease term. Right-of-use assets also include adjustments related to prepaid or deferred lease payments and lease incentives. As most of our leases do not provide an implicit interest rate, we use our incremental borrowing rate based on information available at the lease commencement date to determine the present value of lease payments.

The Company performed evaluations of its contracts and determined that each of its identified leases are operating leases. The components of operating lease expense were as follows (in thousands):

	Three months ended June 30,						Six months ended June 30,
	2022			2021			2022			2021
	(unaudited)
Operating lease cost, gross	$	1,588		$	1,938		$	3,384		$	3,890
Variable lease cost, gross(1)		591			527			1,127			936
Sublease income		(287	)		(249	)		(541	)		(477	)
Total lease costs(2)	$	1,892		$	2,216		$	3,970		$	4,349

(1)Variable rent expense was not included within the measurement of the Company's operating right-of-use assets and lease liabilities. Variable rent expense is comprised primarily of the Company's proportionate share of operating expenses, property taxes and insurance and is classified as lease expense due to the Company's election to not separate lease and non-lease components.

(2)Short-term lease costs for the unaudited three and six months ended June 30, 2022 and 2021 were not significant and are not included in the table above.

Cash paid for amounts included in the measurement of operating lease liabilities for the unaudited three and six months ended June 30, 2022 were $2.0 million and $4.2 million, respectively, and $2.4 million and $4.3 million for the unaudited three and six months ended June 30, 2021, respectively, and were included in net cash used in operating activities in the condensed consolidated statements of cash flows.

As of June 30, 2022 (unaudited), the maturities of the Company’s operating lease liabilities were as follows (in thousands):

Remainder of 2022	$	4,408
2023		8,630
2024		8,385
2025		4,318
2026		2,744
2027 and thereafter		3,085
Total lease payments		31,570
Less:
Imputed interest		(4,713	)
Lease liabilities		26,857
Tenant improvement reimbursements included in the measurement of lease liabilities but not yet received		(414	)
Lease liabilities, net	$	26,443

22

As of June 30, 2022 (unaudited) and December 31, 2021, the weighted average remaining lease term is 4.0 and 4.4 years, respectively, and the weighted average discount rate used to determine operating lease liabilities was 8.19% as of June 30, 2022 (unaudited) and December 31, 2021.

15. Commitments and Contingencies

Non-cancelable purchase obligations

As of June 30, 2022 (unaudited), our outstanding non-cancelable purchase obligations with a term of 12 months or longer related to cloud infrastructure services in the ordinary course of business totaled $45.0 million for fiscal year 2023 and $48.0 million for fiscal years 2024 and 2025, respectively.

Letters of Credit

As of June 30, 2022 (unaudited) and December 31, 2021, we had a total of $4.4 million and $4.2 million, respectively, of letters of credit outstanding that were issued for purposes of securing certain of the Company’s obligations under facility leases and other contractual arrangements.

Litigation

We are involved in various legal proceedings and claims, including challenges to trademarks, from time to time arising in the normal course of business. If we determine that it is probable that a loss has been incurred and the amount is reasonably estimable, we will record a liability in our condensed consolidated financial statements. If only a range of estimated losses can be determined, we accrue an amount within the range that, in our judgment, reflects the most likely outcome; if none of the estimates within that range is a better estimate than any other amount, we accrue the low end of the range. Although the results of litigation and claims are inherently unpredictable and uncertain, management does not believe that the outcome of our various legal proceedings, with the potential exception of the matter described below (which we believe is without merit and which we are defending vigorously against), if determined adversely to us, singly or in the aggregate, would have a material impact on our financial position, results of operations, or liquidity.

In February 2021, Oklahoma Law Enforcement Retirement System and Q. Wade Billings filed a class action lawsuit against Instructure Holdings, LLC, certain Thoma Bravo entities and certain directors and officers of Predecessor, relating to the Take-Private Transaction. The complaint alleges that such directors and officers breached their fiduciary duties in connection with the Take-Private Transaction, and that Instructure Holdings, LLC and Thoma Bravo aided and abetted such breaches. Plaintiffs seek damages of an unidentified amount, interest, and attorneys’ and experts’ fees and expenses.

16. Related-Party Transactions

The Company has agreements in place with Thoma Bravo, LLC for financial and management advisory services, along with compensation arrangements and reimbursements to directors and officers. During the unaudited three and six months ended June 30, 2022 the Company incurred $0.1 million and 0.3 million of costs related to these services, respectively, and $0.2 million and 0.3 million for the unaudited three and six months ended June 30, 2021, respectively. The related expense is reflected in general and administrative expense in the condensed consolidated statements of operations and comprehensive loss.

The spouse of Mitch Benson, our Chief Strategy Officer, is an employee of the Company. Mr. Benson has served as an Officer of the Company since August 2019. His spouse, Ms. Tara Gunther, has been an employee of the Company since 2014. Her 2021 base salary and short-term incentive award was approximately $0.2 million in the aggregate. She also received benefits generally available to all employees. The compensation for Ms. Gunther was determined in accordance with our standard employment and compensation practices applicable to employees with similar responsibilities and positions. For the six months ended June 30, 2022 (unaudited), Ms. Gunther's base salary was $0.1 million.

In connection with our entry into the Credit Facilities on March 24, 2020, affiliates of Thoma Bravo collectively acquired $129.2 million of our Term Loan and as of June 30, 2021 (unaudited), affiliates of Thoma Bravo collectively owned $131.3 million of our Term Loan. In connection with our principal prepayments made in August 2021, $42.5 million of the prepayments were applied to the Term Loan held by affiliates of Thoma Bravo. Additionally, in connection with our October 29, 2021 Refinancing, $88.6 million of our Term Loan held by affiliates of Thoma Bravo was paid off. Refer to Note 7—Credit Facility for additional information regarding the principal prepayments and Refinancing.

Interest paid to affiliates of Thoma Bravo during the six months ended June 30, 2021 (unaudited) was $5.3 million.

23

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis together with the financial statements and the related notes to those statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, and our audited Consolidated Financial Data for the year ended December 31, 2021 and the related notes thereto, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 23, 2022 (the "2021 10-K"). The following discussion contains forward-looking statements. See the “Forward-Looking Statements” section of this Quarterly Report on Form 10-Q.

Overview

From the inception of a teacher’s lesson through a student’s mastery of a concept, Instructure personalizes, simplifies, organizes, and automates the entire learning lifecycle through the power of technology. Our learning platform delivers the elements that leaders, teachers, and learners need – a next-generation LMS, robust assessments for learning, actionable analytics, and engaging, dynamic content. Schools standardize on Instructure’s solutions as their core learning platform because we bring together all of the tools that students, teachers, parents, and administrators need to create an accessible and modern learning environment. Our platform is cloud-native, built on open technologies, and scalable across thousands of institutions and tens of millions of users worldwide. We are the LMS market share leader in both Higher Education and paid K-12, with nearly 7,000 global customers, representing Higher Education institutions and K-12 districts and schools in more than 100 countries. We are maniacally focused on our customers and enhancing the teaching and learning experience. As such, we continuously innovate to grow the footprint of our platform, including through our acquisitions of Portfolium to add online skills portfolio capabilities for Higher Education students, MasteryConnect and Certica to add assessment and analytics capabilities, Impact to allow educators to evaluate the impact education technologies have on student engagement and outcome, Elevate Data Sync to secure syncing capabilities across applications within a school environment, and Canvas Credentials to give educators a robust, scalable and feature-rich platform for badging. Our platform becomes deeply ingrained into our customers’ instructional workflows.

Since our founding in 2008, we have expanded our platform from the core LMS to include a broad set of offerings targeting all aspects of teaching and learning. As our platform has grown, we have become more strategic to schools as they seek vendor consolidation, best of breed solutions, and integrated offerings to serve teachers and students.

This discussion and analysis reflects our financial condition and results of operations for the unaudited three and six months ended June 30, 2022 and 2021.

For the unaudited three months ended June 30, 2022 and 2021:

•Our revenue was $114.6 million and $93.6 million, respectively.

•Our net loss was $12.9 million and $21.7 million, respectively.

•Our adjusted EBITDA was $39.8 million and $31.2 million, respectively.

•Our operating cash flow was $8.6 million and $6.4 million, respectively.

•Our free cash flow was $6.6 million and $5.2 million, respectively.

For the unaudited six months ended June 30, 2022 and 2021:

•Our revenue was $228.0 million and $187.5 million, respectively.

•Our net loss was $18.5 million and $54.8 million, respectively.

•Our adjusted EBITDA was $83.4 million and $63.8 million, respectively.

•Our operating cash flow was $(57.5) million and $(52.4) million, respectively.

•Our free cash flow was $(60.9) million and $(54.0) million, respectively.

Adjusted EBITDA and free cash flow are non-GAAP measures, see “Non-GAAP Financial Measures” for definitions and reconciliations to the most closely comparable GAAP measure.

24

Recent Developments

Macroeconomic Conditions and COVID-19 Update

Adverse macroeconomic conditions, including but not limited to heightened inflation, slower growth or recession, changes to fiscal and monetary policy, higher interest rates, currency fluctuations and challenges in the supply chain could impact our business. In addition, the war in Ukraine has given rise to potential global security issues that may, in particular, adversely affect international business and technology companies, such as ours. Certain of our customers may be negatively impacted by these events.

We believe that the COVID-19 pandemic accelerated adoption of our learning platform, which we expect will continue to generate additional opportunities for us in the future. We continued to experience high usage on our learning platform, even as North American K-12 students started returning to the classroom during 2021. As more of our customers continue to transition back to the classroom on either a full-time or hybrid basis, the demand for our network and data storage capacity, inclusive of third-party cloud hosting, has come down from peak pandemic levels, but remains significantly higher than pre-pandemic levels. These factors have generated a positive impact to our gross margin.

There is no assurance that we will experience a continued increase in the adoption of our learning platform or that new or existing customers will continue to utilize our service as the COVID-19 pandemic continues to taper.

The full extent to which the tapering of the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition continues to be uncertain and cannot be accurately predicted.

Key Factors Affecting Our Performance

Our historical financial performance has been, and we expect our financial performance in the future to be, driven by the following trends and our ability to:

Increase Adoption of Cloud-Based Software by Higher Education and K-12 Institutions

Our ability to increase market adoption of our platform is driven by the overall adoption of cloud applications and infrastructure by academic institutions. We believe that Higher Education and K-12 institutions are poised to accelerate the pace of cloud adoption to support near-term online educational needs, as a result of, and following the COVID-19 pandemic, and to withstand future challenges. Academic institutions that relied upon on-premises solutions to support remote operations faced significant delays at the height of the pandemic. In order to continue providing a high-quality education and support in-person, remote, and hybrid learning, institutions must make a fundamental shift to adopt cloud-based collaboration solutions. As the leader in the market for cloud-based learning technology, we believe the imperative for these institutions to adopt cloud infrastructure will increase demand for our platform and broaden our customer base.

Grow Our Customer Base

We believe there is significant opportunity to grow our customer base in Higher Education and K-12. The growth of our Higher Education customer base is primarily dependent on the replacement of legacy systems with our cloud-native platform in North America and our continued expansion efforts internationally. The growth of our K-12 customer base is primarily dependent on our ability to surround currently implemented free solutions with our learning platform and, in connection therewith, monetize demand for our broad capabilities. We intend to expand our customer base by continuing to make targeted and prudent investments in sales and marketing and customer support.

Cross-sell into our Existing Customer Base

Most of our customers initially engage with us using our Canvas LMS solution, and then we are generally able to cross-sell our other solutions as these customers become aware of the benefits of our broad capabilities, including learning, assessments, analytics, student success, program management, digital courseware, and global online learning. Our future revenue growth is dependent upon our ability to expand our customers’ use of our learning platform. Our ability to increase sales to existing customers depends on a number of factors, including customer satisfaction, competition, pricing, economic conditions, and spending by customers.

Key Components of Results of Operations

Revenue

We generate revenue primarily from two main sources: (1) subscription and support revenue, which is comprised of Software-as-a-Service, or SaaS, fees from customers accessing our learning platform and from customers purchasing additional support beyond the standard support that is included in the basic SaaS fees; and (2) related professional services revenue, which is comprised of training, implementation services and other types of professional services.

25

Subscription revenue is derived from customers using our learning platform and is driven primarily by the number of customers, the number of users at each customer, the price of our applications and renewals. Support revenue is derived from customers purchasing additional support beyond the standard support that is included in the basic SaaS fee. Our contracts typically vary in length between one and five years. Subscriptions and support are non-cancelable and are billed in advance on an annual basis. All subscription and support fees billed are initially recorded in deferred revenue and recognized ratably over the subscription term.

Professional services and other revenue are derived primarily from implementation, training, and other consulting fees. Implementation services includes training and consulting services that generally take anywhere from 30 to 90 days to complete depending on customer-side complexity and timelines. It includes regularly scheduled and highly-structured activities to ensure customers progress toward better utilizing our applications. Most of these interactions take place over the phone and through the use of web meeting technology. Because we have determined the implementation services are distinct, they are recognized over time as the services are rendered, using an efforts-expended input method. Implementation services also include nonrefundable upfront setup fees, which are allocated to the remaining performance obligations.

We include training with every implementation and offer additional training for a fee. The training offered is focused on creating confidence among users so they can be successful with our applications. Most training is performed remotely using web meeting technology. Because we have determined that trainings are distinct, we record training revenue upon the delivery of the training. Training is recognized ratably in the same manner as subscription and support revenue described above.

In addition to our implementation and training offerings, we provide consulting services for custom application development, integrations, content services and change management consulting. These services are architected to boost customer adoption of our applications and to drive usage of features and capabilities that are unique to our company. We have determined that these services are distinct. Professional services revenue is typically recognized over time as the services are rendered, using an efforts-expended input method.

Cost of Revenue

Cost of subscription and support revenue consists primarily of the costs of our cloud hosting provider and other third-party service providers, employee-related costs including payroll, benefits and stock-based compensation expense for our operations and customer support teams, amortization of capitalized software development costs and acquired technology, and allocated overhead costs, which we define as rent, facilities and costs related to IT. Our acquired technology is amortized over the estimated remaining useful life, which is five years.

Cost of professional services and other revenue consists primarily of personnel costs of our professional services organization, including salaries, benefits, travel, bonuses and stock-based compensation, as well as allocated overhead costs.

Operating Expenses

Sales and Marketing. Sales and marketing expenses consist primarily of personnel costs of our sales and marketing employees, including sales commissions and incentives, benefits and stock-based compensation expense, marketing programs, including lead generation, costs of our annual InstructureCon user conference, acquisition-related amortization expenses and allocated overhead costs. We defer and amortize on a straight-line basis sales commission costs related to acquiring new contracts over a period of benefit that we have determined to be generally four years. Customer relationships represent the estimated fair value of the acquired customer bases and are amortized over the estimated remaining useful life of seven years. The trade names acquired are amortized over the estimated remaining useful lives ranging from three to ten years.

Research and Development. Research and development expenses consist primarily of personnel costs of our development team, including payroll, benefits and stock-based compensation expense and allocated overhead costs. We capitalize certain software development costs that are attributable to developing new applications, features and adding incremental functionality to our platform. We amortize these costs to subscription and support cost of revenue in the condensed consolidated statements of operations and comprehensive loss over the estimated life of the new application or incremental functionality, which is generally three years.

General and Administrative. General and administrative expenses consist of personnel costs and related expenses for executive, finance, legal, human resources, recruiting, employee-related information technology, administrative personnel, including payroll, benefits and stock-based compensation expense; professional fees for external legal, accounting and other consulting services; and allocated overhead costs.

Other Income (Expense)

Other income (expense), net consists primarily of interest income, interest expense, and the impact of foreign currency transaction gains and losses. Interest expense is related to fees incurred to have access to our credit facilities. As we have expanded our international operations, our exposure to fluctuations in foreign currencies has increased.

26

Income Tax Benefit

We are subject to income taxes in the United States and foreign jurisdictions in which we do business. These foreign jurisdictions have statutory tax rates different from those in the United States. Accordingly, our effective tax rates will vary depending on the relative proportion of foreign to U.S. income and changes in tax laws. The tax benefit at June 30, 2022 (unaudited) consists of decreases in U.S. Federal deferred tax liabilities due to current year pretax book loss, minimal increases to state deferred tax liabilities due to increases in valuation allowance recorded against state net operating loss carryforwards, and increases to foreign deferred tax assets as a result of changes in foreign tax rates.

Results of Operations

The following tables set forth our results of operations for the periods presented and as a percentage of our total revenue for those periods. The data has been derived from the unaudited condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q which include, in our opinion, all adjustments, consisting only of normal recurring adjustments, that we consider necessary for a fair presentation of the financial position and results of operations for the interim periods presented. The period-to-period comparison of financial results is not necessarily indicative of financial results to be achieved in future periods.

	Three months ended June 30,						Six months ended June 30,
	2022			2021			2022			2021
	(in thousands)
Revenue:
Subscription and support	$	102,905		$	84,257		$	206,397		$	170,611
Professional services and other		11,672			9,310			21,642			16,936
Total revenue		114,577			93,567			228,039			187,547
Cost of revenue:
Subscription and support(1) (2) (3)		35,868			36,163			71,414			76,047
Professional services and other(1) (3)		6,530			4,811			11,995			10,561
Total cost of revenue		42,398			40,974			83,409			86,608
Gross profit		72,179			52,593			144,630			100,939
Operating expenses:
Sales and marketing(1) (2) (3)		45,885			39,083			89,206			80,305
Research and development(1) (3)		18,669			14,279			35,870			31,368
General and administrative(1) (3)		14,253			11,196			29,869			24,547
Impairment on disposal group (3)		—			—			—			1,218
Total operating expenses		78,807			64,558			154,945			137,438
Loss from operations		(6,628	)		(11,965	)		(10,315	)		(36,499	)
Other income (expense):
Interest income		27			—			63			16
Interest expense		(4,611	)		(15,670	)		(9,164	)		(32,930	)
Other expense(3)		(3,417	)		(108	)		(3,111	)		(742	)
Total other income (expense), net		(8,001	)		(15,778	)		(12,212	)		(33,656	)
Loss before income taxes		(14,629	)		(27,743	)		(22,527	)		(70,155	)
Income tax benefit		1,710			6,050			4,063			15,391
Net loss	$	(12,919	)	$	(21,693	)	$	(18,464	)	$	(54,764	)

(1)Includes stock-based compensation as follows:

	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
	(in thousands)
Cost of revenue:
Subscription and support	$	325	$	171	$	607	$	395
Professional services and other		465		110		841		287
Sales and marketing		2,772		1,093		5,349		2,675
Research and development		2,686		934		5,226		2,604
General and administrative		3,139		1,450		6,840		3,382
Total stock-based compensation	$	9,387	$	3,758	$	18,863	$	9,343

27

(2)Includes amortization of acquisition-related intangibles as follows:

	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
	(in thousands)
Cost of revenue:
Subscription and support	$	15,859	$	15,415	$	31,549	$	30,830
Sales and marketing		18,332		17,946		36,381		35,892
Total amortization of acquisition-related intangibles	$	34,191	$	33,361	$	67,930	$	66,722

(3)Includes restructuring, transaction and sponsor related costs as follows:

	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
	(in thousands)
Cost of revenue:
Subscription and support	$	9	$	28	$	18	$	1,948
Professional services and other		41		5		95		855
Sales and marketing		110		201		390		2,452
Research and development		502		128		792		2,679
General and administrative		726		2,592		2,563		6,859
Impairment on disposal group		—		—		—		1,218
Other expense		3,477		—		3,185		—
Total restructuring, transaction and sponsor related costs	$	4,865	$	2,954	$	7,043	$	16,011

28

	Three months ended June 30,		Six months ended June 30,
	2022	2021	2022	2021
	(as a percentage of total revenue)
Revenue:
Subscription and support	90%	90%	91%	91%
Professional services and other	10	10	9	9
Total revenue	100	100	100	100
Cost of revenue:
Subscription and support	31	39	31	41
Professional services and other	6	6	5	6
Total cost of revenue	37	45	36	47
Gross profit	63	55	64	53
Operating expenses:
Sales and marketing	40	42	39	43
Research and development	16	15	16	17
General and administrative	12	12	13	13
Impairment on disposal group	—	—	—	1
Total operating expenses	68	69	68	74
Loss from operations	(5)	(14)	(4)	(21)
Other income (expense):
Interest income	—	—	—	—
Interest expense	(4)	(17)	(4)	(18)
Other expense	(3)	—	(1)	—
Total other income (expense), net	(7)	(17)	(5)	(18)
Loss before income taxes	(12)	(31)	(9)	(39)
Income tax benefit	2	6	2	8
Net loss	(10)%	(25)%	(7)%	(31)%

Comparison of the unaudited three and six months ended June 30, 2022 and unaudited three and six months ended June 30, 2021.

Revenue

	Three months ended June 30,				Change					Six months ended June 30,				Change
	2022		2021		Amount		%			2022		2021		Amount		%
	(dollars in thousands)
Subscription and support	$	102,905	$	84,257	$	18,648		22	%	$	206,397	$	170,611	$	35,786		21	%
Professional services and other		11,672		9,310		2,362		25			21,642		16,936		4,706		28
Total revenue	$	114,577	$	93,567	$	21,010		22	%	$	228,039	$	187,547	$	40,492		22	%

29

Three month change

Subscription and support revenue increased $18.6 million for the unaudited three months ended June 30, 2022 due to an increase in new customers, growth from existing customers through upselling historical products and cross-selling new products, contributions from our recent acquisitions, and the effects of acquisition accounting from Accounting Standards Codification (“ASC”) Topic 805 (“ASC 805”).

Professional services and other revenue increased $2.4 million for the unaudited three months ended June 30, 2022 due to the same factors discussed above.

Six month change

Subscription and support revenue increased $35.8 million for the unaudited six months ended June 30, 2022 due to new and existing customers, through upselling historical products and cross-selling new products, and contributions from our recent acquisitions, as discussed above, as well as the effects of acquisition accounting from ASC 805.

Professional services and other revenue increased $4.7 million for the unaudited six months ended June 30, 2022 due to the same factors discussed above.

Cost of Revenue

	Three months ended June 30,						Change						Six months ended June 30,						Change
	2022			2021			Amount			%			2022			2021			Amount			%
	(dollars in thousands)
Cost of revenue:
Subscription and support	$	35,868		$	36,163		$	(295	)		(1	)%	$	71,414		$	76,047		$	(4,633	)		(6	)%
Professional services and other		6,530			4,811			1,719			36			11,995			10,561			1,434			14
Total cost of revenue	$	42,398		$	40,974		$	1,424			3	%	$	83,409		$	86,608		$	(3,199	)		(4	)%
Gross margin percentage
Subscription and support revenue		65	%		57	%								65	%		55	%
Professional services and other		44			48									45			38
Total gross margin		63			56									63			54

Three month change

Subscription and support cost of revenue decreased $0.3 million for the unaudited three months ended June 30, 2022 due to a decrease of $1.8 million in web hosting costs and $0.3 million in systems and hardware costs. Office rent decreased by $0.1 million and third-party consultants and contractors decreased by $0.1 million. These decreases were offset by an increase in other hosting operations of $0.4 million, an increase in salaries, wages, and employee-related benefits of $0.9 million, and an increase in acquisition-related intangibles of $0.5 million, and other insignificant increases of $0.1 million.

Professional services and other cost of revenue increased $1.7 million for the unaudited three months ended June 30, 2022 due to an increase in salaries, wages, and employee-related benefits of $1.2 million, an increase in software expense of $0.2 million, an increase in travel expense of $0.1 million, an increase in third-party consultants and contractors of $0.1 million, and other insignificant increases of $0.1 million.

Six month change

Subscription and support cost of revenue decreased $4.6 million for the unaudited six months ended June 30, 2022 due to a decrease of $1.9 million related to exiting leased property, which occurred in the first quarter of 2021, and decreases in rent and related expenses of $0.5 million. Web hosting expenses and software license expenses decreased $3.6 million. These decreases were offset by an increase in amortization of acquisition-related intangibles of $0.9 million, an increase in salaries, wages, and related benefits of $0.4 million, and an increase in other employee-related expenses including travel of $0.2 million.

Professional services and other cost of revenue increased $1.4 million for the unaudited six months ended June 30, 2022 due to an increase in salaries, wages, and related benefits of $1.5 million, an increase in systems and hardware expenses of $0.3 million, an increase in other employee-related expenses including travel of $0.2 million, an increase in third-party consultants and contractors of $0.1 million, and other insignificant increases of $0.1 million. These increases were offset by a decrease of $0.8 million related to exiting leased property, which occurred in the first quarter of 2021.

30

Operating Expenses

Sales and Marketing

	Three months ended June 30,				Change					Six months ended June 30,				Change
	2022		2021		Amount		%			2022		2021		Amount		%
	(dollars in thousands)
Sales and marketing	$	45,885	$	39,083	$	6,802		17	%	$	89,206	$	80,305	$	8,901		11	%

Three month change

Sales and marketing expenses increased $6.8 million for the unaudited three months ended June 30, 2022 due to an increase in salaries, wages, and related benefits of $2.7 million, commissions of $1.3 million, and stock-based compensation expense of $1.8 million. There were also additional increases related to amortization of acquisition-related intangibles of $0.3 million, increases in marketing expenses such as advertising and tradeshows of $0.1 million, and an increase in employee-related expenses including travel of $1.0 million. These increases were offset by a decrease in third-party consultants and contractors of $0.4 million.

Six month change

Sales and marketing expenses increased $8.9 million for the unaudited six months ended June 30, 2022 due to an increase in salaries, wages, and related benefits of $4.3 million, commissions of $2.0 million, and stock-based compensation expense of $2.7 million. Additional increases included an increase in marketing expenses such as tradeshows and partnerships of $0.5 million, other employee-related expenses including travel of $1.6 million, and an increase in acquisition-related intangibles of $0.4 million. These increases were offset by a decrease of $2.0 million related to exiting leased property, which occurred in the first quarter of 2021, and a decrease in third-party consultants and contractors of $0.6 million.

Research and Development

	Three months ended June 30,				Change					Six months ended June 30,				Change
	2022		2021		Amount		%			2022		2021		Amount		%
	(dollars in thousands)
Research and development	$	18,669	$	14,279	$	4,390		31	%	$	35,870	$	31,368	$	4,502		14	%

Three month change

Research and development expenses increased $4.4 million for the unaudited three months ended June 30, 2022 due to an increase in salaries, wages, and stock-based compensation of $2.4 million, an increase in third-party consultants and contractors of $1.1 million, an increase in software expenses of $0.4 million, and an increase in other employee-related expenses including travel of $0.5 million. These increases were offset by a decrease in franchise and property taxes of $0.1 million.

Six month change

Research and development expenses increased $4.5 million for the unaudited six months ended June 30, 2022 due to an increase in salaries, wages, and stock-based compensation of $3.1 million, an increase in third-party consultants and contractors of $1.6 million, an increase in systems and hardware expenses of $0.5 million, and an increase in other employee-related expenses including travel of $0.6 million. These increases were offset by a decrease of $1.2 million related to exiting leased property, which occurred in the first quarter of 2021, and a decrease in franchise and property taxes of $0.1 million.

General and Administrative

	Three months ended June 30,				Change					Six months ended June 30,				Change
	2022		2021		Amount		%			2022		2021		Amount		%
	(dollars in thousands)
General and administrative	$	14,253	$	11,196	$	3,057		27	%	$	29,869	$	24,547	$	5,322		22	%

31

Three month change

General and administrative expenses increased by $3.1 million for the unaudited three months ended June 30, 2022 due to an increase in employee-related expenses such as salaries, wages, and stock-based compensation of $2.6 million, an increase in business insurance of $1.1 million, an increase in franchise and property taxes of $0.3 million, an increase in systems and hardware expenses of $0.2 million, an increase in bad debt expense of $0.2 million, and other insignificant increases of $0.2 million. These increases were offset by decreases in legal expenses of $0.5 million and a decrease in third-party consultants and contractors of $1.0 million.

Six month change

General and administrative expenses increased by $5.3 million for the unaudited six months ended June 30, 2022 due to an increase in salaries, wages, and stock-based compensation of $4.2 million, an increase in business insurance of $2.3 million, and an increase in franchise and property taxes of $0.5 million. Additionally, bad debt expense increased $0.4 million, systems and hardware expenses increased by $0.2 million, and other employee-related expenses including travel increased by $0.4 million. These increases were offset by a decrease of $0.7 million related to exiting leased property, which occurred in the first quarter of 2021, decreases in third-party consultants and contractors of $1.9 million, and other insignificant decreases of $0.1 million.

Impairment on Disposal Group
 

	Three months ended June 30,				Change				Six months ended June 30,				Change
	2022		2021		Amount		%		2022		2021		Amount			%
	(dollars in thousands)
Impairment on disposal group	$	—	$	—	$	—		—	$	—	$	1,218	$	(1,218	)		(100	)%

Six month change

Impairment on disposal group decreased by $1.2 million for the unaudited six months ended June 30, 2022. The decrease is due to our decision to market and sell Bridge, the Company’s corporate learning platform and wholly-owned subsidiary.

Other Income (Expense), Net

	Three months ended June 30,						Change					Six months ended June 30,						Change
	2022			2021			Amount		%			2022			2021			Amount		%
	(dollars in thousands)
Other income (expense), net	$	(8,001	)	$	(15,778	)	$	7,777		(49	)%	$	(12,212	)	$	(33,656	)	$	21,444		(64	)%

Three month change

Other income (expense), net includes interest income and expense and the impact of foreign currency transaction gains and losses. Other income (expense), net decreased $7.8 million for the unaudited three months ended June 30, 2022 due to decreased interest expense of $11.0 million as a result of reduced interest rates on our Term Loan and Senior Term Loan (as defined below), as well as the overall reduction in principal following our IPO and Refinancing, and other insignificant decreases of $0.2 million. These decreases were offset by an increase in expense of $3.4 million related to realized and unrealized foreign currency losses.

Six month change

Other income (expense), net includes interest income and expense and the impact of foreign currency transaction gains and losses. Other income (expense), net decreased $21.4 million for the unaudited six months ended June 30, 2022 as a result of decreased interest expense of $23.8 million due to reduced interest rates on our Term Loan and Senior Term Loan, as well as the overall reduction in principal following our IPO and Refinancing. These decreases were offset by an increase of $2.4 million related to realized and unrealized foreign currency losses.

Income Tax Benefit

	Three months ended June 30,				Change						Six months ended June 30,				Change
	2022		2021		Amount			%			2022		2021		Amount			%
	(dollars in thousands)
Income tax benefit	$	1,710	$	6,050	$	(4,340	)		(72	)%	$	4,063	$	15,391	$	(11,328	)		(74	)%

32

Three month change

Income tax benefit decreased $4.3 million for the unaudited three months ended June 30, 2022. Income tax benefit consists of current and deferred taxes for U.S. and foreign income taxes.

Six month change

Income tax benefit decreased $11.3 million for the unaudited six months ended June 30, 2022. Income tax benefit consists of current and deferred taxes for U.S. and foreign income taxes. Due to the Company's NOL carryforward position, the decrease in the income tax benefit was driven mainly by a reduction in pretax book loss recognized in the unaudited six months ended June 30, 2022.

Liquidity and Capital Resources

As of June 30, 2022 (unaudited) and December 31, 2021, our principal sources of liquidity were cash, cash equivalents and restricted cash totaling $87.6 million and $169.2 million, respectively, which was held for working capital purposes, as well as the available balance of our Senior Term Loan, (as defined below). As of June 30, 2022 (unaudited) and December 31, 2021, our cash equivalents were comprised of money market funds. We expect our operating cash flows to improve as we increase our operational efficiency and experience economies of scale.

We have financed our operations through cash received from operations, our IPO, and more recently, our Refinancing. We believe our existing cash and cash equivalents, our Senior Term Loan and cash provided by sales of our solutions and services will be sufficient to meet our working capital, capital expenditure and cash needs for at least the next 12 months and beyond. Our future capital requirements will depend on many factors including our growth rate, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced products and services offerings, and the continuing market acceptance of our products. In the future, we may enter into arrangements to acquire or invest in complementary businesses, services and technologies.

We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in new technologies, this could reduce our ability to compete successfully and harm our results of operations.

A portion of our customers pay in advance for subscriptions, a portion of which is recorded as deferred revenue. Deferred revenue consists of the unearned portion of billed fees for our subscriptions, which is later recognized as revenue in accordance with our revenue recognition policy. As of June 30, 2022 (unaudited), we had deferred revenue of $283.3 million, of which $269.7 million was recorded as a current liability and is expected to be recorded to revenue in the next 12 months, provided all other revenue recognition criteria have been met. As of December 31, 2021, we had deferred revenue of $255.7 million, of which $240.9 million was recorded as a current liability.

The following table shows our cash flows for the unaudited six months ended June 30, 2022 and 2021:

	Six months ended June 30,
	2022			2021
	(in thousands)
Net cash used in operating activities	$	(57,540	)	$	(52,367	)
Net cash provided by (used in) investing activities		(22,863	)		28,405
Net cash provided by (used in) financing activities		1,138			(52,457	)

33

Our cash flows are subject to seasonal fluctuations. A significant portion of our contracts have terms that coincide with our customers’ typical fiscal year-end of June 30. Historical experience has shown an increase in new and renewed contracts as well as anniversary billings, all of which immediately precede the beginning of our academic customers’ typical fiscal year-end. We typically invoice SaaS fees annually upfront with credit terms of net 30 or 60 days. In turn, our cash flows from operations are affected by this seasonality and are typically reflected in higher cash flow, accounts receivable and deferred revenue balances for the second and third quarters of each year.

Credit Facility

On March 24, 2020, we entered into a credit agreement with a syndicate of lenders and Golub Capital Markets LLC, as administrative agent and collateral agent, and Golub Capital Markets LLC and Owl Rock Capital Advisors LLC, as joint bookrunners and joint lead arrangers (the “Credit Agreement”). The Credit Agreement provided for a senior secured term loan facility (the “Initial Term Loan”) in an original aggregate principal amount of $775.0 million, which was supplemented by an incremental term loan pursuant to the First Incremental Amendment and Waiver to Credit Agreement, dated as of December 22, 2020, in a principal amount of $70.0 million (the “Incremental Term Loan” and, together with the Initial Term Loan, the “Term Loan”). The Credit Agreement also provided for a senior secured revolving credit facility in an aggregate principal amount of $50.0 million (the “Revolving Credit Facility” and, together with the Term Loan, the “Credit Facilities”). The Revolving Credit Facility included a $10.0 million sublimit for the issuance of letters of credit.

The Credit Agreement required us to repay the principal of the Term Loan in equal quarterly repayments equal to 0.25% of the original principal amount of Term Loan.

In connection with the Company's IPO, the Company made a principal prepayment in August 2021 of $224.3 million on its outstanding Term Loan. In connection with the underwriters' exercise of their over-allotment option in August 2021, the Company made an additional principal prepayment in August 2021 of $30.8 million on its outstanding Term Loan. The Company also incurred a 1.5% prepayment premium in conjunction with each principal prepayment.

On October 29, 2021, we entered into a credit agreement with JPMorgan Chase Bank, N.A. (“JPMorgan”), as administrative agent (the “2021 Credit Agreement”), governing our senior secured credit facilities (the “Senior Secured Credit Facilities”), consisting of a $500.0 million senior secured term loan facility (the “Senior Term Loan”) and a $125.0 million senior secured revolving credit facility (the “Senior Revolver”). The proceeds from the new Senior Secured Credit Facilities were used, in addition to cash on hand, (1) to refinance, in full, all existing indebtedness under the Credit Agreement (the “Refinancing”), (2) to pay certain fees and expenses incurred in connection with the entry into the 2021 Credit Agreement and the Refinancing, and (3) to finance working capital needs of the Company and its subsidiaries for general corporate purposes.

All of the Company's obligations under the Senior Secured Credit Facilities are guaranteed by the subsidiary guarantors named therein (the “Subsidiary Guarantors”). The Senior Revolver includes borrowing capacity available for letters of credit. Any issuance of letters of credit will reduce the amount available under the Senior Revolver. At and subsequent to closing, there have not been any borrowings incurred under the Senior Revolver.

The Senior Term Loan has a seven-year maturity and the Senior Revolver has a five-year maturity. Commencing June 30, 2022, we are required to repay the Senior Term Loan portion of the Senior Secured Credit Facilities in quarterly principal installments of 0.25% of the aggregate original principal amount of the Senior Term Loan at closing, with the balance payable at maturity. Borrowings under the Senior Secured Credit Facilities bear interest, at the Company's option, at: (i) Base Rate equal to the greater of (a) the Federal Funds Rate plus 1/2 of 1.00%, (b) the rate of interest in effect for such day as publicly announced from time to time by the administrative agent as its "prime rate," (c) a Eurocurrency Rate for such date plus 1.00% and (d) 1.00%; or (ii) the Eurocurrency Rate (provided that the Eurocurrency Rate applicable to the Senior Term Loan shall not be less than 0.50% per annum). The Applicable Rate for the Senior Term Loan with respect to Eurocurrency Rate Loans is 2.75% per annum and 1.75% per annum for Base Rate Loans. The Applicable Rate for the Senior Revolver with respect to Eurocurrency Rate Loans, SONIA Loans, and Alternative Currency Term Rate Loans ranges from 2.00% to 2.5% subject to the Company's Consolidated First Lien Net Leverage Ratio, while the Applicable Rate for Base Rate Loans ranges from 1.00% to 1.50% subject to the Company's Consolidated First Lien Net Leverage Ratio. We are also required to pay an unused commitment fee to the lenders under the Senior Revolver at the Applicable Commitment Fee of the average daily unutilized commitments. The Applicable Commitment Fee ranges from 0.40% to 0.50% subject to the Company's Consolidated First Lien Never Leverage Ratio.

As of June 30, 2022 (unaudited), we had outstanding borrowings of $498.8 million on the Senior Term Loan, no outstanding borrowings under our Senior Revolver and $4.4 million outstanding under letters of credit.

Operating Activities

Net cash used in operating activities consists of net loss adjusted for certain non-cash items, including stock-based compensation, depreciation and amortization and other non-cash charges, net.

34

Net cash used in operating activities during the unaudited six months ended June 30, 2022 was $57.5 million, which was attributable to a net loss of $18.5 million adjusted for certain non-cash items, including $16.0 million of stock-based compensation expense, $70.0 million depreciation and amortization and $0.6 million in amortization of debt discount and issuance costs, and $2.6 million in other non-cash items. These amounts were offset by a decrease of $5.4 million to deferred income taxes. The net change in operating asset and liabilities included a net increase of $90.2 million in deferred revenue and accounts receivable resulting from the seasonality of our business where a significant number of our customer agreements occur in the second and third quarter each year. Prepaid expenses and other current assets increased by $21.2 million, lease liabilities decreased by $3.5 million, other liabilities decreased by $1.4 million, accounts payable and accrued liabilities decreased by $9.1 million deferred commissions decreased by $0.2 million, and right-of-use assets decreased by $2.4 million.

Net cash used in operating activities during the unaudited six months ended June 30, 2021 was $52.4 million, which was attributable to a net loss of $54.8 million adjusted for certain non-cash items, including $4.8 million of stock-based compensation expense, $68.5 million depreciation and amortization, $1.2 million in amortization of debt discount and issuance costs, $1.2 million of impairment on disposal group, and $1.4 million in other non-cash items. These amounts were offset by a decrease to deferred income taxes of $15.4 million. The net change in operating assets and liabilities included a net increase of $52.9 million in deferred revenue and accounts receivable resulting from the seasonality of our business where a significant number of our customer agreements occur in the second and third quarter each year. Prepaid expenses and other current assets increased by $7.0 million, accounts payable and accrued liabilities decreased by $0.2 million, deferred commissions increased by $2.4 million, lease liabilities decreased by $3.1 million, and other liabilities decreased by $0.3 million and a decrease of $6.4 million in right-of-use assets.

Investing Activities

Our investing activities have consisted of business acquisitions, property and equipment purchases for computer-related equipment and capitalization of software development costs. Capitalized software development costs are related to new applications or improvements to our existing software platform that expand the functionality for our customers.

Net cash used in investing activities during the unaudited six months ended June 30, 2022 was $22.9 million, consisting of the acquisition of Canvas Credentials of $19.5 million, net of cash received, and purchases of property and equipment of $3.4 million.

Net cash provided by investing activities during the unaudited six months ended June 30, 2021 was $28.4 million, consisting of $46.0 million due to the sale of our Bridge business, which was offset by the acquisition of Impact of $16.0 million, net of cash received, and purchases of property and equipment of $1.6 million.

Financing Activities

Our financing activities have consisted of proceeds from issuance of common stock from employee equity plans, shares withheld for tax withholdings on vesting of RSUs, repurchases of TopCo units and repayments of long-term debt.

Net cash provided by financing activities during the unaudited six months ended June 30, 2022 was $1.1 million, which consisted of $4.1 million in proceeds from the issuance of common stock from employee equity plans, offset by $1.7 million of shares repurchased for tax withholdings on vesting of restricted stock units and principal payments made on our long-term debt of $1.3 million.

Net cash used in financing activities during the unaudited six months ended June 30, 2021 was $52.5 million, which consisted of $51.5 million of principal payments made on our long-term debt and distributions to stockholders of $0.9 million.

Critical Accounting Estimates

Our condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.

There have been no material changes to our critical accounting estimates as compared to those described in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forth in our 2021 10-K.

Recent Accounting Pronouncement

For information on recent accounting pronouncements, see Note 2. “Summary of Significant Accounting Policies—Recent Accounting Pronouncements" in the notes to the condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

35

Non-GAAP Financial Measures

In addition to our results determined in accordance with U.S. GAAP, we believe the following non-GAAP measures are useful in evaluating our operating performance and liquidity. We believe 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 U.S. 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 U.S. GAAP, and may be different from similarly-titled non-GAAP measures used by other companies. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with U.S. GAAP. Investors are encouraged to review the related U.S. GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable U.S. GAAP financial measures.

	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022			2021
	(in thousands)
Other Financial Data:
Non-GAAP operating income (1)		38,669		30,442		81,166			62,669
Free cash flow (2)		6,551		5,184		(60,919	)		(53,950	)
Adjusted EBITDA (3)		39,808		31,198		83,362			63,758
Allocated Combined Receipts (4)		114,908		95,901		228,869			194,639

(1)We define “non-GAAP operating income” as loss from operations excluding the impact of stock-based compensation, restructuring, transaction and sponsor related 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.

(2)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.

(3)“EBITDA” is defined as earnings before debt-related costs, including interest and loss on debt extinguishment, provision (benefit) for taxes, depreciation, and amortization. We further adjust EBITDA to exclude certain items of a significant or unusual nature, including stock-based compensation, restructuring, transaction and sponsor related costs, amortization of acquisition-related intangibles, and the impact of fair value adjustments to acquired unearned revenue relating to the Take-Private Transaction and Certica, Impact and Elevate Data Sync acquisitions.

(4)“Allocated Combined Receipts” is defined as the combined receipts of our Company and companies that we have acquired allocated to the period of service delivery. We calculate Allocated Combined Receipts as the sum of (i) revenue and (ii) the impact of fair value adjustments to acquired unearned revenue related to the Take-Private Transaction and Certica, Impact and Elevate Data Sync acquisitions that we do not believe are reflective of our ongoing operations.

Non-GAAP Operating Income

We define non-GAAP operating income as loss from operations excluding the impact of stock-based compensation, restructuring, transaction and sponsor related costs, amortization of acquisition-related intangibles, and the impact of fair value adjustments to acquired unearned revenue relating to the Take-Private Transaction and 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 this 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.

36

The following table provides a reconciliation of loss from operations to non-GAAP operating income for each of the periods indicated:

	Three months ended June 30,						Six months ended June 30,
	2022			2021			2022			2021
	(in thousands)
Loss from operations		(6,628	)		(11,965	)		(10,315	)		(36,499	)
Stock-based compensation		9,387			3,758			18,863			9,343
Restructuring, transaction and sponsor related costs		1,388			2,954			3,858			16,011
Amortization of acquisition-related intangibles		34,191			33,361			67,930			66,722
Fair value adjustments to deferred revenue in connection with purchase accounting		331			2,334			830			7,092
Non-GAAP operating income	$	38,669		$	30,442		$	81,166		$	62,669

Free Cash Flow

We define free cash flow as net cash used in operating activities less purchases of property and equipment and intangible assets, net of proceeds from disposals of property and equipment. We believe free cash flow facilitates period-to-period comparisons of liquidity. We consider free cash flow to be an important measure because it measures the amount of cash we generate and reflects changes in working capital. We use free cash flow in conjunction with traditional U.S. GAAP measures as part of our overall assessment of our liquidity, including the preparation of our annual operating budget and quarterly forecasts, to evaluate the effectiveness of our business strategies, and to communicate with our Board concerning our liquidity.

The following table provides a reconciliation of net cash used in operating activities to free cash flow for each of the periods indicated:

	Three months ended June 30,						Six months ended June 30,
	2022			2021			2022			2021
	(in thousands)
Net cash used in operating activities	$	8,619		$	6,365		$	(57,540	)	$	(52,367	)
Purchases of property and equipment and intangible assets		(2,082	)		(1,196	)		(3,415	)		(1,607	)
Proceeds from disposals of property and equipment		14			15			36			24
Free cash flow	$	6,551		$	5,184		$	(60,919	)	$	(53,950	)

Adjusted EBITDA

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, restructuring, transaction and sponsor related costs, amortization of acquisition-related intangibles, and the impact of fair value adjustments to acquired unearned revenue relating to the Take-Private Transaction and 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.

We believe that adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management team and Board. In addition, it provides a useful measure for period-to-period comparisons of our business, as it removes the effect of certain non-cash expenses and certain variable charges.

Adjusted EBITDA has limitations as a financial measure, should be considered as supplemental in nature, and is not meant as a substitute for the related financial information prepared in accordance with U.S. GAAP.

37

The following table presents a reconciliation of net loss to adjusted EBITDA for each of the periods indicated:

	Three months ended June 30,						Six months ended June 30,
	2022			2021			2022			2021
	(in thousands)
Net Loss	$	(12,919	)	$	(21,693	)	$	(18,464	)	$	(54,764	)
Interest on outstanding debt and loss on debt extinguishment		4,608			15,653			9,161			32,923
Benefit for taxes		(1,710	)		(6,050	)		(4,063	)		(15,391	)
Depreciation		1,053			879			2,058			1,818
Amortization		2			2			4			4
Stock-based compensation		9,387			3,758			18,863			9,343
Restructuring, transaction and sponsor related costs		4,865			2,954			7,043			16,011
Amortization of acquisition-related intangibles		34,191			33,361			67,930			66,722
Fair value adjustments to deferred revenue in connection with purchase accounting		331			2,334			830			7,092
Adjusted EBITDA	$	39,808		$	31,198		$	83,362		$	63,758

Allocated Combined Receipts

We define Allocated Combined Receipts as the combined receipts of our Company and companies that we have acquired allocated to the period of service delivery. We calculate Allocated Combined Receipts as the sum of (i) revenue and (ii) the impact of fair value adjustments to acquired unearned revenue related to the Take-Private Transaction and Certica, Impact and Elevate Data Sync acquisitions that we do not believe are reflective of our ongoing operations. Management uses this measure to evaluate 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. Organic growth in current and future periods is driven by sales to new customers and the addition of additional subscriptions and functionality to existing customers, offset by customer cancellations or reduced subscriptions upon renewal.

We believe that it is important to evaluate growth on this organic basis, as it is an indication of the success of our services from the customer’s perspective that is not impacted by corporate events such as acquisitions or the fair value estimates of acquired unearned revenue. We believe this measure is useful to investors because it illustrates the trends in our organic revenue growth and allows investors to analyze the drivers of revenue on the same basis as management.

The following table presents a reconciliation of revenue to Allocated Combined Receipts for each of the periods indicated:

	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
	(in thousands)
Revenue	$	114,577	$	93,567	$	228,039	$	187,547
Fair value adjustments to deferred revenue in connection with purchase accounting		331		2,334		830		7,092
Allocated Combined Receipts	$	114,908	$	95,901	$	228,869	$	194,639

38

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. All statements other than statements of historical facts are “forward-looking statements” for purposes of these provisions, including those relating to future events or our future financial performance and financial guidance. In some cases, you can identify forward-looking statements by terminology such as “may,” “might,” “will,” “should,” “expect,” “plan,” “anticipate,” “project,” “believe,” “estimate,” “predict,” “potential,” “intend” or “continue,” the negative of terms like these or other comparable terminology, and other words or terms of similar meaning in connection with any discussion of future operating or financial performance. For example, all statements we make relating to our estimated and projected costs, expenditures, cash flows, growth rates and financial results or our plans and objectives for future operations, growth initiatives, or strategies are forward-looking statements. These statements are only predictions. You should not place undue reliance on our forward-looking statements. These statements are not guarantees of future performance and are subject to future events, risks and uncertainties, many of which are beyond our control, or currently unknown to us. Our assumptions may turn out to be inaccurate and cause actual events or results to differ materially from our expectation or projections. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected, including:

•risks associated with general global political, macroeconomic, social, health and market conditions, including rising inflation, political instability, terrorist activities or military conflicts, including Russia's invasion of Ukraine;

•risks associated with future stimulus packages approved by the U.S. federal government;

•risks associated with failing to continue our recent growth rates;

•our ability to acquire new customers and successfully retain existing customers;

•the effects of the increased usage of, or interruptions or performance problems associated with, our learning platform;

•the impact on our business and prospects from the ongoing effects of the COVID-19 pandemic;

•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;

•risks to our revenue from changes in the spending policies or budget priorities for government funding of Higher Education and K-12 institutions;

•our ability to grow our business effectively, to scale our business and to manage our expenses;

•risks caused by delays in upturns or downturns being reflected in our operating results;

•risks and uncertainties associated with potential acquisitions;

•our ability to use net operating losses to offset future taxable income;

•our ability to change our pricing models, if necessary to compete successfully;

•the length and unpredictability of our sales cycles;

•risks associated with failure to develop our sales and marketing capabilities;

•the competitiveness of the market in which we operate;

•risks associated with joint ventures, platform partnerships and strategic alliances;

•our ability to offer high-quality professional services and support;

•the effectiveness of our expense reduction plan;

•risks associated with international operations;

•our reliance on our management team and other key employees, including the effects of recent significant changes to our executive leadership team and the resulting transitions;

•our ability to attract and retain qualified personnel;

•our ability to maintain our company culture as we grow;

•risks related our brand recognition and reputation;

•the complexity and time-consuming nature of our billing and collections processing;

39

•our ability to adapt and respond to rapidly changing technology, evolving industry standards and changing customer needs;

•the impact of potential information technology or data security breaches or other cyberattacks or other disruptions;

•risks associated with our use of open source software, including that we make a substantial portion of the source code for Canvas available under the terms of an open source license;

•risks relating to our reliance on third-party software and intellectual property licenses;

•the impact of real or perceived errors, failures or bugs in our solutions;

•risks associated with lawsuits by third parties for alleged infringement, misappropriation or other violation of their intellectual property and proprietary rights;

•our ability to obtain, maintain, protect and enforce our intellectual property and proprietary rights;

•risks related to incorrect or improper use of our solutions or our failure to properly train customers on how to utilize our solutions;

•privacy laws and regulations, including changes thereto, applicable to our business;

•risks relating to non-compliance with FERPA, COPPA and other regulatory regimes applicable to our business;

•risks related to changes in tax laws;

•the impact of export and import control laws and regulations;

•risk relating to non-compliance with anti-corruption, anti-bribery and similar laws;

•our ability to comply with complex procurement rules and regulations;

•risks related to future litigation;

•risks related to our existing and future indebtedness;

•our ability to develop and maintain proper and effective internal control over financial reporting;

•our management team’s limited experience managing a public company

•our ability to correctly estimate market opportunity and forecast market growth;

•the impact of any catastrophic events;

•our ability to raise additional capital or generate cash flows necessary to expand operations and invest in new technologies; and

•other factors disclosed in the section entitled “Risk Factors” in the 2021 10-K and elsewhere in this Quarterly Report.

We derive many of our forward-looking statements from our operating budgets and forecasts, which are based on many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by this cautionary statement as well as other cautionary statements that are made from time to time in our other SEC filings and public communications. You should evaluate all forward-looking statements made in this prospectus in the context of these risks and uncertainties.

We caution you that the important factors referenced above may not contain all of the factors that are important to you. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect. The forward-looking statements included in this report are made only as of the date hereof. We undertake no obligation to update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in foreign currency exchange rates and interest rates and inflation. We do not hold or issue financial instruments for trading purposes.

40

Foreign Currency Exchange Risk

Our reporting currency is the U.S. dollar. Due to our international operations, we have foreign currency risks related to operating expense denominated in currencies other than the U.S. dollar, particularly the euro and the Australian dollar. Most of our sales are denominated in U.S. dollars, and therefore our revenue is not currently subject to significant foreign currency risk. Our operating expenses are denominated in the currencies of the countries in which our operations are located, which are primarily in the United States, Europe, Australia, and New Zealand. Our condensed consolidated results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates. To date, we have not entered into any hedging arrangements with respect to foreign currency risk or other derivative financial instruments. For the unaudited three and six months ended June 30, 2022, a hypothetical 10% change in foreign currency exchange rates applicable to our business would not have had a material impact on our condensed consolidated financial statements.

Interest Rate Risk

We had cash, cash equivalents and restricted cash of $87.6 million and $169.2 million as of June 30, 2022 (unaudited) and December 31, 2021, respectively, consisting of cash and money market accounts in highly rated financial institutions. With the exception of cash, these interest-earning instruments carry a degree of interest rate risk. To date, fluctuations in our interest income have not been significant. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure. Due to the short-term nature of these investments, we have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates.

At June 30, 2022 (unaudited) and December 31, 2021, we also had in place a $125.0 million Senior Revolver and approximately $498.8 million outstanding on our Senior Term Loan. As of June 30, 2022 (unaudited) and December 31, 2021, we had no outstanding borrowings under our Senior Revolver. The Senior Revolver bears interest at 2.5% whereas the Senior Term Loan bears interest at 2.75% plus a variable applicable rate. At June 30, 2022 (unaudited) and December 31, 2021, the applicable rate was 0.52% and 0.50%, respectively.

We have an agreement to maintain cash balances at a financial institution of no less than $4.4 million as collateral for several letters of credit for purposes of securing certain of the Company’s obligations under facility leases and other contractual arrangements.

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures. Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, have evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were designed to, and were effective to, provide assurance at a reasonable level that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Changes in internal control over financial reporting. There were no changes in our internal control over financial reporting during the quarter ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent limitation on the effectiveness of internal control. The effectiveness of any system of internal control over financial reporting, including ours, is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, any system of internal control over financial reporting, including ours, no matter how well designed and operated, can only provide reasonable, not absolute assurances. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business, but cannot assure you that such improvements will be sufficient to provide us with effective internal control over financial reporting.

41

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are, and from time to time may be, party to litigation and subject to claims incident to the ordinary course of business. As our growth continues, we may become party to an increasing number of litigation matters and claims. The outcome of litigation and claims cannot be predicted with certainty, and the resolution of these matters could materially affect our future results of operations, cash flows or financial position. With the potential exception of the below matter (which we believe is without merit and which we are defending vigorously against), we are not presently party to any legal proceedings that in the opinion of management, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition or cash flows.

In February 2021, Oklahoma Law Enforcement Retirement System and Q. Wade Billings filed a class action lawsuit in the Delaware Court of Chancery against Instructure Holdings, LLC, certain Thoma Bravo entities and certain directors and officers of Predecessor, relating to the Take-Private Transaction. The complaint alleges that such directors and officers breached their fiduciary duties in connection with the Take-Private Transaction, and that Instructure Holdings, LLC and Thoma Bravo aided and abetted such breaches. Plaintiffs seek damages of an unidentified amount, interest, and attorneys’ and experts’ fees and expenses.

On April 8, 2022, the defendants filed their reply brief in further support of their motion to dismiss and their opposition to plaintiff’s motion to convert the motion to dismiss to one for summary judgment. We do not believe these claims have merit and are defending vigorously against them.

Item 1A. Risk Factors

There have been no material changes in the risk factors included in section entitled “Risk Factors” included in the 2021 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None

Item 3. Defaults upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits

42

EXHIBIT INDEX

Exhibit Number	Description
3.1	Second Amended and Restated Certificate of Incorporation of Instructure Holdings, Inc., filed July 23, 2021(1)
3.2	Amended and Restated Bylaws of Instructure Holdings, Inc., effective July 21, 2021(2)
31.1	Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of the Principal Executive Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification of the Principal Financial Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH	Inline XBRL Taxonomy Extension Schema
101.CAL	Inline XBRL Taxonomy Extension Calculation
101.DEF	Inline XBRL Extension Definition
101.LAB	Inline XBRL Taxonomy Extension Label
101.PRE	Inline XBRL Taxonomy Extension Presentation
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Document has been furnished, is not deemed filed and is not to be incorporated by reference into any of the Company’s filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, irrespective of any general incorporation language contained in any such filing.

(1) Incorporated by reference to Exhibit 3.1 on Form 8-K filed on July 21, 2021

(2) Incorporated by reference to Exhibit 3.2 on Form 8-K filed on July 21, 2021

43

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Instructure Holdings, Inc.
Date: August 3, 2022	By:	/s/Dale Bowen
		Dale Bowen
		Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer)

44

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Steve Daly, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Instructure Holdings, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 3, 2022	By:	/s/ Steve Daly
		Steve Daly
		Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Dale Bowen, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Instructure Holdings, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 3, 2022	By:	/s/ Dale Bowen
		Dale Bowen
		Chief Financial Officer (Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Instructure Holdings, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steve Daly, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: August 3, 2022	By:	/s/ Steve Daly
		Steve Daly
		Chief Executive Officer (Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Instructure Holdings, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dale Bowen, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: August 3, 2022	By:	/s/ Dale Bowen
		Dale Bowen
		Chief Financial Officer (Principal Financial Officer)

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2022	Aug. 01, 2022
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Jun. 30, 2022
Document Fiscal Year Focus	2022
Current Fiscal Year End Date	--12-31
Document Fiscal Period Focus	Q2
Entity Registrant Name	Instructure Holdings, Inc.
Entity Central Index Key	0001841804
Entity File Number	001-40647
Entity Tax Identification Number	84-4325548
Entity Current Reporting Status	Yes
Entity Shell Company	false
Entity Filer Category	Non-accelerated Filer
Entity Interactive Data Current	Yes
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Address Address Line1	6330 South 3000 East
Entity Address, Address Line Two	Suite 700
Entity Address City Or Town	Salt Lake City
Entity Address, State and Province	UT
Entity Incorporation State Country Code	DE
Entity Address Postal Zip Code	84121
Local Phone Number	203-6755
City Area Code	800
Security12b Title	Common Stock, par value $0.01 per share
Trading Symbol	INST
Security Exchange Name	NYSE
Entity Common Stock, Shares Outstanding		141,914,344

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Current assets:
Cash and cash equivalents	$ 83,234	$ 164,928
Accounts receivable net	167,646	51,607
Prepaid expenses	37,941	15,475
Deferred commissions	12,374	11,418
Other current assets	2,887	3,384
Total current assets	304,082	246,812
Property and equipment, net	12,203	10,792
Right-of-use assets	15,765	18,175
Goodwill	1,203,979	1,194,221
Intangible assets, net	574,812	629,746
Noncurrent prepaid expenses	1,127	1,553
Deferred commissions, net of current portion	18,953	20,105
Deferred tax assets	8,561	6,477
Other assets	5,689	5,901
Total assets	2,145,171	2,133,782
Current liabilities:
Accounts payable	16,128	18,324
Accrued liabilities	23,204	28,408
Lease liabilities	6,998	6,666
Long-term debt, current	4,013	2,763
Deferred revenue	269,655	240,936
Total current liabilities	319,998	297,097
Long-term debt, net of current portion	488,493	490,500
Deferred revenue, net of current portion	13,667	14,740
Lease liabilities, net of current portion	19,859	23,678
Deferred tax liabilities	26,513	29,851
Other long-term liabilities	2,153	3,531
Total liabilities	870,683	859,397
Stockholders’ equity:
Common stock, par value $0.01 per share; 500,000 shares authorized as of June 30, 2022 (unaudited) and December 31, 2021; 141,914 and 140,741 shares issued and outstanding as of June 30, 2022 (unaudited) and December 31, 2021, respectively.	1,419	1,407
Additional paid-in capital	1,558,193	1,539,638
Accumulated deficit	(285,124)	(266,660)
Total stockholders’ equity	1,274,488	1,274,385
Total liabilities and stockholders’ equity	$ 2,145,171	$ 2,133,782

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Jun. 30, 2022	Dec. 31, 2021
Statement of Financial Position [Abstract]
Common stock par value	$ 0.01	$ 0.01
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares, issued	141,914,000	140,741,000
Common stock, shares, outstanding	141,914,000	140,741,000

XML

Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Revenue:
Total revenue	$ 114,577	$ 93,567	$ 228,039	$ 187,547
Cost of revenue:
Total cost of revenue	42,398	40,974	83,409	86,608
Gross profit	72,179	52,593	144,630	100,939
Operating expenses:
Sales and marketing	45,885	39,083	89,206	80,305
Research and development	18,669	14,279	35,870	31,368
General and administrative	14,253	11,196	29,869	24,547
Impairment on held-for-sale assets	0	0	0	1,218
Total operating expenses	78,807	64,558	154,945	137,438
Loss from operations	(6,628)	(11,965)	(10,315)	(36,499)
Other income (expense):
Interest income	27	0	63	16
Interest expense	(4,611)	(15,670)	(9,164)	(32,930)
Other income (expense), net	(3,417)	(108)	(3,111)	(742)
Total other income (expense), net	(8,001)	(15,778)	(12,212)	(33,656)
Loss before income taxes	(14,629)	(27,743)	(22,527)	(70,155)
Income tax benefit	1,710	6,050	4,063	15,391
Net loss and comprehensive loss	$ (12,919)	$ (21,693)	$ (18,464)	$ (54,764)
Net loss per common share, basic	$ (0.09)	$ (0.17)	$ (0.13)	$ (0.43)
Net loss per common share, diluted	$ (0.09)	$ (0.17)	$ (0.13)	$ (0.43)
Weighted-average common shares outstanding--basic	141,534	126,049	141,244	126,083
Weighted-average common shares outstanding--diluted	141,534	126,049	141,244	126,083
Subscription and Support
Revenue:
Total revenue	$ 102,905	$ 84,257	$ 206,397	$ 170,611
Cost of revenue:
Total cost of revenue	35,868	36,163	71,414	76,047
Professional Services and Other
Revenue:
Total revenue	11,672	9,310	21,642	16,936
Cost of revenue:
Total cost of revenue	$ 6,530	$ 4,811	$ 11,995	$ 10,561

XML

Condensed Consolidated Statements of Shareholders' Equity (Unaudited) - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Accumulated Deficit
Balance at Dec. 31, 2020	$ 1,087,984	$ 1,262	$ 1,264,703	$ (177,981)
Balance, shares at Dec. 31, 2020		126,219
Repurchase of TopCo Units	(923)	$ (2)	(921)
Repurchase of TopCo Units, shares		(218)
Stock-based compensation	4,901		4,901
Net loss	(54,764)			(54,764)
Balance at Jun. 30, 2021	1,037,198	$ 1,260	1,268,683	(232,745)
Balance, shares at Jun. 30, 2021		126,001
Balance at Mar. 31, 2021	1,057,016	$ 1,261	1,266,807	(211,052)
Balance, shares at Mar. 31, 2021		126,086
Repurchase of TopCo Units	(360)	$ (1)	(359)
Repurchase of TopCo Units, shares		(85)
Stock-based compensation	2,235		2,235
Net loss	(21,693)			(21,693)
Balance at Jun. 30, 2021	1,037,198	$ 1,260	1,268,683	(232,745)
Balance, shares at Jun. 30, 2021		126,001
Balance at Dec. 31, 2021	1,274,385	$ 1,407	1,539,638	(266,660)
Balance, shares at Dec. 31, 2021		140,741
Vesting of restricted stock units, net		$ 10	(10)
Vesting of restricted stock units, shares		1,014
Purchase of ESPP shares	4,076	$ 3	4,073
Purchase of ESPP shares, Shares		240
Shares withheld for tax withholding on vesting of restricted stock units	(1,688)	$ (1)	(1,687)
Shares withheld for tax withholding on vesting of restricted stock units, shares		(81)
Stock-based compensation	16,179		16,179
Net loss	(18,464)			(18,464)
Balance at Jun. 30, 2022	1,274,488	$ 1,419	1,558,193	(285,124)
Balance, shares at Jun. 30, 2022		141,914
Balance at Mar. 31, 2022	1,279,526	$ 1,413	1,550,318	(272,205)
Balance, shares at Mar. 31, 2022		141,347
Vesting of restricted stock units, net		$ 6	(6)
Vesting of restricted stock units, shares		589
Shares withheld for tax withholding on vesting of restricted stock units	(425)		(425)	0
Shares withheld for tax withholding on vesting of restricted stock units, shares		(22)
Stock-based compensation	8,306		8,306	0
Net loss	(12,919)			(12,919)
Balance at Jun. 30, 2022	$ 1,274,488	$ 1,419	$ 1,558,193	$ (285,124)
Balance, shares at Jun. 30, 2022		141,914

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Operating activities:
Net loss	$ (18,464)	$ (54,764)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation of property and equipment	2,057	1,818
Amortization of intangible assets	67,934	66,728
Amortization of deferred financing costs	587	1,218
Impairment of disposal group	0	1,218
Stock-based compensation	15,971	4,823
Deferred income taxes	(5,422)	(15,402)
Other	2,599	1,405
Changes in assets and liabilities:
Accounts receivable, net	(115,316)	(96,913)
Prepaid expenses and other assets	(21,176)	(6,970)
Deferred commissions	196	(2,375)
Right-of-use assets	2,410	6,380
Accounts payable and accrued liabilities	(9,131)	(195)
Deferred revenue	25,080	44,058
Lease liabilities	(3,487)	(3,050)
Other liabilities	(1,378)	(346)
Net cash used in operating activities	(57,540)	(52,367)
Investing activities:
Purchases of property and equipment	(3,415)	(1,607)
Proceeds from sale of property and equipment	36	24
Proceeds from sale of Bridge	0	46,018
Business acquisitions, net of cash received	(19,484)	(16,030)
Net cash provided by (used in) investing activities	(22,863)	28,405
Financing activities:
Proceeds from issuance of common stock from employee equity plans	4,076	0
Shares repurchased for tax withholdings on vesting of restricted stock	(1,688)	0
Distributions to stockholders	0	(923)
Repayments on long-term debt	(1,250)	(51,534)
Net cash provided by (used in) financing activities	1,138	(52,457)
Foreign currency impacts on cash, cash equivalents, and restricted cash	(2,291)	0
Net increase (decrease) in cash, cash equivalents, and restricted cash	(81,556)	(76,419)
Cash, cash equivalents, and restricted cash, beginning of period	169,152	150,953
Cash, cash equivalents, and restricted cash, end of period	87,596	74,534
Supplemental cash flow disclosure:
Cash paid for taxes	2,775	403
Interest paid	5,766	31,749
Non-cash investing and financing activities:
Capital expenditures incurred but not yet paid	189	65
Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents [Abstract]
Cash and Cash Equivalents, at Carrying Value	83,234	70,200
Restricted Cash	4,362	4,334
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Including Disposal Group and Discontinued Operations, Total	$ 87,596	$ 74,534

XML

Description of Business and Basis of Presentation

6 Months Ended

Jun. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Description of Business and Basis of Presentation

1. Description of Business and Basis of Presentation

Organization

On March 24, 2020, Instructure Parent, L.P. (“TopCo”) acquired 100 percent of Instructure, Inc.’s equity. Instructure Intermediate Holdings I, Inc. was a wholly-owned subsidiary of TopCo and was formed on January 14, 2020 by Thoma Bravo Fund XIII, L.P. (“Thoma Bravo”) for the purpose of purchasing (the “Take-Private Transaction”) Instructure, Inc. and had no operations prior to the Take-Private Transaction. On May 26, 2021, Instructure Intermediate Holdings I, Inc. changed its name to Instructure Holdings, Inc. (the “Company” or “Instructure”).

Instructure, Inc. was incorporated in the state of Delaware in September 2008. We are headquartered in Salt Lake City, Utah, and have wholly-owned subsidiaries in the United Kingdom, Australia, the Netherlands, Hong Kong, Sweden, Brazil, Mexico, Hungary, and Singapore.

2021 Stock Split and Initial Public Offering (“IPO”)

On July 9, 2021, the Company effected a 126,239.815-for-1 stock split of its issued and outstanding shares of common stock and made comparable and equitable adjustments to its equity awards in accordance with the terms of the awards. The par value of the common stock was not adjusted as a result of the stock split. Accordingly, all share and per share amounts for all periods presented in the accompanying condensed consolidated financial statements and notes thereto have been adjusted retrospectively, where applicable, to reflect this stock split. In connection with the stock split, on July 9, 2021, the Company’s board of directors and stockholders approved the Certificate of Amendment to the Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock from 2,000 shares to 500,000,000 shares and to increase the number of authorized shares of preferred stock from zero shares to 50,000,000 shares. No preferred stock has been issued or outstanding.

On July 26, 2021, the Company completed its IPO of 12,500,000 shares of common stock at an offering price of $20.00 per share. The Company received net proceeds of $234.0 million after deducting underwriting discounts and commissions. On August 19, 2021, the underwriters partially exercised their over-allotment option and purchased an additional 1,675,000 shares of common stock at the offering price of $20.00 per share. The Company received additional net proceeds of $31.4 million after deducting underwriting discounts and commissions.

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) applicable to interim periods, under the rules and regulations of the United States Securities and Exchange Commission (“SEC”). In the opinion of management, we have prepared the accompanying unaudited condensed consolidated financial statements on a basis substantially consistent with the audited consolidated financial statements of the Company as of and for the fiscal year ended December 31, 2021, and these condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of the interim periods presented. All intercompany balances and transactions have been eliminated in consolidation. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for any subsequent quarter or for the entire year ending December 31, 2022. The year-end balance sheet data was derived from audited financial statements, but the interim condensed consolidated balance sheet included in this Form 10-Q does not include all disclosures required under U.S. GAAP. Certain information and note disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP have been omitted under the rules and regulations of the SEC.

These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 23, 2022 (the "2021 10-K").

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Such estimates, which we evaluate on an on-going basis, include provisions for credit losses, useful lives for property and equipment and intangible assets, valuation allowances for net deferred income tax assets, valuation of stock-based compensation and common stock, acquisition-related estimates, our assessment for impairment of goodwill, intangible assets, and other long-lived assets, the standalone selling price of performance obligations and the determination of the period of benefit for deferred commissions. We base our estimates on historical experience and on various other assumptions which we believe to be reasonable.

Operating Segments

We operate in a single operating segment, cloud-based learning management, assessment and performance systems. Operating segments are defined as components of an enterprise for which separate financial information is regularly evaluated by the chief operating decision makers (“CODMs”), which are our chief executive officer and chief financial officer, in deciding how to allocate resources and assess performance. Our CODMs evaluate our financial information and resources and assess the performance of these resources on a consolidated basis. Since we operate in one operating segment, all required financial segment information can be found in the condensed consolidated financial statements.

XML

Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2022

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

The Company’s significant accounting policies are discussed in “Note 1 – Description of Business and Summary of Significant Accounting Policies” of the 2021 10-K. There have been no significant changes to these policies during the unaudited six months ended June 30, 2022.

Recent Accounting Pronouncements

Adopted accounting pronouncements

Effective January 1, 2021, the Company adopted Accounting Standards Update (“ASU”) No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify the accounting for income taxes by removing certain exceptions to the general principles and also simplification of areas such as franchise taxes, step up in tax basis goodwill, separate entity financial statements and interim recognition of enactment of tax laws or rate changes. During the second quarter of 2022, a wholly-owned foreign subsidiary had year-to-date pretax book loss in excess of full year forecasted loss due to unrealized losses on foreign currency. Under the Year-to-Date Loss Limitation in Interim-Period Tax Accounting section of ASU 2019-12, the benefit recorded related to this entity is no longer limited to the forecasted full year benefit. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements and related notes.

Effective January 1, 2022, the Company adopted ASU No. 2021-05, Leases (Topic 842): Lessors—Certain Leases with Variable Lease Payments, to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing transactions. Upon adoption a lessor will be required to classify a lease with variable lease payments (that do not depend on a rate or index) as an operating lease on commencement date if classifying the lease as a sales-type or direct financing lease would result in a selling loss. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements and related notes.

Effective January 1, 2022, the Company adopted ASU No. 2021-01, Reference Rate Reform (Topic 848), which refined the scope of Topic 848 and clarified some of its provisions. The amendments permit entities to elect certain optional expedients and exceptions when accounting for derivative contracts and certain hedging relationships affected by the discounting transition. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements and related notes.

Effective January 1, 2022, the Company 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 Topic 606. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements and related notes.

Issued accounting pronouncements

There have been no recent accounting pronouncements issued which are expected to have a material effect on the Company's condensed consolidated financial statements. Management continues to monitor and review recently issued accounting guidance upon issuance.

XML

Net Loss Per Share

6 Months Ended

Jun. 30, 2022

Earnings Per Share [Abstract]

Net Loss Per Share

3. Net Loss Per Share

A reconciliation of the denominator used in the calculation of basic and diluted net loss per share is as follows (in thousands, except per share amounts):

	Three months ended June 30,						Six months ended June 30,
	2022			2021			2022			2021
	(unaudited)
Numerator:
Net loss	$	(12,919	)	$	(21,693	)	$	(18,464	)	$	(54,764	)
Denominator:
Weighted-average common shares outstanding—basic		141,534			126,049			141,244			126,083
Dilutive effect of share equivalents resulting from unvested restricted stock units and shares for issuance under employee stock purchase plan		—			—			—			—
Weighted-average common shares outstanding—diluted		141,534			126,049			141,244			126,083
Net loss per common share, basic and diluted	$	(0.09	)	$	(0.17	)	$	(0.13	)	$	(0.43	)

For the unaudited three and six months ended June 30, 2022, we incurred net losses and, therefore, the effect of our restricted stock units (“RSUs”) and employee stock purchase plan were not included in the calculation of diluted net loss per share as the effect would be anti-dilutive. We also incurred losses in the unaudited three and six months ended June 30, 2021. The following table contains share totals with a potentially dilutive impact (in thousands):

	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
	(unaudited)
Restricted stock units		5,722		—		5,722		—
Shares for issuance under employee stock purchase plan		126		—		126		—
Total		5,848		—		5,848		—

XML

Acquisitions

6 Months Ended

Jun. 30, 2022

Business Combinations [Abstract]

Acquisitions

5. Acquisitions

2022 Acquisitions

On April 13, 2022, we acquired all outstanding shares of Concentric Sky, Inc. (“Concentric Sky” which was rebranded to “Canvas Credentials” subsequent to acquisition) for the purpose of our continued commitment to building the education industry’s most integrated teaching and learning platform to support lifelong learning. $0.5 million of the purchase price was held back for a period of 90 days following the acquisition for working capital adjustments. The acquisition did not have a material effect on our revenue or earnings in the condensed consolidated statements of operations and comprehensive loss for the reporting periods presented. For tax purposes, a 338(h)(10) election was filed to step up the tax basis of assets acquired to fair market value.
 

The following table summarizes the preliminary estimated fair values of the consideration transferred, assets acquired and liabilities assumed as of the date of the Canvas Credentials acquisition (in thousands):

Consideration transferred
Cash paid	$	20,814
Holdback amount		500
Total purchase consideration	$	21,314
Identifiable assets acquired
Cash	$	1,330
Accounts receivable		1,018
Prepaid expenses and other assets		109
Intangible assets: developed technology		3,900
Intangible assets: customer relationships		9,100
Total assets acquired	$	15,457
Liabilities assumed
Accounts payable and accrued liabilities	$	1,335
Deferred revenue		2,566
Total liabilities assumed	$	3,901
Goodwill		9,758
Total purchase consideration	$	21,314

2021 Acquisitions

On June 28, 2021, we acquired all outstanding shares of Eesysoft Software International B.V. (“Eesysoft” which was rebranded to “Impact by Instructure” or “Impact” subsequent to acquisition) for the purpose of enhancing our ability to help our customers more effectively use our core products. $1.5 million of the purchase price is being paid over a period of 18 months following the closing of the transaction. The acquisition did not have a material effect on our revenue or earnings in the condensed consolidated statements of operations and comprehensive loss for the reporting periods presented. On June 28, 2021, the Company recorded an increase to the Impact deferred tax liability of $0.7 million in purchase accounting due to a step up in book basis of intangible assets as a result of the stock acquisition. We expect the net deferred tax liability to decrease as book amortization expense is recognized on the acquisition-related intangible assets.

The final allocation of the purchase price was as follows (in thousands):
 

Consideration transferred
Cash paid	$	17,472
Deferred consideration		1,500
Total purchase consideration	$	18,972
Identifiable assets acquired
Cash	$	586
Accounts receivable		624
Deposits		9
Intangible assets: developed technology		3,300
Intangible assets: customer relationships		1,700
Total assets acquired	$	6,219
Liabilities assumed
Accounts payable and accrued liabilities	$	49
Deferred revenue		692
Payroll tax liability		91
Deferred tax liability		672
Lease liability		24
Total liabilities assumed	$	1,528
Goodwill		14,281
Total purchase consideration	$	18,972

On November 5, 2021, we acquired all outstanding shares of Kimono LLC (“Kimono” which was rebranded to “Elevate Data Sync” subsequent to acquisition) for the purpose of enhancing our ability to help our customers more effectively synchronize data between our core product applications and student information systems (“SIS”). $0.4 million of the purchase price was held back for a period of 90 days following the acquisition for working capital adjustments. The acquisition did not have a material effect on our revenue or earnings in the condensed consolidated statements of operations and comprehensive loss for the reporting periods presented. For tax purposes, a 338(h)(10) election was filed to step up the tax basis of assets acquired to fair market value.

The final allocation of the purchase price was as follows (in thousands):

Consideration transferred
Cash paid	$	11,021
Holdback amount		350
Total purchase consideration	$	11,371
Identifiable assets acquired
Cash and cash equivalents	$	1,324
Accounts receivable, net		336
Prepaid expenses		66
Intangible assets: developed technology		2,200
Intangible assets: customer relationships		1,200
Total assets acquired	$	5,126
Liabilities assumed
Accounts payable and accrued liabilities	$	174
Deferred revenue		515
Other liabilities		25
Total liabilities assumed	$	714
Goodwill		6,959
Total purchase consideration	$	11,371

For all periods presented, the excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill, of which $16.7 million is expected to be deductible for tax purposes. The goodwill generated from these transactions is attributable to the expected synergies to be achieved upon consummation of the business combinations and the assembled workforce values. The fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions. Developed technology represents the estimated fair value of the acquired existing technology and is being amortized over its estimated remaining useful life of five years. Amortization of developed technology is included in subscription and support cost of revenue expenses in the accompanying condensed consolidated statements of operations and comprehensive loss. Customer relationships represent the estimated fair value of the acquired customer bases and are amortized over the estimated remaining useful life of seven years. Amortization of customer relationships is included in sales and marketing expenses in the accompanying condensed consolidated statements of operations and comprehensive loss.

Sale of getBridge LLC (“Bridge”)

On February 26, 2021, the Company sold Bridge, its corporate learning platform and wholly-owned subsidiary, for a total purchase price of $47.0 million. We received cash proceeds net of transaction costs of $46.0 million. The proceeds from this sale were used to pay down the balance of our then outstanding Term Loan (as defined in Note 7—Credit Facility). During the unaudited six months ended June 30, 2021, we recognized a pretax loss on this divestiture of $1.2 million, which is included in operating expenses in the accompanying condensed consolidated statements of operations and comprehensive loss.

XML

Property and Equipment

6 Months Ended

Jun. 30, 2022

Property, Plant and Equipment [Abstract]

Property and Equipment

4. Property and Equipment

Property and equipment consisted of the following (in thousands):

	June 30,			December 31,
	2022			2021
	(unaudited)
Computer and office equipment	$	4,806		$	2,668
Capitalized software development costs		6,569			4,591
Furniture and fixtures		1,615			1,325
Leasehold improvements and other		6,917			4,330
Total property and equipment		19,907			12,914
Less accumulated depreciation and amortization		(7,704	)		(2,122	)
Total	$	12,203		$	10,792

Accumulated amortization for capitalized software development costs was $1.4 million and $0.8 million at June 30, 2022 (unaudited) and December 31, 2021, respectively. Amortization expense for capitalized software development costs for the unaudited three and six months ended June 30, 2022 was $0.3 million and $0.6 million, respectively, and $46.7 thousand and $0.3 million for the unaudited three and six months ended June 30, 2021, respectively, and is recorded within subscription and support cost of revenue on the condensed consolidated statements of operations and comprehensive loss.

XML

Goodwill and Intangible Assets

6 Months Ended

Jun. 30, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

6. Goodwill and Intangible Assets

Goodwill activity was as follows (in thousands):

	Total
Balance as of December 31, 2021	$	1,194,221
Additions (Note 5—Acquisitions)		9,758
Balance as of June 30, 2022 (unaudited)	$	1,203,979

Intangible assets consisted of the following (in thousands):

	Weighted-Average Remaining Useful Life	June 30, 2022							December 31, 2021
		Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
				(unaudited)
Software	8 Months	$	21	$	(16	)	$	5	$	21	$	(13	)	$	8
Trade names	90 Months		125,800		(29,366	)		96,434		125,800		(22,809	)		102,991
Developed technology	34 Months		317,700		(135,765	)		181,935		313,800		(104,215	)		209,585
Customer relationships	58 Months		422,700		(126,262	)		296,438		413,600		(96,438	)		317,162
Total		$	866,221	$	(291,409	)	$	574,812	$	853,221	$	(223,475	)	$	629,746

Amortization expense for intangible assets was $34.2 million and $67.9 million for the unaudited three and six months ended June 30, 2022, respectively, and $33.4 million and $66.7 million for the unaudited three and six months ended June 30, 2021, respectively.

Based on the recorded intangible assets at June 30, 2022 (unaudited), estimated amortization expense is expected to be as follows (in thousands):

	Amortization
	Expense
Years Ending December 31,	(unaudited)
Remainder of 2022	$	68,523
2023		137,041
2024		136,806
2025		94,093
2026		74,005
2027 and thereafter		64,344
Total	$	574,812

XML

Revenue

6 Months Ended

Jun. 30, 2022

Geographic Areas, Revenues from External Customers [Abstract]

Geographic Data and Revenue

8. Revenue

We have one operating segment, which is our cloud-based learning, assessment, development and engagement systems. Historically, we had primarily generated revenues from two customer bases, Education and Corporate. Education customers consist of K-12 and Higher Education institutions that purchase our Canvas Learning Management System (“LMS”), which includes assessments, analytics and learning content. On February 26, 2021, the Company sold Bridge and no longer receives revenues from Corporate customers. Corporate customers purchased Bridge-related product, the Company's corporate learning platform, which included a learning management system and performance platform that helped employees and managers transform their organization through connection, alignment, and growth. The following tables present the Company’s disaggregated revenues based on its two customer bases and by geographic region, based on the physical location of the customer (in thousands):

	Three months ended June 30,						Six months ended June 30,
	2022			2021			2022			2021
	(unaudited)
Education	$	114,577		$	93,567		$	228,039		$	183,885
Corporate		—			—			—			3,662
Total revenue	$	114,577		$	93,567		$	228,039		$	187,547
Percentage of revenue generated by Education		100	%		100	%		100	%		98	%

	Three months ended June 30,						Six months ended June 30,
	2022			2021			2022			2021
	(unaudited)
United States	$	90,957		$	75,127		$	181,064		$	150,698
Foreign		23,620			18,440			46,975			36,849
Total revenue	$	114,577		$	93,567		$	228,039		$	187,547
Percentage of revenue generated outside of the United States		21	%		20	%		21	%		20	%

Deferred Revenue and Performance Obligations

During the unaudited three and six months ended June 30, 2022, 89% and 84% of revenue recognized was included in our deferred revenue balance at March 31, 2022 (unaudited), and December 31, 2021, respectively. During the unaudited three and six months ended June 30, 2021, 89% and 82%, respectively, of revenue recognized was included in our deferred revenue balance at March 31, 2021 (unaudited), and December 31, 2020, respectively.

Transaction Price Allocated to the Remaining Performance Obligations

As of June 30, 2022 (unaudited), approximately $783.7 million of revenue is expected to be recognized from remaining performance obligations. We expect to recognize revenue on approximately 74% of our remaining performance obligations over the next 24 months, with the balance recognized thereafter.

Concentration of Credit Risk, Significant Customers and Provision for Credit Losses

There were no customers with revenue as a percentage of total revenue exceeding 10% for the periods presented.

As of June 30, 2022 and 2021 (unaudited) there were no customers with outstanding net accounts receivable balances as a percentage of total outstanding net accounts receivable greater than 10%. As of December 31, 2021, our largest customer's outstanding net accounts receivable balance as a percentage of total outstanding net accounts receivable represented 10.5%. There were no other customers with outstanding net accounts receivable balances as a percentage of total outstanding net accounts receivable greater than 10% as of December 31, 2021.

Our provisions for credit loss balances at June 30, 2022 (unaudited) and December 31, 2021 were $1.3 million and $0.8 million, respectively.

XML

Deferred Commissions

6 Months Ended

Jun. 30, 2022

Deferred Costs [Abstract]

Deferred Commissions Disclosure

9. Deferred Commissions

Deferred commissions primarily consist of sales commissions that are capitalized as incremental contract origination costs and were $31.3 million and $31.5 million as of June 30, 2022 (unaudited) and December 31, 2021, respectively. Amortization expense for deferred commissions was $3.8 million and $7.2 million for the unaudited three and six months ended June 30, 2022, respectively, and $2.4 million and $4.8 million for the unaudited three and six months ended June 30, 2021, respectively. There was no impairment of deferred commissions during these periods.

XML

Credit Facility

6 Months Ended

Jun. 30, 2022

Line of Credit Facility [Abstract]

Credit Facility

7. Credit Facility

On March 24, 2020, we entered into a credit agreement with a syndicate of lenders and Golub Capital Markets LLC, as administrative agent and collateral agent, and Golub Capital Markets LLC and Owl Rock Capital Advisors LLC, as joint bookrunners and joint lead arrangers (the “Credit Agreement”). The Credit Agreement provided for a senior secured term loan facility (the “Initial Term Loan”) in an original aggregate principal amount of $775.0 million, which was supplemented by an incremental term loan pursuant to the First Incremental Amendment and Waiver to Credit Agreement, dated as of December 22, 2020, in a principal amount of $70.0 million (the “Incremental Term Loan” and, together with the Initial Term Loan, the “Term Loan”). The maturity date for the Term Loan was March 24, 2026, with the remaining principal due in full on the maturity date. The Credit Agreement also provided for a senior secured revolving credit facility in an aggregate principal amount of $50.0 million (the “Revolving Credit Facility” and, together with the Term Loan, the “Credit Facilities”). The Revolving Credit Facility included a $10.0 million sublimit for the issuance of letters of credit.

The Credit Agreement required us to repay the principal of the Term Loan in equal quarterly repayments equal to 0.25% of the aggregate original principal amount of the Term Loan, reduced as a result of the application of prepayments. Further, until the last day of the quarter ending June 30, 2021, the Credit Facilities bore interest at a rate equal to (i) 6.00% plus the highest of (x) the prime rate (as determined by reference to the Wall Street Journal), (y) the Federal funds open rate plus 0.50% per annum, and (z) a daily Eurodollar rate based on an interest period of one month plus 1.00% per annum or (ii) the Eurodollar rate plus 7.00% per annum, subject to a 1.00% Eurodollar floor. Thereafter, on the last day of each of the five full fiscal quarters, we had the option (a “Pricing Grid Election”) to (i) retain the aforementioned applicable margins or (ii) switch to the applicable margins set forth on a pricing grid which, subject to certain pro forma total net leverage ratio limits, provided for applicable margins ranging from 5.50% to 7.00%, in the case of Eurodollar loans, and 4.50% to 6.00% in the case of ABR Loans (as defined in the Credit Agreement). The applicable margins set forth on the pricing grid would become mandatory beginning on the last day of the tenth full fiscal quarter ending after March 24, 2020. Interest payments were due quarterly, or more frequently, based on the terms of the Credit Agreement.

On May 27, 2021, the Company exercised its option to make a Pricing Grid Election. As a result, the Company’s applicable margin for Eurodollar loans under the Credit Facilities from May 27, 2021 onward was 5.5%. In connection with the Company's IPO, the Company made a principal prepayment in August 2021 of $224.3 million on its outstanding Term Loan. In connection with the underwriters' exercise of their over-allotment option in August 2021, the Company made an additional principal prepayment in August 2021 of $30.8 million on its outstanding Term Loan. The Company also incurred a 1.5% prepayment premium in conjunction with each principal prepayment.

The Company incurred fees with respect to the Revolving Credit Facility, including a commitment fee of 0.50% per annum of unused commitments under the Revolving Credit Facility.

On October 29, 2021, we entered into a credit agreement with JPMorgan Chase Bank, N.A. (“JPMorgan”), as administrative agent, (the “2021 Credit Agreement”) governing our senior secured credit facilities (the “Senior Secured Credit Facilities”), consisting of a $500.0 million senior secured term loan facility (the “Senior Term Loan”) and a $125.0 million senior secured revolving credit facility (the “Senior Revolver”). The proceeds from the Senior Secured Credit Facilities were used, in addition to cash on hand, (1) to refinance, in full, all existing indebtedness under the Credit Agreement (the “Refinancing”), (2) to pay certain fees and expenses incurred in connection with the entry into the 2021 Credit Agreement and the Refinancing, and (3) to finance working capital needs of the Company and its subsidiaries for general corporate purposes.

All of the Company's obligations under the Senior Secured Credit Facilities are guaranteed by the subsidiary guarantors named therein (the “Subsidiary Guarantors”). The Senior Revolver includes a $10.0 million sublimit for the issuance of letters of credit. Any issuance of letters of credit will reduce the amount available under the Senior Revolver. As of June 30, 2022 (unaudited), we had no outstanding borrowings under our Senior Revolver.

The Senior Term Loan has a seven-year maturity and the Senior Revolver has a five-year maturity. Commencing June 30, 2022, we were required to repay the Senior Term Loan portion of the Senior Secured Credit Facilities in quarterly principal installments of 0.25% of the aggregate original principal amount of the Senior Term Loan at closing, with the balance payable at maturity. Borrowings under the Senior Secured Credit Facilities bear interest, at the Company's option, at: (i) Base Rate equal to the greater of (a) the Federal Funds Rate plus 1/2 of 1.00%, (b) the rate of interest in effect for such day as publicly announced from time to time by the administrative agent as its "prime rate," (c) a Eurocurrency Rate for such date plus 1.00% and (d) 1.00%; or (ii) the Eurocurrency Rate (provided that the Eurocurrency Rate applicable to the Senior Term Loan shall not be less than 0.50% per annum). The Applicable Rate for the Senior Term Loan with respect to Eurocurrency Rate Loans is 2.75% per annum and 1.75% per annum for Base Rate Loans. The Applicable Rate for the Senior Revolver with respect to Eurocurrency Rate Loans, SONIA Loans, and Alternative Currency Term Rate Loans ranges from 2.00% to 2.5% subject to the Company's Consolidated First Lien Net Leverage Ratio, while the Applicable Rate for Base Rate Loans ranges from 1.00% to 1.50% subject to the Company's Consolidated First Lien Net Leverage Ratio. We are also required to pay an unused commitment fee to the lenders under the Senior Revolver at the Applicable Commitment Fee of the average daily unutilized commitments. The Applicable Commitment Fee ranges from 0.40% to 0.50% subject to the Company's Consolidated First Lien Never Leverage Ratio.

The 2021 Credit Agreement contains a financial covenant solely with respect to the Senior Revolver. If the outstanding amounts under the Senior Revolver exceed 35% of the aggregate amount of the Senior Revolver commitments, we are required to maintain at the end of each fiscal quarter, commencing with the quarter ending June 30, 2022, a Consolidated Net Leverage Ratio of not more than 7.75 to 1.00. As of June 30, 2022 (unaudited), there was no amount outstanding under the Senior Revolver. The Company had $125.0 million of availability under the Senior Revolver as of June 30, 2022 (unaudited).

Debt discount costs of $13.6 million were incurred in connection with the Term Loan. An additional $3.8 million of debt discount costs were incurred after the IPO in August 2021 in connection with the prepayment premium associated with the Term Loan as the prepayments were treated as modifications for accounting purposes. These debt discount costs were being amortized into interest expense over the contractual term of the Term Loan. As a result of the Refinancing in the fourth quarter of 2021, the Company wrote off the remaining $13.8 million of debt discount costs related to the Credit Facilities to loss on debt extinguishment in the condensed consolidated statements of operations and comprehensive loss. Additionally, as a result of the Refinancing, the Company capitalized $1.0 million and $5.9 million of debt discount costs incurred in connection with the Senior Term Loan in long-term debt, current and long-term debt, net of current portion, respectively, on the condensed consolidated balance sheets. The Company recognized $0.3 million and $0.5 million of amortization of debt discount costs for the unaudited three and six months ended June 30, 2022, respectively, and $0.6 million and $1.2 million for the unaudited three and six months ended June 30, 2021, respectively, which is recorded as interest expense in the accompanying condensed consolidated statements of operations and comprehensive loss. At June 30, 2022 (unaudited) and December 31, 2021 the Company had an aggregate principal amount outstanding of $498.8 million and $500.0 million, respectively, under the Senior Term Loan, bearing interest at 3.27% and 3.25%, respectively. The Company had $6.2 million and $6.7 million of unamortized debt discount costs at June 30, 2022 (unaudited) and December 31, 2021, respectively, which is recorded as a reduction of the debt balance on the Company’s condensed consolidated balance sheets.

Debt issuance costs of $0.7 million were incurred in connection with the Revolving Credit Facility. These debt issuance costs were being amortized into interest expense over the contractual term of the Revolving Credit Facility. As a result of the Refinancing, the Company wrote off the remaining $0.5 million of debt issuance costs related to the Credit Facilities to loss on debt extinguishment in the condensed consolidated statements of operations and comprehensive loss. Additionally, as a result of the Refinancing, the Company capitalized $0.2 million and $0.8 million of deferred issuance costs incurred in connection with the Senior Revolver in other current assets and other assets, respectively, on the condensed consolidated balance sheets. The Company recognized $47.0 thousand and $0.1 million of amortization of debt issuance costs for the unaudited three and six months ended June 30, 2022, respectively, and $30.0 thousand and $0.1 million for the unaudited three and six months ended June 30, 2021, respectively, which is recorded as interest expense in the accompanying condensed consolidated statements of operations and comprehensive loss. The Company had $0.8 million and $0.9 million of unamortized debt issuance costs at June 30, 2022 (unaudited) and December 31, 2021, respectively, which were included in other current assets and other assets on the Company’s condensed consolidated balance sheets.

The Senior Secured Credit Facilities contain customary negative covenants. At June 30, 2022 (unaudited), the Company was in compliance with all applicable covenants pertaining to the Senior Secured Credit Facilities. The Company also maintained compliance with all applicable covenants pertaining to the Credit Facilities prior to the Refinancing.

The maturities of outstanding debt, as of June 30, 2022 (unaudited), are as follows (in thousands):

	Amount
Years Ending December 31,	(unaudited)
Remainder of 2022	$	2,500
2023		5,000
2024		5,000
2025		5,000
2026		5,000
Thereafter		476,250
Total	$	498,750

XML

Stockholders' Equity

6 Months Ended

Jun. 30, 2022

Stockholders' Equity Note [Abstract]

Stockholders' Equity

10. Stockholders’ Equity

The TopCo Amended and Restated Partnership Agreement (“Partnership Agreement”) set forth the terms, rights, powers, qualifications, limitations and restrictions of the partnership. In accordance with the Partnership Agreement, there was an unlimited number of authorized Class A Units and Class B Units (collectively, the “Units”) and issuance of such Units was determined by the board of managers.

In connection with the Take-Private Transaction, TopCo issued 1,250,000 Class A Units and 90,000,000 Class B Units, with no par values, for the cash paid by Thoma Bravo and its affiliated funds. Units shared in distributions according to a “waterfall” which provided for distributions to be made in the following order and priority: (1) first, to the holders of Class A Units until they received a 9% annual return on their remaining unreturned capital contributions, compounded quarterly; (2) second, to the holders of Class A Units until they received an amount equal to their respective capital contributions on a pro rata basis; and (3) third, to the holders of the remaining Class B Units based on their percentage of ownership, taking into account any applicable vesting terms and participation threshold on the Class B Units. A participation threshold in respect of a Class B Unit was determined at the time of issuance or grant and was equal to or greater than the amount payable in respect of a Class B Unit having a participation threshold of zero pursuant to the waterfall in a hypothetical liquidation of TopCo at the value of TopCo as of immediately prior to such issuance or grant. No conversion or redemption rights are associated with Class A or Class B Units. In connection with the IPO, TopCo effected a series of transactions that resulted in TopCo’s equityholders holding shares of our common stock directly, and then TopCo being liquidated and dissolved.

In connection with the Take-Private Transaction, the Company's board of directors authorized 2,000 shares of common stock with a par value of $0.01. Common stock issued and outstanding prior to the stock split as of July 9, 2021 (unaudited) and December 31, 2020 were 998.10 and 999.84, respectively. No other shares were issued. Subsequently, on July 9, 2021, the Company effected a 126,239.815-for-1 stock split of its issued and outstanding shares of common stock and made comparable and equitable adjustments to its equity awards in accordance with the terms of the awards. The par value of the common stock was not adjusted as a result of the stock split. Accordingly, all share and per share amounts for all periods presented in the accompanying condensed consolidated financial statements and notes thereto have been adjusted retrospectively, where applicable, to reflect this stock split.

As of June 30, 2022 (unaudited) and December 31, 2021, there were 500,000,000 shares of common stock authorized. As of June 30, 2022 (unaudited) and December 31, 2021, there were 141,914,344 and 140,740,569 shares of common stock issued and outstanding, respectively.

XML

Stock-Based Compensation

6 Months Ended

Jun. 30, 2022

Share-Based Payment Arrangement [Abstract]

Stock-Based Compensation

11. Stock-Based Compensation

Employee Equity Plans

In April 2020, as part of the Take-Private Transaction, the board of managers approved the Instructure Parent, LP Incentive Equity Plan (the “2020 Plan”) and the Instructure Co-Invest Agreement (the “Co-Invest Agreement”) to incentivize employees and to align the employees and management with the owners of the business. The 2020 Plan provided for the grant of incentive stock options, profits interest, equity appreciation rights and other forms of awards to employees and non-employees granted or denominated in TopCo Units. Under the 2020 Plan, 10,000,000 Class B Units (“Incentive Units”) were reserved for issuance (“Incentive Carry”) and did not have a contractual life. Incentive Carry grants were subject to a service and a performance vesting condition based on the achievement of an EBITDA target as established by the Company’s board of managers, over a performance period of four years. Additionally, TopCo granted 480,000 Incentive Units to certain members of the board of managers that were only subject to service-based vesting conditions over four years (“Board Carry”). These Incentive Units were not included in the Incentive Carry pool previously discussed and there was no contractual life. The Co-Invest Agreement offered employees the one-time opportunity to co-invest in TopCo by purchasing Units directly from the Company for cash. Under the Co-Invest agreement, the purchase price for one Class A unit and 72 Class B units was $1,000, which was the same investment allocation between the two unit classes as the investment made by existing investors at the time of the Take-Private Transaction.

The 2020 Plan was terminated in July 2021 in connection with the IPO. No further equity awards were granted under the 2020 Plan subsequent to the IPO. As of the IPO date, 2,271,698 vested Incentive Units converted to 1,305,738 shares of the Company's common stock and were released to the Unit holders, and 6,126,802 unvested Incentive Units were exchanged for 3,496,739 RSUs under the 2021 Plan. The RSUs generally vest in 11 equal quarterly installments commencing on September 1, 2021.

In July 2021, our board of directors adopted the 2021 Omnibus Incentive Plan (the “2021 Plan”), which serves as the successor to 2020 Plan. Accordingly, no shares remain available for issuance under the 2020 Plan. A total of 18,000,000 shares of the Company's common stock were initially reserved for issuance under the 2021 Plan. Pursuant to the terms of the 2021 Plan, the share reserve increased by 5,629,623 shares in January 2022. As of June 30, 2022, we had 16,257,713 shares of common stock available for future grants under the 2021 Plan.

In July 2021, our board of directors adopted, and our stockholders approved the 2021 Employee Stock Purchase Plan (the "2021 ESPP"), which allows eligible employees to purchase shares of our common stock at a discount through payroll deductions of up to 15% of their eligible compensation, subject to any plan limitations. The initial offering period ended on February 28, 2022. Each new offering period begins on or about March 1 and September 1 and is approximately six months in duration. On each purchase date, eligible employees will purchase our common stock at a price per share equal to 85% of the lesser of (1) the fair market value of our common stock on the offering date or (2) the fair market value of our common stock on the purchase date. A total of 1,900,000 shares of the Company’s common stock were initially reserved for issuance under the 2021 ESPP. Pursuant to the terms of the 2021 ESPP, the share reserve increased by 1,407,406 shares in January 2022. As of June 30, 2022 (unaudited), 3,067,546 shares of common stock were available for purchase under the 2021 ESPP.

During the unaudited three months ended June 30, 2022, we granted 626,686 RSUs to employees under the 2021 Plan. Each RSU entitles the recipient to receive one share of the Company's common stock upon vesting. The RSUs are subject to time-based service requirements and generally vest over a four-year service period. The grant date fair values of the RSUs granted during the unaudited three months ended June 30, 2022 ranged from $17.59 to $21.88, which represent the closing stock price for the underlying common stock on the respective grant dates, with an aggregate fair value of $12.8 million.

The following two tables present stock-based compensation by award type and where the stock-based compensation expense was recorded in our condensed consolidated statements of operations and comprehensive loss (in thousands):

	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
	(unaudited)
Options	$	2	$	28	$	21	$	76
Restricted stock units		8,848		1,495		17,711		4,367
Shares for issuance under employee stock purchase plan		537		—		1,131		—
Class A and Class B Units		—		2,235		—		4,900
Total stock-based compensation	$	9,387	$	3,758	$	18,863	$	9,343

	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
	(unaudited)
Subscription and support cost of revenue	$	325	$	171	$	607	$	395
Professional services and other cost of revenue		465		110		841		287
Sales and marketing		2,772		1,093		5,349		2,675
Research and development		2,686		934		5,226		2,604
General and administrative		3,139		1,450		6,840		3,382
Total stock-based compensation	$	9,387	$	3,758	$	18,863	$	9,343

In connection with the Take-Private Transaction on March 31, 2020, and except for certain executives, outstanding stock options and restricted stock units, and together with the stock options, “equity awards”, whether vested or unvested, were cancelled and replaced with the right to receive $49.00 per share in cash, less the applicable exercise price per share and applicable withholding taxes (the “per share price”), with respect of each share of common stock underlying such award (“Cash Replacement Awards”). The per share price attributed to the unvested equity awards vest and are payable at the same time such equity awards would have vested pursuant to their original terms prior to the replacement. During the unaudited three and six months ended June 30, 2022 the Company recognized $1.2 million and $2.9 million of stock-based compensation expense associated with Cash Replacement Awards, respectively, and $1.5 million and $4.4 million for the unaudited three and six months ended June 30, 2021, respectively.

Restricted Stock Units

The following table summarizes the activity of RSUs for the unaudited six months ended June 30, 2022 (in thousands, except per unit amounts):

	RSUs			Weighted Average Grant Date Fair Value Per Unit
Unvested and outstanding at December 31, 2021		1,987		$	21.00
Granted		2,509			21.51
Vested		(440	)		20.61
Forfeited or cancelled		(318	)		21.53
Unvested and outstanding at June 30, 2022		3,738		$	21.35

As of June 30, 2022 (unaudited), total unrecognized compensation cost related to unvested RSUs amounted to $75.4 million, which is expected to be recognized over a weighted average period of 3.5 years.

The following table summarizes the activity of the Incentive Carry and Board Carry, subsequent to their conversion into RSUs under the 2021 Plan, for the unaudited six months ended June 30, 2022 (in thousands, except per unit amounts):

	RSUs			Weighted Average Grant Date Fair Value Per Unit
Unvested and outstanding at December 31, 2021		2,736		$	10.75
Vested		(575	)		10.81
Forfeited or cancelled		(177	)		11.07
Unvested and outstanding at June 30, 2022		1,984		$	10.73

There were no Incentive Units granted subsequent to December 31, 2021. As of June 30, 2022 (unaudited) and December 31, 2021, we had $20.4 million and $28.3 million of unrecognized stock-based compensation expense related to unvested Incentive Units exchanged for RSUs, that are expected to be recognized over a weighted-average period of 1.8 and 2.3 years, respectively.

2021 ESPP

The following table summarizes the assumptions relating to 2021 ESPP purchase rights used in a Black-Scholes option pricing model for the three months ended June 30, 2022 and 2021 (unaudited):

	Three months ended June 30,
	2022	2021
Dividend yield	None	None
Volatility	41%	None
Risk-free interest rate	0.06	None
Expected life (years)	0.5	None

XML

Income Taxes

6 Months Ended

Jun. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

12. Income Taxes

Utilization of the net operating loss carryforwards and credits may be subject to substantial annual limitation due to the ownership change limitations provided by Section 382 of the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization.

We file tax returns in the United States, the United Kingdom, Australia, the Netherlands, Hong Kong, Sweden, Brazil, Mexico, Hungary, China, Singapore and various state jurisdictions. All of our tax years remain open to examination by major taxing jurisdictions to which we are subject, as carryforward attributes generated in past years may still be adjusted upon examination by the Internal Revenue Service or state and foreign tax authorities if they have or will be used in future periods.

We believe that we have provided adequate reserves for our income tax uncertainties in all open tax years. We do not expect our gross unrecognized tax benefits to change significantly in the next 12 months.

XML

Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2022

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Abstract]

Fair Value of Financial Instruments

13. Fair Value of Financial Instruments

The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked to offer prices. Fair value measurements do not include transaction costs. The fair value hierarchy prioritizes the quality and reliability of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined into the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

There were no transfers between Level 1 and Level 2 of the fair value measurement hierarchy during the period ended June 30, 2022 (unaudited) and December 31, 2021. Assets measured at fair value on a recurring basis as of June 30, 2022 (unaudited) were as follows (in thousands):

	June 30, 2022
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	3,346	$	—	$	—	$	3,346
Total assets	$	3,346	$	—	$	—	$	3,346

Assets measured at fair value on a recurring basis as of December 31, 2021 were as follows (in thousands):

	December 31, 2021
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	3,343	$	—	$	—	$	3,343
Total assets	$	3,343	$	—	$	—	$	3,343

Instruments Not Recorded at Fair Value on a Recurring Basis.

We estimate the fair value of our Senior Term Loan carried at face value, less unamortized discount costs, quarterly for disclosure purposes. The estimated fair value of our Senior Term Loan is determined by Level 2 inputs, observable market based inputs or unobservable inputs that are corroborated by market data. As of June 30, 2022 (unaudited), the fair value of our Senior Term Loan was $493.0 million. The carrying amounts of our cash, prepaid expenses, other current assets, and accrued liabilities approximate their current fair value because of their nature and relatively short maturity dates or durations.

XML

Leases

6 Months Ended

Jun. 30, 2022

Leases [Abstract]

Leases

14. Leases

The Company leases office space under non-cancelable operating leases with lease terms ranging from one to seven years. These leases require monthly lease payments that may be subject to annual increases throughout the lease term. Certain of these leases also include early termination options. The Company has elected to exercise its early termination rights. All related operating leases have been impaired to reflect this early termination option. The Company subleases four of its locations. As of June 30, 2022, the first, second, third, and fourth sublease term has 12 months, 78 months, 43 months, and 22 months remaining, respectively. None of the above subleases have an option for renewal.
 

Operating lease right-of-use assets and operating lease liabilities are recognized at the lease commencement date based on the present value of the lease payments over the lease term. Right-of-use assets also include adjustments related to prepaid or deferred lease payments and lease incentives. As most of our leases do not provide an implicit interest rate, we use our incremental borrowing rate based on information available at the lease commencement date to determine the present value of lease payments.

The Company performed evaluations of its contracts and determined that each of its identified leases are operating leases. The components of operating lease expense were as follows (in thousands):

	Three months ended June 30,						Six months ended June 30,
	2022			2021			2022			2021
	(unaudited)
Operating lease cost, gross	$	1,588		$	1,938		$	3,384		$	3,890
Variable lease cost, gross(1)		591			527			1,127			936
Sublease income		(287	)		(249	)		(541	)		(477	)
Total lease costs(2)	$	1,892		$	2,216		$	3,970		$	4,349

(1)Variable rent expense was not included within the measurement of the Company's operating right-of-use assets and lease liabilities. Variable rent expense is comprised primarily of the Company's proportionate share of operating expenses, property taxes and insurance and is classified as lease expense due to the Company's election to not separate lease and non-lease components.

(2)Short-term lease costs for the unaudited three and six months ended June 30, 2022 and 2021 were not significant and are not included in the table above.

Cash paid for amounts included in the measurement of operating lease liabilities for the unaudited three and six months ended June 30, 2022 were $2.0 million and $4.2 million, respectively, and $2.4 million and $4.3 million for the unaudited three and six months ended June 30, 2021, respectively, and were included in net cash used in operating activities in the condensed consolidated statements of cash flows.

As of June 30, 2022 (unaudited), the maturities of the Company’s operating lease liabilities were as follows (in thousands):

Remainder of 2022	$	4,408
2023		8,630
2024		8,385
2025		4,318
2026		2,744
2027 and thereafter		3,085
Total lease payments		31,570
Less:
Imputed interest		(4,713	)
Lease liabilities		26,857
Tenant improvement reimbursements included in the measurement of lease liabilities but not yet received		(414	)
Lease liabilities, net	$	26,443

As of June 30, 2022 (unaudited) and December 31, 2021, the weighted average remaining lease term is 4.0 and 4.4 years, respectively, and the weighted average discount rate used to determine operating lease liabilities was 8.19% as of June 30, 2022 (unaudited) and December 31, 2021.

XML

Commitments and Contingencies

6 Months Ended

Jun. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

15. Commitments and Contingencies

Non-cancelable purchase obligations

As of June 30, 2022 (unaudited), our outstanding non-cancelable purchase obligations with a term of 12 months or longer related to cloud infrastructure services in the ordinary course of business totaled $45.0 million for fiscal year 2023 and $48.0 million for fiscal years 2024 and 2025, respectively.

Letters of Credit

As of June 30, 2022 (unaudited) and December 31, 2021, we had a total of $4.4 million and $4.2 million, respectively, of letters of credit outstanding that were issued for purposes of securing certain of the Company’s obligations under facility leases and other contractual arrangements.

Litigation

We are involved in various legal proceedings and claims, including challenges to trademarks, from time to time arising in the normal course of business. If we determine that it is probable that a loss has been incurred and the amount is reasonably estimable, we will record a liability in our condensed consolidated financial statements. If only a range of estimated losses can be determined, we accrue an amount within the range that, in our judgment, reflects the most likely outcome; if none of the estimates within that range is a better estimate than any other amount, we accrue the low end of the range. Although the results of litigation and claims are inherently unpredictable and uncertain, management does not believe that the outcome of our various legal proceedings, with the potential exception of the matter described below (which we believe is without merit and which we are defending vigorously against), if determined adversely to us, singly or in the aggregate, would have a material impact on our financial position, results of operations, or liquidity.

In February 2021, Oklahoma Law Enforcement Retirement System and Q. Wade Billings filed a class action lawsuit against Instructure Holdings, LLC, certain Thoma Bravo entities and certain directors and officers of Predecessor, relating to the Take-Private Transaction. The complaint alleges that such directors and officers breached their fiduciary duties in connection with the Take-Private Transaction, and that Instructure Holdings, LLC and Thoma Bravo aided and abetted such breaches. Plaintiffs seek damages of an unidentified amount, interest, and attorneys’ and experts’ fees and expenses.

XML

Related Party Transactions

6 Months Ended

Jun. 30, 2022

Related Party Transactions [Abstract]

Related - Party Transactions

16. Related-Party Transactions

The Company has agreements in place with Thoma Bravo, LLC for financial and management advisory services, along with compensation arrangements and reimbursements to directors and officers. During the unaudited three and six months ended June 30, 2022 the Company incurred $0.1 million and 0.3 million of costs related to these services, respectively, and $0.2 million and 0.3 million for the unaudited three and six months ended June 30, 2021, respectively. The related expense is reflected in general and administrative expense in the condensed consolidated statements of operations and comprehensive loss.

The spouse of Mitch Benson, our Chief Strategy Officer, is an employee of the Company. Mr. Benson has served as an Officer of the Company since August 2019. His spouse, Ms. Tara Gunther, has been an employee of the Company since 2014. Her 2021 base salary and short-term incentive award was approximately $0.2 million in the aggregate. She also received benefits generally available to all employees. The compensation for Ms. Gunther was determined in accordance with our standard employment and compensation practices applicable to employees with similar responsibilities and positions. For the six months ended June 30, 2022 (unaudited), Ms. Gunther's base salary was $0.1 million.

In connection with our entry into the Credit Facilities on March 24, 2020, affiliates of Thoma Bravo collectively acquired $129.2 million of our Term Loan and as of June 30, 2021 (unaudited), affiliates of Thoma Bravo collectively owned $131.3 million of our Term Loan. In connection with our principal prepayments made in August 2021, $42.5 million of the prepayments were applied to the Term Loan held by affiliates of Thoma Bravo. Additionally, in connection with our October 29, 2021 Refinancing, $88.6 million of our Term Loan held by affiliates of Thoma Bravo was paid off. Refer to Note 7—Credit Facility for additional information regarding the principal prepayments and Refinancing.

Interest paid to affiliates of Thoma Bravo during the six months ended June 30, 2021 (unaudited) was $5.3 million.

XML

Description of Business and Basis of Presentation (Policies)

6 Months Ended

Jun. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization

Organization

On March 24, 2020, Instructure Parent, L.P. (“TopCo”) acquired 100 percent of Instructure, Inc.’s equity. Instructure Intermediate Holdings I, Inc. was a wholly-owned subsidiary of TopCo and was formed on January 14, 2020 by Thoma Bravo Fund XIII, L.P. (“Thoma Bravo”) for the purpose of purchasing (the “Take-Private Transaction”) Instructure, Inc. and had no operations prior to the Take-Private Transaction. On May 26, 2021, Instructure Intermediate Holdings I, Inc. changed its name to Instructure Holdings, Inc. (the “Company” or “Instructure”).

Instructure, Inc. was incorporated in the state of Delaware in September 2008. We are headquartered in Salt Lake City, Utah, and have wholly-owned subsidiaries in the United Kingdom, Australia, the Netherlands, Hong Kong, Sweden, Brazil, Mexico, Hungary, and Singapore.

Basis of Presentation

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) applicable to interim periods, under the rules and regulations of the United States Securities and Exchange Commission (“SEC”). In the opinion of management, we have prepared the accompanying unaudited condensed consolidated financial statements on a basis substantially consistent with the audited consolidated financial statements of the Company as of and for the fiscal year ended December 31, 2021, and these condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of the interim periods presented. All intercompany balances and transactions have been eliminated in consolidation. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for any subsequent quarter or for the entire year ending December 31, 2022. The year-end balance sheet data was derived from audited financial statements, but the interim condensed consolidated balance sheet included in this Form 10-Q does not include all disclosures required under U.S. GAAP. Certain information and note disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP have been omitted under the rules and regulations of the SEC.

These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 23, 2022 (the "2021 10-K").

Use of Estimates

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Such estimates, which we evaluate on an on-going basis, include provisions for credit losses, useful lives for property and equipment and intangible assets, valuation allowances for net deferred income tax assets, valuation of stock-based compensation and common stock, acquisition-related estimates, our assessment for impairment of goodwill, intangible assets, and other long-lived assets, the standalone selling price of performance obligations and the determination of the period of benefit for deferred commissions. We base our estimates on historical experience and on various other assumptions which we believe to be reasonable.

Operating Segments

Operating Segments

We operate in a single operating segment, cloud-based learning management, assessment and performance systems. Operating segments are defined as components of an enterprise for which separate financial information is regularly evaluated by the chief operating decision makers (“CODMs”), which are our chief executive officer and chief financial officer, in deciding how to allocate resources and assess performance. Our CODMs evaluate our financial information and resources and assess the performance of these resources on a consolidated basis. Since we operate in one operating segment, all required financial segment information can be found in the condensed consolidated financial statements.

XML

Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2022

Accounting Policies [Abstract]

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Adopted accounting pronouncements

Effective January 1, 2021, the Company adopted Accounting Standards Update (“ASU”) No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify the accounting for income taxes by removing certain exceptions to the general principles and also simplification of areas such as franchise taxes, step up in tax basis goodwill, separate entity financial statements and interim recognition of enactment of tax laws or rate changes. During the second quarter of 2022, a wholly-owned foreign subsidiary had year-to-date pretax book loss in excess of full year forecasted loss due to unrealized losses on foreign currency. Under the Year-to-Date Loss Limitation in Interim-Period Tax Accounting section of ASU 2019-12, the benefit recorded related to this entity is no longer limited to the forecasted full year benefit. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements and related notes.

Effective January 1, 2022, the Company adopted ASU No. 2021-05, Leases (Topic 842): Lessors—Certain Leases with Variable Lease Payments, to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing transactions. Upon adoption a lessor will be required to classify a lease with variable lease payments (that do not depend on a rate or index) as an operating lease on commencement date if classifying the lease as a sales-type or direct financing lease would result in a selling loss. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements and related notes.

Effective January 1, 2022, the Company adopted ASU No. 2021-01, Reference Rate Reform (Topic 848), which refined the scope of Topic 848 and clarified some of its provisions. The amendments permit entities to elect certain optional expedients and exceptions when accounting for derivative contracts and certain hedging relationships affected by the discounting transition. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements and related notes.

Effective January 1, 2022, the Company 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 Topic 606. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements and related notes.

Issued accounting pronouncements

There have been no recent accounting pronouncements issued which are expected to have a material effect on the Company's condensed consolidated financial statements. Management continues to monitor and review recently issued accounting guidance upon issuance.

XML

Net Loss Per Share (Tables)

6 Months Ended

Jun. 30, 2022

Earnings Per Share [Abstract]

Summary of Reconciliation of the Denominator Used in the Calculation of Basic and Diluted Loss Per Share

A reconciliation of the denominator used in the calculation of basic and diluted net loss per share is as follows (in thousands, except per share amounts):

	Three months ended June 30,						Six months ended June 30,
	2022			2021			2022			2021
	(unaudited)
Numerator:
Net loss	$	(12,919	)	$	(21,693	)	$	(18,464	)	$	(54,764	)
Denominator:
Weighted-average common shares outstanding—basic		141,534			126,049			141,244			126,083
Dilutive effect of share equivalents resulting from unvested restricted stock units and shares for issuance under employee stock purchase plan		—			—			—			—
Weighted-average common shares outstanding—diluted		141,534			126,049			141,244			126,083
Net loss per common share, basic and diluted	$	(0.09	)	$	(0.17	)	$	(0.13	)	$	(0.43	)

Summary of Shares Excluded from Calculation of Diluted Loss Per Share with a Potential Dilutive Impact

The following table contains share totals with a potentially dilutive impact (in thousands):

	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
	(unaudited)
Restricted stock units		5,722		—		5,722		—
Shares for issuance under employee stock purchase plan		126		—		126		—
Total		5,848		—		5,848		—

XML

Acquisitions (Tables)

6 Months Ended

Jun. 30, 2022

Concentric Sky, Inc [Member]

Business Acquisition [Line Items]

Schedule of Fair Value of Assets Acquired and Liabilities Assumed

The following table summarizes the preliminary estimated fair values of the consideration transferred, assets acquired and liabilities assumed as of the date of the Canvas Credentials acquisition (in thousands):

Consideration transferred
Cash paid	$	20,814
Holdback amount		500
Total purchase consideration	$	21,314
Identifiable assets acquired
Cash	$	1,330
Accounts receivable		1,018
Prepaid expenses and other assets		109
Intangible assets: developed technology		3,900
Intangible assets: customer relationships		9,100
Total assets acquired	$	15,457
Liabilities assumed
Accounts payable and accrued liabilities	$	1,335
Deferred revenue		2,566
Total liabilities assumed	$	3,901
Goodwill		9,758
Total purchase consideration	$	21,314

Eesysoft Software International B.V. [Member]

Business Acquisition [Line Items]

Schedule of Fair Value of Assets Acquired and Liabilities Assumed

The final allocation of the purchase price was as follows (in thousands):
 

Consideration transferred
Cash paid	$	17,472
Deferred consideration		1,500
Total purchase consideration	$	18,972
Identifiable assets acquired
Cash	$	586
Accounts receivable		624
Deposits		9
Intangible assets: developed technology		3,300
Intangible assets: customer relationships		1,700
Total assets acquired	$	6,219
Liabilities assumed
Accounts payable and accrued liabilities	$	49
Deferred revenue		692
Payroll tax liability		91
Deferred tax liability		672
Lease liability		24
Total liabilities assumed	$	1,528
Goodwill		14,281
Total purchase consideration	$	18,972

Elevate Data Sync [Member]

Business Acquisition [Line Items]

Schedule of Fair Value of Assets Acquired and Liabilities Assumed

The final allocation of the purchase price was as follows (in thousands):

Consideration transferred
Cash paid	$	11,021
Holdback amount		350
Total purchase consideration	$	11,371
Identifiable assets acquired
Cash and cash equivalents	$	1,324
Accounts receivable, net		336
Prepaid expenses		66
Intangible assets: developed technology		2,200
Intangible assets: customer relationships		1,200
Total assets acquired	$	5,126
Liabilities assumed
Accounts payable and accrued liabilities	$	174
Deferred revenue		515
Other liabilities		25
Total liabilities assumed	$	714
Goodwill		6,959
Total purchase consideration	$	11,371

XML

Property and Equipment (Tables)

6 Months Ended

Jun. 30, 2022

Property, Plant and Equipment Assets Held-for-sale Disclosure [Abstract]

Schedule of Property and Equipment, Net of Amount Held-for-Sale

Property and equipment consisted of the following (in thousands):

	June 30,			December 31,
	2022			2021
	(unaudited)
Computer and office equipment	$	4,806		$	2,668
Capitalized software development costs		6,569			4,591
Furniture and fixtures		1,615			1,325
Leasehold improvements and other		6,917			4,330
Total property and equipment		19,907			12,914
Less accumulated depreciation and amortization		(7,704	)		(2,122	)
Total	$	12,203		$	10,792

XML

Goodwill and Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill

Goodwill activity was as follows (in thousands):

	Total
Balance as of December 31, 2021	$	1,194,221
Additions (Note 5—Acquisitions)		9,758
Balance as of June 30, 2022 (unaudited)	$	1,203,979

Schedule of Intangible Assets

Intangible assets consisted of the following (in thousands):

	Weighted-Average Remaining Useful Life	June 30, 2022							December 31, 2021
		Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
				(unaudited)
Software	8 Months	$	21	$	(16	)	$	5	$	21	$	(13	)	$	8
Trade names	90 Months		125,800		(29,366	)		96,434		125,800		(22,809	)		102,991
Developed technology	34 Months		317,700		(135,765	)		181,935		313,800		(104,215	)		209,585
Customer relationships	58 Months		422,700		(126,262	)		296,438		413,600		(96,438	)		317,162
Total		$	866,221	$	(291,409	)	$	574,812	$	853,221	$	(223,475	)	$	629,746

Estimated Future Amortization Expense

Based on the recorded intangible assets at June 30, 2022 (unaudited), estimated amortization expense is expected to be as follows (in thousands):

	Amortization
	Expense
Years Ending December 31,	(unaudited)
Remainder of 2022	$	68,523
2023		137,041
2024		136,806
2025		94,093
2026		74,005
2027 and thereafter		64,344
Total	$	574,812

XML

Credit Facility (Tables)

6 Months Ended

Jun. 30, 2022

Line of Credit Facility [Abstract]

Schedule of Maturities of Long-term Debt

The maturities of outstanding debt, as of June 30, 2022 (unaudited), are as follows (in thousands):

	Amount
Years Ending December 31,	(unaudited)
Remainder of 2022	$	2,500
2023		5,000
2024		5,000
2025		5,000
2026		5,000
Thereafter		476,250
Total	$	498,750

XML

Revenue (Tables)

6 Months Ended

Jun. 30, 2022

Geographic Areas, Revenues from External Customers [Abstract]

Schedule of Revenue by Geographic Region

The following tables present the Company’s disaggregated revenues based on its two customer bases and by geographic region, based on the physical location of the customer (in thousands):

	Three months ended June 30,						Six months ended June 30,
	2022			2021			2022			2021
	(unaudited)
Education	$	114,577		$	93,567		$	228,039		$	183,885
Corporate		—			—			—			3,662
Total revenue	$	114,577		$	93,567		$	228,039		$	187,547
Percentage of revenue generated by Education		100	%		100	%		100	%		98	%

	Three months ended June 30,						Six months ended June 30,
	2022			2021			2022			2021
	(unaudited)
United States	$	90,957		$	75,127		$	181,064		$	150,698
Foreign		23,620			18,440			46,975			36,849
Total revenue	$	114,577		$	93,567		$	228,039		$	187,547
Percentage of revenue generated outside of the United States		21	%		20	%		21	%		20	%

XML

Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2022

Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]

Summary of Stock-Based Compensation Expense by Award Type

The following two tables present stock-based compensation by award type and where the stock-based compensation expense was recorded in our condensed consolidated statements of operations and comprehensive loss (in thousands):

	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
	(unaudited)
Options	$	2	$	28	$	21	$	76
Restricted stock units		8,848		1,495		17,711		4,367
Shares for issuance under employee stock purchase plan		537		—		1,131		—
Class A and Class B Units		—		2,235		—		4,900
Total stock-based compensation	$	9,387	$	3,758	$	18,863	$	9,343

Summary of Stock-Based Compensation Expense Recorded in Consolidated Statement of Operations

	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
	(unaudited)
Subscription and support cost of revenue	$	325	$	171	$	607	$	395
Professional services and other cost of revenue		465		110		841		287
Sales and marketing		2,772		1,093		5,349		2,675
Research and development		2,686		934		5,226		2,604
General and administrative		3,139		1,450		6,840		3,382
Total stock-based compensation	$	9,387	$	3,758	$	18,863	$	9,343

Summary of Restricted Stock Unit Activity

The following table summarizes the activity of RSUs for the unaudited six months ended June 30, 2022 (in thousands, except per unit amounts):

	RSUs			Weighted Average Grant Date Fair Value Per Unit
Unvested and outstanding at December 31, 2021		1,987		$	21.00
Granted		2,509			21.51
Vested		(440	)		20.61
Forfeited or cancelled		(318	)		21.53
Unvested and outstanding at June 30, 2022		3,738		$	21.35

Summary of Assumptions Relating to Stock Options and ESPP Purchase Rights

The following table summarizes the assumptions relating to 2021 ESPP purchase rights used in a Black-Scholes option pricing model for the three months ended June 30, 2022 and 2021 (unaudited):

	Three months ended June 30,
	2022	2021
Dividend yield	None	None
Volatility	41%	None
Risk-free interest rate	0.06	None
Expected life (years)	0.5	None

2020 Plan

Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]

Summary of Restricted Stock Units Activity

The following table summarizes the activity of the Incentive Carry and Board Carry, subsequent to their conversion into RSUs under the 2021 Plan, for the unaudited six months ended June 30, 2022 (in thousands, except per unit amounts):

	RSUs			Weighted Average Grant Date Fair Value Per Unit
Unvested and outstanding at December 31, 2021		2,736		$	10.75
Vested		(575	)		10.81
Forfeited or cancelled		(177	)		11.07
Unvested and outstanding at June 30, 2022		1,984		$	10.73

XML

Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2022

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Abstract]

Schedule of Fair Value, Assets Measured on Recurring Basis.

Assets measured at fair value on a recurring basis as of June 30, 2022 (unaudited) were as follows (in thousands):

	June 30, 2022
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	3,346	$	—	$	—	$	3,346
Total assets	$	3,346	$	—	$	—	$	3,346

Assets measured at fair value on a recurring basis as of December 31, 2021 were as follows (in thousands):

	December 31, 2021
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	3,343	$	—	$	—	$	3,343
Total assets	$	3,343	$	—	$	—	$	3,343

XML

Leases (Tables)

6 Months Ended

Jun. 30, 2022

Leases [Abstract]

Summary of Components of Operating Lease Expense

The Company performed evaluations of its contracts and determined that each of its identified leases are operating leases. The components of operating lease expense were as follows (in thousands):

	Three months ended June 30,						Six months ended June 30,
	2022			2021			2022			2021
	(unaudited)
Operating lease cost, gross	$	1,588		$	1,938		$	3,384		$	3,890
Variable lease cost, gross(1)		591			527			1,127			936
Sublease income		(287	)		(249	)		(541	)		(477	)
Total lease costs(2)	$	1,892		$	2,216		$	3,970		$	4,349

Schedule of Maturities of The Company’s Operating Lease Liabilities

As of June 30, 2022 (unaudited), the maturities of the Company’s operating lease liabilities were as follows (in thousands):

Remainder of 2022	$	4,408
2023		8,630
2024		8,385
2025		4,318
2026		2,744
2027 and thereafter		3,085
Total lease payments		31,570
Less:
Imputed interest		(4,713	)
Lease liabilities		26,857
Tenant improvement reimbursements included in the measurement of lease liabilities but not yet received		(414	)
Lease liabilities, net	$	26,443

XML

Description of Business and Basis of Presentation - Additional Information (Details) $ / shares in Units, $ in Millions	Aug. 19, 2021 USD ($) $ / shares shares	Jul. 26, 2021 USD ($) $ / shares shares	Jul. 09, 2021 shares	Jun. 30, 2022 $ / shares shares	Dec. 31, 2021 $ / shares shares
Stock split of issued and outstanding common stock			126,239.815
Common stock, shares authorized				500,000,000	500,000,000
Preferred stock, shares issued				0
Preferred stock, shares outstanding				0
Common stock, shares, issued				141,914,000	140,741,000
Offering price per share | $ / shares				$ 0.01	$ 0.01
Maximum [Member]
Common stock, shares authorized			500,000,000
Preferred stock, shares authorized			50,000,000
Minimum [Member]
Common stock, shares authorized			2,000
Preferred stock, shares authorized			0
IPO Member
Common stock, shares, issued		12,500,000
Offering price per share | $ / shares		$ 20.00
Net proceeds after underwriting discounts and commission deduction | $		$ 234.0
Over Allotment Option Member
Common stock, shares, issued	1,675,000
Offering price per share | $ / shares	$ 20.00
Net proceeds after underwriting discounts and commission deduction | $	$ 31.4
Top Co [Member]
Business acquisition, percentage acquired				100.00%

XML

Net Loss Per Share - Summary of Reconciliation of the Denominator Used in the Calculation of Basic and Diluted Loss Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Numerator:
Net loss	$ (12,919)	$ (21,693)	$ (18,464)	$ (54,764)
Denominator:
Weighted-average common shares outstanding--basic	141,534	126,049	141,244	126,083
Dilutive effect of share equivalents resulting from stock options and unvested restricted stock units	0	0	0	0
Weighted-average common shares outstanding--diluted	141,534	126,049	141,244	126,083
Earnings Per Share, Basic	$ (0.09)	$ (0.17)	$ (0.13)	$ (0.43)
Earnings Per Share, Diluted	$ (0.09)	$ (0.17)	$ (0.13)	$ (0.43)

XML

Net Loss Per Share - Summary of Shares Excluded from Calculation of Diluted Loss Per Share with a Potential Dilutive Impact (Details) - shares shares in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Shares excluded from calculation of diluted loss per share with a potential dilutive impact	5,848	0	5,848	0
Restricted Stock Units
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Shares excluded from calculation of diluted loss per share with a potential dilutive impact	5,722	0	5,722	0
Shares for issuance under employee stock purchase plan
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Shares excluded from calculation of diluted loss per share with a potential dilutive impact	126	0	126	0

XML

Acquisitions - Additional information (Details) - USD ($) $ in Thousands					3 Months Ended	6 Months Ended
	Apr. 13, 2022	Nov. 05, 2021	Jun. 28, 2021	Feb. 26, 2021	Mar. 31, 2022	Jun. 30, 2022
Business Acquisition [Line Items]
Purchase price of bridge				$ 47,000
Proceeds net of transaction costs				$ 46,000
Pre tax loss on sale of business						$ 1,200
Customer Lists
Business Acquisition [Line Items]
Finite-lived intangible asset, useful life						7 years
Developed Technology
Business Acquisition [Line Items]
Finite-lived intangible asset, useful life						5 years
Concentric Sky, Inc [Member]
Business Acquisition [Line Items]
Purchase Price, Future Payment	$ 500
Elevate Data Sync [Member]
Business Acquisition [Line Items]
Purchase Price, Future Payment		$ 400
Description of business acquisition					the purchase price was held back for a period of 90 days following the acquisition for working capital adjustments.
Eesysoft Software International B.V. [Member]
Business Acquisition [Line Items]
Purchase Price, Future Payment			$ 1,500
Deferred tax liability						$ 672
Increase (decrease) in deferred liabilities			$ 700

XML

Acquisitions - Schedule of Fair Value of Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands			6 Months Ended
	Apr. 13, 2022	Nov. 05, 2021	Jun. 30, 2022	Dec. 31, 2021
Liabilities assumed
Goodwill			$ 1,203,979	$ 1,194,221
Concentric Sky, Inc [Member]
Business Acquisition [Line Items]
Cash paid	$ 20,814
Holdback amount	500
Total purchase consideration	21,314
Identifiable assets acquired
Cash	1,330
Accounts receivable, net	1,018
Prepaid expenses and other assets	109
Total assets acquired	15,457
Liabilities assumed
Accounts payable and accrued liabilities	1,335
Deferred revenue	2,566
Total liabilities assumed	3,901
Goodwill	9,758
Total purchase consideration	21,314
Eesysoft Software International B.V. [Member]
Business Acquisition [Line Items]
Cash paid			17,472
Deferred consideration			1,500
Total purchase consideration			18,972
Identifiable assets acquired
Cash			586
Accounts receivable, net			624
Deposits			9
Total assets acquired			6,219
Liabilities assumed
Accounts payable and accrued liabilities			49
Deferred revenue			692
Payroll tax liability			91
Deferred tax liability			672
Lease liability			24
Total liabilities assumed			1,528
Goodwill			14,281
Total purchase consideration			18,972
Elevate Data Sync [Member]
Business Acquisition [Line Items]
Cash paid		$ 11,021
Holdback amount		350
Total purchase consideration		11,371
Identifiable assets acquired
Cash		1,324
Accounts receivable, net		336
Prepaid expenses and other assets		66
Total assets acquired		5,126
Liabilities assumed
Accounts payable and accrued liabilities		174
Deferred revenue		515
Other Liabilities		25
Total liabilities assumed		714
Goodwill		6,959
Total purchase consideration		11,371
Developed Technology | Concentric Sky, Inc [Member]
Identifiable assets acquired
Intangible assets	3,900
Developed Technology | Eesysoft Software International B.V. [Member]
Identifiable assets acquired
Intangible assets			3,300
Developed Technology | Elevate Data Sync [Member]
Identifiable assets acquired
Intangible assets		2,200
Customer Relationships | Concentric Sky, Inc [Member]
Identifiable assets acquired
Intangible assets	$ 9,100
Customer Relationships | Eesysoft Software International B.V. [Member]
Identifiable assets acquired
Intangible assets			$ 1,700
Customer Relationships | Elevate Data Sync [Member]
Identifiable assets acquired
Intangible assets		$ 1,200

XML

Property and Equipment - Schedule of Property and Equipment, Net of Amount Held-for-Sale (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Property Plant And Equipment [Line Items]
Total property and equipment	$ 19,907	$ 12,914
Less accumulated depreciation and amortization	(7,704)	(2,122)
Total	12,203	10,792
Computer and office equipment
Property Plant And Equipment [Line Items]
Total property and equipment	4,806	2,668
Capitalized software development costs
Property Plant And Equipment [Line Items]
Total property and equipment	6,569	4,591
Furniture and Fixtures
Property Plant And Equipment [Line Items]
Total property and equipment	1,615	1,325
Leasehold improvement and other
Property Plant And Equipment [Line Items]
Total property and equipment	$ 6,917	$ 4,330

XML

Property and Equipment - Additional Information (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021
Property, Plant and Equipment [Abstract]
Capitalized computer software, accumulated amortization	$ 1,400,000		$ 1,400,000		$ 800,000
Capitalized computer software, amortization	$ 300,000	$ 46,700	$ 600,000	$ 300,000

XML

Goodwill and Intangible Assets - Schedule of Goodwill (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2022 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
Balance as of December 31, 2020	$ 1,194,221
Additions (Note 5 - Acquisitions)	9,758
Balance as of June 30, 2021	$ 1,203,979

XML

Goodwill and Intangible Assets - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Acquired Indefinite-Lived Intangible Assets [Line Items]
Amortization of intangible assets	$ 34,200	$ 33,400	$ 67,934	$ 66,728

XML

Goodwill and Intangible Assets - Schedule of Intangible Assets (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2022	Dec. 31, 2021
Acquired Indefinite Lived Intangible Assets [Line Items]
Gross	$ 866,221	$ 853,221
Accumulated Amortization	(291,409)	(223,475)
Net Carrying Amount	574,812	629,746
Software
Acquired Indefinite Lived Intangible Assets [Line Items]
Gross	21	21
Accumulated Amortization	16	(13)
Net Carrying Amount	$ 5	8
Weighted Average Remaining Useful Life	8 months
Trade Names
Acquired Indefinite Lived Intangible Assets [Line Items]
Gross	$ 125,800	125,800
Accumulated Amortization	29,366	(22,809)
Net Carrying Amount	$ 96,434	102,991
Weighted Average Remaining Useful Life	90 months
Developed Technology
Acquired Indefinite Lived Intangible Assets [Line Items]
Gross	$ 317,700	313,800
Accumulated Amortization	135,765	(104,215)
Net Carrying Amount	$ 181,935	209,585
Weighted Average Remaining Useful Life	34 months
Customer Relationships
Acquired Indefinite Lived Intangible Assets [Line Items]
Gross	$ 422,700	413,600
Accumulated Amortization	126,262	(96,438)
Net Carrying Amount	$ 296,438	$ 317,162
Weighted Average Remaining Useful Life	58 months

XML

Goodwill and Intangible Assets - Estimated Future Amortization Expense (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Goodwill and Intangible Assets Disclosure [Abstract]
Remainder of 2022	$ 68,523
2023	137,041
2024	136,806
2025	94,093
2026	74,005
2027 and thereafter	64,344
Net Carrying Amount	$ 574,812	$ 629,746

XML

Revenue - Additional Information (Details) $ in Millions	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2022 USD ($) Customer	Jun. 30, 2021	Jun. 30, 2022 USD ($) Customer Segment	Jun. 30, 2021	Dec. 31, 2021 USD ($) Customer
Disaggregation Of Revenue [Line Items]
Number of Operating Segments | Segment			1
Number of Customer Bases			2
Percentage of revenue recognized included in deferred revenue	89.00%	89.00%	84.00%	82.00%
Revenue, remaining performance obligation expected to be recognized | $	$ 783.7		$ 783.7
Provision for credit losses | $			$ 1.3		$ 0.8
Sales Revenue
Disaggregation Of Revenue [Line Items]
Number of customers greater than 10 % of total revenue	0		0
Sales Revenue | International Customers | Customer Concentration Risk
Disaggregation Of Revenue [Line Items]
Percentage of revenue generated outside of the United States			10.00%
Trade Accounts Receivable
Disaggregation Of Revenue [Line Items]
Number of other customers greater than 10 % of accounts receivable	0		0		0
Trade Accounts Receivable | International Customers | Customer Concentration Risk
Disaggregation Of Revenue [Line Items]
Percentage of revenue generated outside of the United States			10.00%		10.50%

XML

Revenue - Schedule of Revenue by Geographic Region (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Disaggregation Of Revenue [Line Items]
Total revenue	$ 114,577	$ 93,567	$ 228,039	$ 187,547
United States
Disaggregation Of Revenue [Line Items]
Total revenue	90,957	75,127	181,064	150,698
Foreign
Disaggregation Of Revenue [Line Items]
Total revenue	23,620	18,440	46,975	36,849
Customer Concentration Risk | Sales Revenue
Disaggregation Of Revenue [Line Items]
Total revenue	114,577	93,567	$ 228,039	187,547
Customer Concentration Risk | Sales Revenue | Foreign
Disaggregation Of Revenue [Line Items]
Percentage of revenue generated outside of the United States			10.00%
Geographic Concentration Risk | Sales Revenue
Disaggregation Of Revenue [Line Items]
Total revenue	$ 114,577	$ 93,567	$ 228,039	$ 187,547
Geographic Concentration Risk | Sales Revenue | Foreign
Disaggregation Of Revenue [Line Items]
Percentage of revenue generated outside of the United States	21.00%	20.00%	21.00%	20.00%
Education
Disaggregation Of Revenue [Line Items]
Total revenue	$ 114,577	$ 93,567	$ 228,039	$ 183,885
Education | Customer Concentration Risk | Sales Revenue
Disaggregation Of Revenue [Line Items]
Percentage of revenue generated outside of the United States	100.00%	100.00%	100.00%	98.00%
Corporate
Disaggregation Of Revenue [Line Items]
Total revenue	$ 0	$ 0	$ 0	$ 3,662

XML

Revenue - Additional Information (Details1) - Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2020-04-01	Jun. 30, 2022
Disaggregation Of Revenue [Line Items]
Revenue, Remaining performance obligation, percentage	74.00%
Revenue, Remaining performance obligation period	24 months

XML

Deferred Commissions - Additional information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021
Deferred Costs [Abstract]
Deferred commissions	$ 31,300		$ 31,300		$ 31,500
Amortization of deferred sales commissions	3,800	$ 2,400	7,200	$ 4,800
Deferred commissions impairment charges	$ 0	$ 0	$ 0	$ 0

XML

Assets And Liabilities Held for Sale - Additional Information (Details) - USD ($) $ in Millions		6 Months Ended
	Feb. 26, 2021	Jun. 30, 2022
Discontinued Operations and Disposal Groups [Abstract]
Purchase price of bridge	$ 47.0
Proceeds net of transaction costs	$ 46.0
Pre tax loss on sale of business		$ 1.2

XML

Credit Facility - Additional Information (Details) - USD ($)			1 Months Ended		3 Months Ended		6 Months Ended		12 Months Ended
	Oct. 29, 2021	Mar. 24, 2020	Aug. 31, 2021	Mar. 24, 2020	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021	May 27, 2021
Debt Instrument [Line Items]
Line of credit facility,maturity date		Mar. 24, 2026
Letters of credit outstanding					$ 4,400,000		$ 4,400,000		$ 4,200,000
Percentage of principal amount redeemed				0.25%
Line of credit facility, interest rate				6.00%
Line of credit facility, Variable rate	1.00%			0.50%
Debt discount costs					13,600,000		13,600,000
Additional debt discount costs					3,800,000		3,800,000
Write off of Deferred Debt Issuance Cost							13,800,000
Amortization of debt discount cost					300,000	$ 500,000	600,000	$ 1,200,000
Amortization of deferred financing costs							587,000	1,218,000
Prepayment premium in conjunction with principal payment			1.50%
Other Assets
Debt Instrument [Line Items]
Unamortized debt issuance costs									900,000
Debt issuance costs					800,000		800,000
Minimum [Member]
Debt Instrument [Line Items]
Line of credit facility, interest rate		5.50%		5.50%
Loan unused commitiment fee, percentage	0.40%
Maximum [Member]
Debt Instrument [Line Items]
Loan unused commitiment fee, percentage	0.50%
Federal Fund
Debt Instrument [Line Items]
Line of credit facility, Variable rate				1.00%
Eurodollar
Debt Instrument [Line Items]
Line of credit facility, Variable rate	1.00%			7.00%
Euro Dollar Floor
Debt Instrument [Line Items]
Line of credit facility, Variable rate				1.00%
Base Rate
Debt Instrument [Line Items]
Line of credit facility, Variable rate	0.005%
Base Rate | Minimum [Member]
Debt Instrument [Line Items]
Line of credit facility, interest rate	1.00%
Base Rate | Maximum [Member]
Debt Instrument [Line Items]
Line of credit facility, interest rate	1.50%
Letter of Credit
Debt Instrument [Line Items]
Letters of credit outstanding					10,000,000.0		10,000,000.0
Initial Term Loan
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity		$ 775,000,000.0		$ 775,000,000.0
Incremental Term Loan
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity		70,000,000.0		70,000,000.0
Revolving Credit Facility
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity		50,000,000.0		$ 50,000,000.0
Loan unused commitiment fee, percentage				0.50%
Borrowings outstanding							0
Write off of Deferred Debt Issuance Cost							500,000
Debt issuance costs		$ 700,000		$ 700,000
Amortization of deferred financing costs					47,000.0	$ 30,000.0	100,000	$ 100,000
Euro Dollar Loan
Debt Instrument [Line Items]
Line of credit facility, interest rate										5.50%
Euro Dollar Loan | Maximum [Member]
Debt Instrument [Line Items]
Line of credit facility, interest rate		7.00%		7.00%
A B R Loan | Minimum [Member]
Debt Instrument [Line Items]
Line of credit facility, Variable rate				4.50%
A B R Loan | Maximum [Member]
Debt Instrument [Line Items]
Line of credit facility, Variable rate				6.00%
Term Loan
Debt Instrument [Line Items]
Unamortized debt discount costs					6,200,000		6,200,000		6,700,000
Term Loan | Other Assets
Debt Instrument [Line Items]
Unamortized debt issuance costs					800,000		800,000
Term Loan | Short Term Debt [Member]
Debt Instrument [Line Items]
Debt discount costs					1,000,000.0		1,000,000.0
Term Loan | Long term Debt [Member]
Debt Instrument [Line Items]
Debt discount costs					5,900,000		5,900,000
Term Loan | IPO [Member]
Debt Instrument [Line Items]
Borrowings outstanding			$ 224,300,000
Term Loan | Over Allotment Option Member
Debt Instrument [Line Items]
Borrowings outstanding			$ 30,800,000
Senior Term Loan
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity	$ 500,000,000.0				498,800,000		$ 498,800,000		$ 500,000,000.0
Percentage of principal amount redeemed	0.25%
Line of credit facility, interest rate							3.27%		3.25%
Line of credit facility, expiration period	7 years
Senior Term Loan | Eurodollar
Debt Instrument [Line Items]
Line of credit facility, interest rate	2.75%
Senior Term Loan | Eurodollar | Maximum [Member]
Debt Instrument [Line Items]
Line of credit facility, interest rate	0.50%
Senior Term Loan | Base Rate
Debt Instrument [Line Items]
Line of credit facility, interest rate	1.75%
Senior Revolver
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity	$ 125,000,000.0				125,000,000.0		$ 125,000,000.0
Borrowings outstanding							0
Line of credit facility, expiration period	5 years
Line of credit percentage of outstanding amount	35.00%
Senior Revolver | Other Current Assets
Debt Instrument [Line Items]
Debt issuance costs					$ 200,000		$ 200,000
Senior Revolver | Minimum [Member]
Debt Instrument [Line Items]
Net leverage ratio	100.00
Senior Revolver | Maximum [Member]
Debt Instrument [Line Items]
Net leverage ratio	775
Senior Revolver | Eurodollar | Minimum [Member]
Debt Instrument [Line Items]
Line of credit facility, interest rate	2.00%
Senior Revolver | Eurodollar | Maximum [Member]
Debt Instrument [Line Items]
Line of credit facility, interest rate	2.50%

XML

Credit Facility - Schedule of Future Minimum Principal Payments Related to the Credit Facility (Details)	Jun. 30, 2022 USD ($)
Line of Credit Facility [Abstract]
Remainder of 2022	$ 2,500
2023	5,000
2024	5,000
2025	5,000
2026	5,000
Thereafter	476,250
Total	$ 498,750,000

XML

Stockholders' Equity - Additional Information (Details)		6 Months Ended
	Jul. 09, 2021 shares	Jun. 30, 2022 $ / shares shares	Dec. 31, 2021 $ / shares shares	Dec. 31, 2020 shares
Class Of Stock [Line Items]
Common stock, shares authorized		500,000,000	500,000,000
Common stock par value | $ / shares		$ 0.01	$ 0.01
Common stock, shares, issued		141,914,000	140,741,000
Common stock, shares, outstanding		141,914,000	140,741,000
Stock split of issued and outstanding common stock	126,239.815
Preferred stock, shares outstanding		0
Preferred stock, shares issued		0
Take-Private Transaction
Class Of Stock [Line Items]
Common stock, shares authorized		2,000
Common stock par value | $ / shares		$ 0.01
Common stock, shares, issued	998.10			999.84
Common stock, shares, outstanding	998.10			999.84
Maximum [Member]
Class Of Stock [Line Items]
Common stock, shares authorized	500,000,000
Preferred stock, shares authorized	50,000,000
Minimum [Member]
Class Of Stock [Line Items]
Common stock, shares authorized	2,000
Preferred stock, shares authorized	0
Partnership
Class Of Stock [Line Items]
Percentage annual return on remaining unreturned capital contributions		9.00%
Redemption and conversion, description		No conversion or redemption rights are associated with Class A or Class B Units. In connection with the IPO, TopCo effected a series of transactions that resulted in TopCo’s equityholders holding shares of our common stock directly, and then TopCo being liquidated and dissolved.
Common stock, shares, issued		141,914,344	140,740,569
Common stock, shares, outstanding		141,914,344	140,740,569
Partnership | Common Class A
Class Of Stock [Line Items]
Units issued		1,250,000
Unit par value | $ / shares		$ 0
Partnership | Common Class B
Class Of Stock [Line Items]
Units issued		90,000,000
Unit par value | $ / shares		$ 0

XML

Stock-Based Compensation - Summary of Stock-Based Compensation Expense by Award Type (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Total stock-based compensation	$ 9,387	$ 3,758	$ 18,863	$ 9,343
Employee Stock Option
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Total stock-based compensation	2	28	21	76
Restricted Stock Units
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Total stock-based compensation	8,848	1,495	17,711	4,367
Shares for issuance under employee stock purchase plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Total stock-based compensation	537	0	1,131	0
Class A and Class B Units
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Total stock-based compensation	$ 0	$ 2,235	$ 0	$ 4,900

XML

Stock-Based Compensation - Summary of Stock-Based Compensation Expense Recorded in Consolidated Statement of Operations (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total stock-based compensation	$ 9,387	$ 3,758	$ 18,863	$ 9,343
Subscription and Support Cost of Revenue
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total stock-based compensation	325	171	607	395
Professional Services And Other Cost Of Revenue
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total stock-based compensation	465	110	841	287
Sales and Marketing
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total stock-based compensation	2,772	1,093	5,349	2,675
Research and Development
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total stock-based compensation	2,686	934	5,226	2,604
General and Administrative
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total stock-based compensation	$ 3,139	$ 1,450	$ 6,840	$ 3,382

XML

Stock-Based Compensation - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended			3 Months Ended		6 Months Ended		12 Months Ended
	Jul. 31, 2021	Apr. 30, 2020	Mar. 31, 2020	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021	Jan. 31, 2022
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Cash value per share of stock repurchased and retired during period			$ 49.00
Stock-based compensation expense				$ 9,387	$ 3,758	$ 18,863	$ 9,343
Common stock, capital shares reserved for future issuance									5,629,623
Number of shares offered to employees						480,000
Unrecognized stock-based compensation costs				$ 20,400		$ 20,400		$ 28,300
Total unrecognized compensation cost, period for recognition						1 year 9 months 18 days		2 years 3 months 18 days
Common stock authorized				16,257,713		16,257,713
IPO Member
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Conversion of shares						1,305,738
2021 Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Common stock, capital shares reserved for future issuance									1,407,406
Common stock authorized				3,067,546		3,067,546
2021 Employee Stock Purchase Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, Description						In July 2021, our board of directors adopted, and our stockholders approved the 2021 Employee Stock Purchase Plan (the "2021 ESPP"), which allows eligible employees to purchase shares of our common stock at a discount through payroll deductions of up to 15% of their eligible compensation, subject to any plan limitations. The initial offering period ended on February 28, 2022. Each new offering period begins on or about March 1 and September 1 and is approximately six months in duration. On each purchase date, eligible employees will purchase our common stock at a price per share equal to 85% of the lesser of (1) the fair market value of our common stock on the offering date or (2) the fair market value of our common stock on the purchase date. A total of 1,900,000 shares of the Company’s common stock were initially reserved for issuance under the 2021 ESPP. Pursuant to the terms of the 2021 ESPP, the share reserve increased by 1,407,406 shares in January 2022. As of June 30, 2022 (unaudited), 3,067,546 shares of common stock were available for purchase under the 2021 ESPP.
Common stock authorized	18,000,000			1,900,000		1,900,000
Discount on share market price	15.00%
Purchase price of common stock, percent	85.00%
2020 Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Common stock authorized	0
Common Class B
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of shares offered to employees		72
Stock issued during period, value, new issues		$ 1,000
Common stock authorized				10,000,000		10,000,000
Common Class A
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of shares offered to employees		1
Incentive Carry | IPO Member
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Vested, Number of Shares						2,271,698
Unvested shares				6,126,802		6,126,802
Restricted Stock Units
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-based compensation expense				$ 8,848	1,495	$ 17,711	4,367
Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Vested in Period						440
RSU granted						2,509
Unrecognized stock-based compensation costs				75,400		$ 75,400
Aggregate fair value of RSU				$ 12,800		$ 12,800
Vesting rights						The RSUs generally vest in 11 equal quarterly installments commencing on September 1, 2021.
Total unrecognized compensation cost, period for recognition						3 years 6 months
Restricted Stock Units | Minimum [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Amount per share of RSU granted				$ 17.59
Restricted Stock Units | Maximum [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Amount per share of RSU granted				$ 21.88
Restricted Stock Units | 2021 Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Vested in Period						3,496,739
RSU granted				626,686
Cash Replacement Awards
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-based compensation expense				$ 1,200	$ 1,500	$ 2,900	$ 4,400

XML

Stock-Based Compensation - Summary of Assumptions Relating to Stock Options and ESPP Purchase Rights (Details) - Employee Stock Purchase Plan	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2021
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Dividend yield	0.00%	0.00%
Volatility	41.00%	0.00%
Risk-free interest rate	0.06%	0.00%
Expected life (years)	6 months		0 years

XML

Stock-Based Compensation - Summary of Restricted Stock Units Activity (Details) - Restricted Stock Units	6 Months Ended
	Jun. 30, 2022 $ / shares shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unvested and outstanding, Beginning Balance | shares	1,987,000
Granted | shares	2,509
Vested | shares	(440)
Forfeited or cancelled | shares	(318)
Unvested and outstanding, Ending Balance | shares	3,738,000
Outstanding, Weighted Average Grant Date Fair Value, Beginning balance | $ / shares	$ 21.00
Granted | $ / shares	21.51
Vested | $ / shares	20.61
Forfeited or cancelled | $ / shares	21.53
Outstanding, Weighted Average Grant Date Fair Value, Ending balance | $ / shares	$ 21.35
2021 Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unvested and outstanding, Beginning Balance | shares	2,736,000
Vested | shares	(575)
Forfeited or cancelled | shares	(177)
Unvested and outstanding, Ending Balance | shares	1,984,000
Outstanding, Weighted Average Grant Date Fair Value, Beginning balance | $ / shares	$ 10.75
Vested | $ / shares	10.81
Forfeited or cancelled | $ / shares	11.07
Outstanding, Weighted Average Grant Date Fair Value, Ending balance | $ / shares	$ 10.73

XML

Fair Value of Financial Instruments - Additional Information (Detail) - Fair Value Measurements Recurring - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair value of Term Loan	$ 493,000
Fair Value Liabilities Measurement Transfers Amount	$ 0	$ 0

XML

Fair Value of Financial Instruments - Summary of Assets Measured at Fair Value on a Recurring Basis (Detail) - Fair Value Measurements Recurring - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total assets	$ 3,346	$ 3,343
Level 1
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total assets	3,346	3,343
Level 2
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total assets	0	0
Level 3
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total assets	0	0
Money Market Funds
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total assets	3,346	3,343
Money Market Funds | Level 1
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total assets	3,346	3,343
Money Market Funds | Level 2
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total assets	0	0
Money Market Funds | Level 3
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total assets	$ 0	$ 0

XML

Leases - Additional Information (Details)	6 Months Ended
	Jun. 30, 2022
Minimum [Member]
Lessee Lease Description [Line Items]
Lease term	1 year
Maximum [Member]
Lessee Lease Description [Line Items]
Lease term	7 years
Property One
Lessee Lease Description [Line Items]
Sublease remaining lease term	12 months
Property Two
Lessee Lease Description [Line Items]
Sublease remaining lease term	78 months
Property Three
Lessee Lease Description [Line Items]
Sublease remaining lease term	43 months
Property Four
Lessee Lease Description [Line Items]
Sublease remaining lease term	22 months

XML

Leases - Summary of Components of Operating Lease Expense (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Leases [Abstract]
Operating lease cost, gross		$ 1,588	$ 1,938	$ 3,384	$ 3,890
Variable lease cost, gross	[1]	591	527	1,127	936
Sublease Income		(287)	(249)	(541)	(477)
Lease, Cost, Total	[2]	$ 1,892	$ 2,216	$ 3,970	$ 4,349

[1] Variable rent expense was not included within the measurement of the Company's operating right-of-use assets and lease liabilities. Variable rent expense is comprised primarily of the Company's proportionate share of operating expenses, property taxes and insurance and is classified as lease expense due to the Company's election to not separate lease and non-lease components.

[2] Short-term lease costs for the unaudited three and six months ended June 30, 2022 and 2021 were not significant and are not included in the table above.

XML

Leases - Summary of Measurement of Operating Lease Liabilities - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Leases [Abstract]
Measurement of operating lease liabilities	$ 2.0	$ 4.2	$ 2.4	$ 4.3

XML

Leases - Schedule of Maturities of the Company's Operating Lease Liabilities (Details) $ in Thousands	Jun. 30, 2022 USD ($)
Lessee, Operating Lease, Liability, to be Paid [Abstract]
Remainder of 2022	$ 4,408
2023	8,630
2024	8,385
2025	4,318
2026	2,744
2027 and Thereafter	3,085
Total lease payments	31,570
Imputed interest	(4,713)
Lease liabilities	26,857
Tenant improvement reimbursements included in the measurement of lease liabilities but not yet received	414
Lease liabilities, net	$ 26,443

XML

Leases - Summary of Weighted Average Remaining Lease Term - Additional Information (Details)	Jun. 30, 2022	Dec. 31, 2021
Leases [Abstract]
Weighted average remaining lease term	4 years	4 years 4 months 24 days
Weighted average discount rate, percent	8.19%	8.19%

XML

Commitments and Contingencies - Additional Information (Details) - USD ($) $ in Millions	Jun. 30, 2022	Dec. 31, 2021
Commitments and Contingencies Disclosure [Abstract]
Letters of credit outstanding	$ 4.4	$ 4.2
2023	45.0
2024	48.0
2025	$ 48.0

XML

Related Party Transactions - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021	Oct. 29, 2021	Aug. 31, 2021	Mar. 24, 2020
Related Party Transaction [Line Items]
Salary and short-term incentive award			$ 100
Term loan	$ 498,750		498,750
Affiliates Of Thoma Bravo
Related Party Transaction [Line Items]
Acquisition of term loan		$ 131,300		$ 131,300				$ 129,200
Interest paid to affiliates of Thomas Bravo				5,300
Principal payment to related party							$ 42,500
Term loan						$ 88,600
Take-Private Transaction
Related Party Transaction [Line Items]
Related party expense	$ 100	$ 200	$ 300	$ 300
Salary and short-term incentive award					$ 200