10-Q

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

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

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.

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 May 7, 2024, there were 145,927,863 shares of the registrant’s common stock outstanding.

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.

The following provides a reconciliation of cash, cash equivalents, restricted cash, and funds held on behalf of customers 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 (in thousands):

1. Description of Business and Basis of Presentation

Company and Background

Instructure Holdings, Inc. (the “Company,” “Instructure,” “we,” “our,” or “us”) is an education technology company dedicated to elevating student access, amplifying the power of teaching, and inspiring everyone to learn together. Instructure’s platform delivers a next-generation learning management system (“LMS”), robust assessments for learning, actionable analytics, and engaging, dynamic content. Instructure offers its platform through a Software-as-a-Service, or SaaS, business model. The Company was founded 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, Ireland, Canada, and Singapore.

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, 2023, 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, 2024. 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, 2023, filed with the SEC on February 21, 2024 (the “2023 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, acquisition related estimates, our assessment for impairment of goodwill, intangible assets, and other long-lived assets, the standalone selling price of performance obligations, timing of professional services revenue recognition, 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 (“CODM”), which are our chief executive officer and chief financial officer, in deciding how to allocate resources and assess performance. Our CODM 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

A summary of the Company’s significant accounting policies is discussed in “Note 1 – Description of Business and Summary of Significant Accounting Policies” of the 2023 10-K. There have been no significant changes to these policies during the three months ended March 31, 2024, except as noted below.

Revenue Recognition

We generate revenue primarily from two main sources: (1) subscription and support revenue, which is comprised of SaaS fees from customers accessing our learning platform and usage of our credential management 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. Consistent with ASC 606, Revenue from Contracts with Customers, revenue is recognized when control of these services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services. The timing of revenue recognition may differ from the timing of invoicing our customers. We record an unbilled receivable, which is included within accounts receivable—net on our consolidated balance sheets, when revenue is recognized prior to invoicing.

We determined revenue recognition through the following steps:

•

Identification of the contract, or contracts, with a customer

•

Identification of the performance obligations in the contract

•

Determination of the transaction price

•

Allocation of the transaction price to the performance obligations in the contract

•

Recognition of revenue when, or as, we satisfy a performance obligation

The following describes the nature of our primary types of revenue and the revenue recognition policies and significant payment terms as they pertain to the types of transactions we enter into with our customers.

Subscription and Support

Subscription and support revenue is derived from fees from customers to access and use our learning platform and our credential management platform, and support beyond the standard support that is included with all subscriptions. The terms of our subscriptions do not provide customers the right to take possession of the software. Subscription and support revenue from our learning platform is generally recognized on a ratable basis over the contract term. Payments from customers are primarily due annually in advance. Subscription and support revenue from our credential management platform is generally recognized based on the proportion of credentials transferred to the total estimated credentials to be transferred over the contract period. Customers choose to access and use the credential management platform through subscription contracts by committing to guaranteed minimum payments with excess volume billed in arrears, or through transactional contracts where payment generally occurs once an order is placed. The Company records pass through fees for transactional contracts on a net revenue basis, as the Company does not have control over the credential and is therefore acting as the agent.

Professional Services and Other

Professional services revenue is derived from implementation, training, and consulting services. Our professional services are typically considered distinct from the related subscription services as the promise to transfer the subscription can be fulfilled independently from the promise to deliver the professional services (i.e., customer receives standalone functionality from the subscription and the customer obtains the intended benefit of the subscription without the professional services). Professional services arrangements are billed in advance, and revenue from these arrangements is typically 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.

Contracts with Multiple Performance Obligations

Many of our contracts with customers contain multiple performance obligations. We account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price (“SSP”) basis. We determine the SSP based on our overall pricing objectives by reviewing our significant pricing practices, including discounting practices, geographical locations, the size and volume of our transactions, the customer type, price lists, our pricing strategy, and historical standalone sales. SSP is analyzed on a periodic basis to identify if we have experienced significant changes in our selling prices.

Deferred Commissions

Sales commissions earned by our sales force, as well as related payroll taxes, are considered incremental and recoverable costs of obtaining a contract with a customer. These costs are deferred and then amortized on a straight-line basis over a period of benefit that we have determined to be generally four years. We determined the period of benefit by taking into consideration our customer contracts, our technology and other factors. Amortization of deferred commissions is included in sales and marketing expenses in the accompanying consolidated statements of operations and comprehensive loss.

Deferred Revenue

Deferred revenue consists of billings and payments received in advance of revenue recognition generated by our subscription and support services and professional services and other, as described above.

Funds Held on Behalf of Customers and Customer Fund Deposits

Funds held on behalf of customers and customer fund deposits represent cash received or in-transit from credential requestors via third-party credit card processors and other payment methods. The Company generally remits payment to customers within 30 to 60 days following the purchase of a credential. Funds held on behalf of customers represent the total amount due to customers, and as such, a liability for the same amount is recorded to customer fund deposits. The funds held on behalf of customers are not available for general business use by the Company.

Recent Accounting Pronouncements

Issued accounting pronouncements

In November 2023, the FASB issued Accounting Standards Update (“ASU”) No. 2023-07, Improvements to Reportable Segment Disclosures (Topic 280), which updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the CODM and included within each reported measure of a segment's profit or loss. The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. We do not expect the adoption of this guidance to have a material impact on our condensed consolidated financial statements and related notes.

In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures (Topic 740), which requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. We do not expect the adoption of this guidance to have a material impact on our condensed consolidated financial statements and related notes.

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 March 31,
	2024			2023
Numerator:
Net loss	$	(21,125	)	$	(11,857	)
Denominator:
Weighted-average common shares outstanding—basic		145,455			143,112
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		145,455			143,112
Net loss per common share, basic and diluted	$	(0.15	)	$	(0.08	)

For the three months ended March 31, 2024 and 2023, we incurred net losses and, therefore, the effect of our restricted stock units (“RSUs”) and of shares issuable under the employee stock purchase plan were not included in the calculation of diluted net loss per share as the effect would be anti-dilutive. The following table contains share totals with a potentially dilutive impact (in thousands):



	Three months ended March 31,
	2024		2023
Restricted stock units		5,618		6,656
Shares issuable under employee stock purchase plan		33		28
Total		5,651		6,684

4. Property and Equipment

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


	March 31,			December 31,
	2024			2023
Computer and office equipment	$	6,157		$	5,437
Capitalized software development costs		14,870			13,556
Furniture and fixtures		1,189			1,153
Leasehold improvements and other		4,485			6,270
Total property and equipment		26,701			26,416
Less accumulated depreciation and amortization		(12,617	)		(12,937	)
Total	$	14,084		$	13,479

Accumulated amortization for capitalized software development costs was $5.5 million and $4.7 million at March 31, 2024 and December 31, 2023, respectively. Amortization expense for capitalized software development costs for the three months ended March 31, 2024 and March 31, 2023 was $0.8 million and $0.6 million, respectively, and is recorded within subscription and support cost of revenue on the condensed consolidated statements of operations and comprehensive loss.

5. Acquisitions

2024 Acquisitions

On February 1, 2024, we acquired all outstanding shares of PCS Holdings, LLC (“Parchment”), the world's largest academic credentialing platform and network. By adding Parchment to the Instructure Learning Platform, we provide a verifiable and comprehensive digital passport of achievement records and outcomes for learners.

At the time of the acquisition, we recorded a provisional net deferred tax liability of $46.6 million in purchase accounting due to the 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 conclusions below will remain provisional until the Parchment tax returns are filed.

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


Consideration transferred
Cash paid	$	831,264
Escrow		2,000
Total purchase consideration	$	833,264

Identifiable assets acquired
Cash and cash equivalents	$	5,445
Funds held on behalf of customers		6,081
Accounts receivable		9,746
Prepaid expenses and other assets		3,331
Property and equipment		212
Right-of-use assets		375
Intangible assets: developed technology		45,800
Intangible assets: trade name		12,500
Intangible assets: customer relationships		240,000
Total assets acquired	$	323,490

Liabilities assumed
Accounts payable and accrued liabilities	$	9,676
Customer fund deposits		6,081
Lease liabilities		430
Deferred revenue		17,478
Deferred tax liabilities		46,574
Other liabilities		2,807
Total liabilities assumed	$	83,046
Goodwill		592,820
Total purchase consideration	$	833,264

For all periods presented, the excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired is recorded as goodwill, of which $235.0 million is expected to be deductible for tax purposes from the Parchment acquisition. The goodwill generated from acquisition transactions is attributable to the expected synergies to be achieved upon consummation of the business combination 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. Amortization of developed technology is included in subscription and support cost of revenue expenses in the accompanying consolidated statements of operations and comprehensive loss. Amortization of customer relationships and trade names is included in sales and marketing expenses in the accompanying consolidated statements of operations and comprehensive loss. Amortization of non-compete agreements is included in research and development expenses in the accompanying consolidated statements of operations and comprehensive loss.

The following unaudited pro forma condensed combined financial information (in thousands) presents the results of operations of Instructure as if the Parchment acquisition occurred as of January 1, 2023. The unaudited pro forma results may not necessarily reflect actual results of operations that would have been achieved, nor are they necessarily indicative of future results of operations. The unaudited pro forma results reflect the elimination of historical intangible amortization expense incurred by Parchment and the step-up amortization adjustments for the fair value of intangible assets acquired, the elimination of historical interest expense incurred by Parchment on its debt and the incurrence of interest expense related to the issuance of debt in connection with the Parchment acquisition, and transaction expenses, nonrecurring post-combination compensation expense and the related adjustment to the income tax provision.


	Three months ended March 31,
	2024			2023
Total revenue	$	165,513		$	153,257
Net loss	$	(22,410	)	$	(33,824	)

Actual revenue and net loss recorded on Instructure's condensed combined statement of operations and comprehensive loss for Parchment during the three months ended March 31, 2024 was $18.0 million, and $2.5 million, respectively.

6. Goodwill and Intangible Assets

Goodwill activity was as follows (in thousands):


	Total
Balance as of December 31, 2023	$	1,265,316
Additions - see Note 5. “Acquisitions”		592,820
Balance as of March 31, 2024	$	1,858,136

Intangible assets consisted of the following (in thousands):


	Weighted-Average Remaining Useful Life	March 31, 2024							December 31, 2023
		Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net

Software	0 Months	$	21	$	(21	)	$	—	$	21	$	(21	)	$	—
Trade names	68 Months		138,600		(52,984	)		85,616		126,100		(49,336	)		76,764
Developed technology	31 Months		371,100		(250,499	)		120,601		325,300		(232,662	)		92,638
Customer relationships	81 Months		691,400		(242,959	)		448,441		451,400		(221,123	)		230,277
Non-compete agreements	20 Months		50		(22	)		28		50		(17	)		33
Total		$	1,201,171	$	(546,485	)	$	654,686	$	902,871	$	(503,159	)	$	399,712

Amortization expense for intangible assets was $43.3 million for the three months ended March 31, 2024, and $35.7 million for the three months ended March 31, 2023.

Based on the recorded intangible assets at March 31, 2024, estimated amortization expense is expected to be as follows (in thousands):


	Amortization
	Expense
Years Ending December 31,
Remainder of 2024	$	141,551
2025		146,021
2026		125,918
2027		86,180
2028		63,231
Thereafter		91,785
Total	$	654,686

7. Credit Facility

On October 29, 2021, we entered into a credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, (the “2021 Credit Agreement”) governing our senior secured credit facilities (the “Senior Secured Credit Facilities”), consisting of a $500.0 million initial 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, to (1) refinance, in full, all existing indebtedness under our initial credit agreement entered into in March of 2020 with a syndicate of lenders and Golub Capital Markets LLC (the “2021 Refinancing”), (2) pay certain fees and expenses incurred in connection with the entry into the 2021 Credit Agreement and the Refinancing, and (3) 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 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 March 31, 2024, 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. 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 Net Leverage Ratio.

On June 21, 2023, we entered into the first amendment to the 2021 Credit Agreement (the “Amended 2021 Credit Agreement”) whereby all borrowings denominated in U.S. dollars and that incur interest or fees using the Eurocurrency Rate, which are determined by reference to the London Interbank Offered Rate (“LIBOR”), have been replaced with the Secured Overnight Financing Rate (“SOFR”). For SOFR loans, the loans denominated in dollars now bear interest at the Adjusted Term SOFR Rate, which is equal to the Term SOFR Reference Rate, as published by the CME Term SOFR Administrator, plus the Term SOFR Adjustment as dictated by the interest rate period elected by the Company. The Term SOFR Adjustment ranges from 0.11448% to 0.42826% per annum. The Applicable Rate (x) for the Initial Term Loans remains at 2.75% per annum for SOFR loans and (y) for the Revolving Credit Facility remains at 2.50% per annum with applicable step downs. The transition from LIBOR to SOFR became effective on July 5, 2023. All other terms and conditions in place under the 2021 Credit Agreement on the effective date of the Amended 2021 Credit Agreement remained unchanged and in full effect.

The Amended 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 a Consolidated Net Leverage Ratio of not more than 7.75 to 1.00. As of March 31, 2024, there was no amount outstanding under the Senior Revolver. The Company had $125.0 million of availability under the Senior Revolver as of March 31, 2024.

On February 1, 2024, we entered into the second amendment to the 2021 Credit Agreement as previously amended by the Amended 2021 Credit Agreement (the “Amended 2023 Credit Agreement”), by and among the Company and certain of its subsidiaries, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders named therein. Pursuant to the Amended 2023 Credit Agreement, among certain other amendments, the lenders agreed, severally and not jointly, to extend additional 2023 Incremental Term Loans (the “2023 Incremental Term Loans”) to Instructure under the 2021 Credit Agreement in an aggregate principal amount equal to $685.0 million. The Company used the proceeds of the 2023 Incremental Term Loans, borrowed under the 2021 Credit Agreement, to finance (i) the cash consideration for the acquisition of Parchment, and (ii) fees and costs incurred in connection with the acquisition and related transactions. The Senior Secured Credit Facilities, together with the Amended 2023 Credit Agreement, comprise our amended senior secured credit facilities (the “Amended Senior Secured Credit Facilities”).

As a result of the 2023 Incremental Term Loans, the Company capitalized $4.4 million and $16.3 million of debt discount costs incurred in connection with the Amended 2023 Credit Agreement in long-term debt, current and long-term debt, net of current portion, respectively, on the condensed consolidated balance sheets. The Company recognized $1.0 million of amortization of debt discount costs for the three months ended March 31, 2024 and $0.2 million for the three months ended March 31, 2023, which is recorded as interest expense in the accompanying condensed consolidated statements of operations and comprehensive loss. At March 31, 2024 and December 31, 2023, the Company had an aggregate principal amount outstanding of $1,173.3 million and $491.3 million, respectively, under the Amended Senior Secured Credit Facilities, bearing interest at 8.35% and 8.68%, respectively. The Company had $24.6 million and $4.9 million of unamortized debt discount costs at March 31, 2024 and December 31, 2023, respectively, which is recorded as a reduction of the debt balance on the Company’s condensed consolidated balance sheets.

As a result of the 2021 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 of amortization of debt issuance costs for the three months ended March 31, 2024 and $47.0 thousand for the three months ended March 31, 2023, which is recorded as interest expense in the accompanying condensed consolidated statements of operations and comprehensive loss. The Company had $0.5 million of unamortized debt issuance costs at March 31, 2024 and December 31, 2023, which are included in other current assets and other assets on the Company’s condensed consolidated balance sheets.

The Amended Senior Secured Credit Facilities contain customary negative covenants. At March 31, 2024, the Company was in compliance with all applicable covenants pertaining to the Amended Senior Secured Credit Facilities.

The maturities of outstanding debt as of March 31, 2024 are as follows (in thousands):


	Amount
Years Ending December 31,
Remainder of 2024	$	8,979
2025		11,972
2026		11,972
2027		11,972
2028		1,128,362
Thereafter		—
Total	$	1,173,257

8. Revenue

We have one operating segment, which is our cloud-based learning, assessment, development and engagement systems. Our customers consist of K-12 and Higher Education institutions that purchase our Canvas LMS, which includes assessments, analytics, learning content, and credentials. The following table presents the Company’s disaggregated revenues by geographic region, based on the physical location of the customer (in thousands):



	Three months ended March 31,
	2024			2023

United States	$	126,510		$	102,596
Foreign		28,945			26,247
Total revenue	$	155,455		$	128,843
Percentage of revenue generated outside of the United States		19	%		20	%

Deferred Revenue and Performance Obligations

During the three months ended March 31, 2024, 81% of revenue recognized was included in our deferred revenue balance at December 31, 2023. During the three months ended March 31, 2023, 93% of revenue recognized was included in our deferred revenue balance at December 31, 2022.

Transaction Price Allocated to the Remaining Performance Obligations

As of March 31, 2024, approximately $820.4 million of revenue is expected to be recognized from remaining performance obligations. We expect to recognize revenue on approximately 76% 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 March 31, 2024 and December 31, 2023 there were no customers with outstanding net accounts receivable balances as a percentage of total outstanding net accounts receivable greater than 10%.

Our provisions for credit loss balances at March 31, 2024 and December 31, 2023 were $1.8 million and $2.0 million, respectively.

10. Stock-Based Compensation

As of March 31, 2024 and December 31, 2023, there were 500,000,000 shares of common stock authorized. As of March 31, 2024 and December 31, 2023, there were 145,927,863 and 145,207,497 shares of common stock issued and outstanding, respectively.

Employee Equity Plans

The Instructure Parent, LP Incentive Equity Plan (the “2020 Plan”) was terminated in July 2021 in connection with the Company’s initial public offering (the “IPO”). As of the IPO date 6,126,802 unvested incentive units were exchanged for 3,496,739 RSUs under the 2021 Plan. These RSUs will generally vest in 11 equal quarterly installments commencing September 1, 2021.

In July 2021, our board of directors adopted the 2021 Omnibus Incentive Plan (the “2021 Plan”) and 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 5,808,300 shares in January 2024. As of March 31, 2024, we had 24,034,135 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. 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 1,452,075 shares in January 2024. As of March 31, 2024, 5,304,954 shares of common stock were available for purchase under the 2021 ESPP.

During the three months ended March 31, 2024, we granted 1,739,348 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 value of the RSUs granted during the three months ended March 31, 2024 ranged from $21.45 to $25.41, which represents the closing stock price for the underlying common stock on the respective grant dates, with an aggregate fair value of $42.8 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 March 31,
	2024		2023

Restricted stock units		12,048		9,599
Shares issuable under employee stock purchase plan		397		411
Total stock-based compensation	$	12,445	$	10,010



	Three months ended March 31,
	2024		2023

Subscription and support cost of revenue	$	565	$	379
Professional services and other cost of revenue		644		414
Sales and marketing		3,114		2,528
Research and development		3,840		3,174
General and administrative		4,282		3,515
Total stock-based compensation	$	12,445	$	10,010

Restricted Stock Units

The following table summarizes the activity of RSUs for the three months ended March 31, 2024 (in thousands, except per unit amounts):


	RSUs			Weighted Average Grant Date Fair Value Per Unit
Unvested and outstanding at December 31, 2023		4,470		$	23.68
Granted		1,739			24.60
Vested		(394	)		23.59
Forfeited or canceled		(288	)		22.97
Unvested and outstanding at March 31, 2024		5,527		$	23.98

As of March 31, 2024 and December 31, 2023, total unrecognized compensation cost related to unvested RSUs amounted to $123.3 million and $95.1 million, respectively, which is expected to be recognized over a weighted average period of


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


		Page
	PART I. FINANCIAL INFORMATION

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	6

	Notes to Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34

Item 4.	Controls and Procedures	35

	PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	36

Item 1A.	Risk Factors	36

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36

Item 3.	Default Upon Senior Securities	36

Item 4.	Mine Safety Disclosures	36

Item 5.	Other Information	36

Item 6.	Exhibits	36

SIGNATURES		38


	March 31,			December 31,
	2024			2023
Assets
Current assets:
Cash and cash equivalents	$	83,015		$	341,047
Funds held on behalf of customers		5,286			—
Accounts receivable—net		52,273			67,193
Prepaid expenses		68,592			12,082
Deferred commissions		12,764			13,705
Other current assets		4,207			4,797
Total current assets		226,137			438,824
Property and equipment, net		14,084			13,479
Right-of-use assets		10,021			9,002
Goodwill		1,858,136			1,265,316
Intangible assets, net		654,686			399,712
Noncurrent prepaid expenses		3,241			4,182
Deferred commissions, net of current portion		12,865			13,816
Deferred tax assets		6,842			6,739
Other assets		5,467			6,908
Total assets	$	2,791,479		$	2,157,978
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	12,773		$	23,589
Customer fund deposits		5,286			—
Accrued liabilities		33,576			23,760
Lease liabilities		6,837			7,513
Long-term debt, current		6,615			4,013
Deferred revenue		223,175			291,784
Total current liabilities		288,262			350,659
Long-term debt, net of current portion		1,142,090			482,387
Deferred revenue, net of current portion		11,825			10,876
Lease liabilities, net of current portion		11,795			9,246
Deferred tax liabilities		53,246			14,420
Other long-term liabilities		5,686			4,898
Total liabilities		1,512,904			872,486
Stockholders’ equity:
Common stock, par value $0.01 per share; 500,000 shares authorized as of March 31, 2024 and December 31, 2023; 145,928 and 145,207 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively.		1,459			1,452
Additional paid-in capital		1,633,221			1,619,020
Accumulated deficit		(356,105	)		(334,980	)
Total stockholders’ equity		1,278,575			1,285,492
Total liabilities and stockholders’ equity	$	2,791,479		$	2,157,978


	Three months ended March 31,
	2024			2023
Revenue:
Subscription and support	$	144,657		$	118,480
Professional services and other		10,798			10,363
Total revenue		155,455			128,843
Cost of revenue:
Subscription and support		46,312			38,810
Professional services and other		8,041			7,022
Total cost of revenue		54,353			45,832
Gross profit		101,102			83,011
Operating expenses:
Sales and marketing		59,256			50,850
Research and development		27,536			23,702
General and administrative		20,390			14,373
Total operating expenses		107,182			88,925
Loss from operations		(6,080	)		(5,914	)
Other income (expense):
Interest income		2,508			1,341
Interest expense		(22,596	)		(9,485	)
Other income (expense)		(1,835	)		76
Loss on extinguishment of debt		(189	)		—
Total other income (expense), net		(22,112	)		(8,068	)
Loss before income taxes		(28,192	)		(13,982	)
Income tax benefit		7,067			2,125
Net loss and comprehensive loss	$	(21,125	)	$	(11,857	)
Net loss per common share, basic and diluted	$	(0.15	)	$	(0.08	)
Weighted average common shares used in computing basic and diluted net loss per common share		145,455			143,112


	Common
	Stock, $0.01						Additional						Total
	Par Value						Paid-In			Accumulated			Stockholders’
	Shares			Amount			Capital			Deficit			Equity
Balances at December 31, 2023		145,207		$	1,452		$	1,619,020		$	(334,980	)	$	1,285,492
Vesting of restricted stock units		624			6			(6	)		—			—
Purchase of ESPP shares		166			2			3,226			—			3,228
Shares withheld for tax withholding on vesting of restricted stock units		(69	)		(1	)		(1,567	)		—			(1,568	)
Stock-based compensation		—			—			12,548			—			12,548
Net loss		—			—			—			(21,125	)		(21,125	)
Balances at March 31, 2024		145,928		$	1,459		$	1,633,221		$	(356,105	)	$	1,278,575

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Large accelerated filer		Accelerated filer	

Non-accelerated filer		Smaller reporting company	

Emerging growth company	



	As of March 31,
	2024		2023

Cash and cash equivalents	$	83,015	$	104,758
Restricted cash		954		4,336
Funds held on behalf of customers		5,286		—
Total cash, cash equivalents, restricted cash, and funds held on behalf of customers	$	89,255	$	109,094