false000184180400018418042024-08-022024-08-02

 

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

 

FORM 8-K

 

CURRENT REPORT

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

Date of Report (Date of earliest event reported): August 02, 2024

 

 

INSTRUCTURE HOLDINGS, INC.

(Exact name of Registrant as Specified in Its Charter)

 

 

Delaware

001-40647

84-4325548

(State or Other Jurisdiction
of Incorporation)

(Commission File Number)

(IRS Employer
Identification No.)

 

 

 

 

 

6330 SOUTH 3000 EAST

SUITE 700

 

SALT LAKE CITY, Utah

 

84121

(Address of Principal Executive Offices)

 

(Zip Code)

 

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

 

 

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

 

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

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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


Title of each class

 

Trading
Symbol(s)

 


Name of each exchange on which registered

Common Stock, par value $0.01 per share

 

INST

 

The New York Stock Exchange

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

Emerging growth company

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

 


 

Item 2.02 Results of Operations and Financial Condition.

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

 

Key Financials:
(Dollars in millions)

 

 

Three months ended
June 30,

 

 

 

 

 

Six months ended
June 30,

 

 

 

2024

 

 

2023

 

 

Year-over-Year (% or bps)

 

 

2024

 

 

2023

 

 

Year-over-Year (% or bps)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

170.4

 

 

$

131.1

 

 

 

30.0

%

 

$

325.9

 

 

$

259.9

 

 

 

25.4

%

Loss from Operations

 

$

(1.2

)

 

$

(2.1

)

 

 

(42.7

)%

 

$

(7.3

)

 

$

(8.0

)

 

 

(9.0

)%

Non-GAAP Operating Income*

 

$

72.0

 

 

$

50.2

 

 

 

43.5

%

 

$

135.5

 

 

$

97.3

 

 

 

39.2

%

GAAP Net Loss

 

$

(20.9

)

 

$

(11.0

)

 

 

90.9

%

 

$

(42.1

)

 

$

(22.8

)

 

 

84.3

%

GAAP Net Loss Margin

 

 

(12.3

)%

 

 

(8.4

)%

 

(390) bps

 

 

 

(12.9

)%

 

 

(8.8

)%

 

(410) bps

 

Adjusted EBITDA*

 

$

73.4

 

 

$

51.3

 

 

 

43.2

%

 

$

138.4

 

 

$

99.5

 

 

 

39.0

%

Adjusted EBITDA Margin*

 

 

43.1

%

 

 

39.1

%

 

400 bps

 

 

 

42.5

%

 

 

38.3

%

 

420 bps

 

Cash Flow from Operations

 

$

(8.2

)

 

$

25.1

 

 

 

(132.5

)%

 

$

(100.7

)

 

$

(55.8

)

 

 

(80.5

)%

Adjusted Unlevered Free Cash Flow*

 

$

25.7

 

 

$

37.1

 

 

 

(30.7

)%

 

$

(39.6

)

 

$

(26.3

)

 

 

(50.5

)%

Remaining Performance Obligations ("RPO")

 

$

934.9

 

 

$

853.6

 

 

 

9.5

%

 

$

934.9

 

 

$

853.6

 

 

 

9.5

%

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

Balance Sheet and Cash Flow

As of June 30, 2024, cash, cash equivalents, restricted cash, and funds held on behalf of customers were $145.2 million and total debt was $1,240.3 million; compared to cash, cash equivalents, and restricted cash of $344.2 million and total debt of $491.3 million as of December 31, 2023. The decrease in cash, cash equivalents, restricted cash, and funds held on behalf of customers and increase in debt since December 31, 2023 is primarily driven by cash spent and debt incurred in connection with the Parchment acquisition. As of June 30, 2024, Instructure’s total leverage ratio is 4.9x (which represents Total Debt to trailing twelve month Adjusted EBITDA) and net leverage ratio is 4.3x (which represents Net Debt to trailing twelve month Adjusted EBITDA). This calculation includes twelve months of historical Instructure Adjusted EBITDA and five months of Parchment contribution to Adjusted EBITDA. Net cash used in operating activities was $8.2 million for the three months ended June 30, 2024, compared to $25.1 million net cash provided by operating activities in the prior year period. This decrease was primarily driven by higher interest expense. Adjusted Unlevered Free Cash Flow was $25.7 million for the three months ended June 30, 2024, compared to $37.1 million in the prior year period.

Transaction with KKR

Given the announcement made on July 25, 2024, regarding Instructure’s entry into a definitive agreement to be acquired by affiliates of investment funds managed by Kohlberg Kravis Roberts & Co. L.P. (“KKR”), a leading global investment firm, Instructure will not host an earnings conference call or provide financial guidance in conjunction with this report. The Company’s previously issued guidance for full year fiscal 2024 should no longer be relied upon. For further detail on quarterly performance, please refer to Instructure’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, filed today with the SEC.

About Instructure

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


Non-GAAP Financial Measures

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

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

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

Non-GAAP Operating Income; Non-GAAP Operating Income Margin. We define non-GAAP operating income as loss from operations excluding the impact of stock-based compensation, transaction costs, globalization costs, restructuring costs, technology modernization costs, other non-recurring costs, and amortization of acquisition-related intangibles. We believe non-GAAP operating income is useful in evaluating our operating performance compared to that of other companies in our industry, as this metric generally eliminates the effects of certain items that may vary for different companies for reasons unrelated to overall operating performance. Although we exclude the amortization of acquisition-related intangibles from the non-GAAP measure, management believes it is important for investors to understand that such intangible assets were recorded as part of purchase accounting and contribute to revenue generation. Non-GAAP operating income margin is defined as non-GAAP operating income divided by revenue.

Adjusted EBITDA; Adjusted EBITDA Margin. EBITDA is defined as earnings before debt-related costs, including interest and loss on debt extinguishment, benefit for taxes, depreciation, and amortization. We further adjust EBITDA to exclude certain items of a significant or unusual nature, including stock-based compensation, transaction costs, globalization costs, restructuring costs, technology modernization costs, other non-recurring costs, effects of foreign currency transaction (gains) and losses, and amortization of acquisition-related intangibles. Although we exclude the amortization of acquisition-related intangibles from this non-GAAP measure, management believes that it is important for investors to understand that such intangible assets were recorded as part of purchase accounting and contribute to revenue generation. Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by revenue.

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

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

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


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

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

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

Forward-Looking Statements

This report contains “forward-looking” statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding the Company’s expectations relating to the proposed merger and related transactions, the Company’s growth, customer demand and application adoption, the Company’s research and development efforts and future application releases, the Company’s business strategy, statements about artificial intelligence and the Company’s expectations regarding future revenue, expenses, cash flows and net income or loss.

These statements are not guarantees of future performance, but are based on management’s expectations as of the date of this press release and assumptions that are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements. Important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements include the following: the risk that the proposed merger may not be completed in a timely manner or at all, which may adversely affect the Company’s business and the price of the common stock, the occurrence of any event, change or other circumstance or condition that could give rise to the termination of the merger agreement related to the proposed merger, including in circumstances requiring the Company to pay a termination fee, the ability to obtain the necessary financing arrangements set forth in the commitment letters received in connection with the proposed merger, potential litigation relating to the proposed merger that could be instituted against the parties to the merger agreement related to the proposed merger or their respective directors, managers or officers, including the effects of any outcomes related thereto, certain restrictions during the pendency of the merger that may impact the Company’s ability to pursue certain business opportunities or strategic transactions, uncertainty as to timing of completion of the proposed merger, risks that the benefits of the proposed merger are not realized when and as expected, risks associated with the continued economic uncertainty, including persistent inflation, labor shortages, high interest rates, foreign currency exchange volatility, concerns of economic slowdown or recession, reduced spending by customers and geopolitical instability; failure to continue our recent growth rates; the effects of increased usage of, or interruptions or performance problems associated with, our learning platform; the impact on our business and prospects from health pandemics and epidemics; our history of losses and expectation that we will not be profitable for the foreseeable future; or ability to acquire new customers and successfully retain existing customers; failure of the markets for our applications to develop at anticipated rates; failure to manage our growth effectively; and changes in the spending policies or budget priorities for government funding of Higher Education and K-12 institutions.

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

 


INSTRUCTURE HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

 

 

June 30,
2024

 

 

December 31,
2023

 

 

Assets

 

(unaudited)

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

137,743

 

 

$

341,047

 

 

Funds held on behalf of customers

 

 

6,470

 

 

 

 

 

Accounts receivable—net

 

 

223,220

 

 

 

67,193

 

 

Prepaid expenses

 

 

53,752

 

 

 

12,082

 

 

Deferred commissions

 

 

15,085

 

 

 

13,705

 

 

Other current assets

 

 

6,658

 

 

 

4,797

 

 

Total current assets

 

 

442,928

 

 

 

438,824

 

 

Property and equipment, net

 

 

14,905

 

 

 

13,479

 

 

Right-of-use assets

 

 

9,161

 

 

 

9,002

 

 

Goodwill

 

 

1,858,136

 

 

 

1,265,316

 

 

Intangible assets, net

 

 

611,788

 

 

 

399,712

 

 

Noncurrent prepaid expenses

 

 

2,841

 

 

 

4,182

 

 

Deferred commissions, net of current portion

 

 

13,350

 

 

 

13,816

 

 

Deferred tax assets

 

 

6,564

 

 

 

6,739

 

 

Other assets

 

 

4,530

 

 

 

6,908

 

 

Total assets

 

$

2,964,203

 

 

$

2,157,978

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

 

$

20,075

 

 

$

23,589

 

 

Customer fund deposits

 

 

6,470

 

 

 

 

 

Accrued liabilities

 

 

40,470

 

 

 

23,760

 

 

Lease liabilities

 

 

6,076

 

 

 

7,513

 

 

Long-term debt, current

 

 

76,525

 

 

 

4,013

 

 

Deferred revenue

 

 

330,429

 

 

 

291,784

 

 

Total current liabilities

 

 

480,045

 

 

 

350,659

 

 

Long-term debt, net of current portion

 

 

1,140,139

 

 

 

482,387

 

 

Deferred revenue, net of current portion

 

 

9,574

 

 

 

10,876

 

 

Lease liabilities, net of current portion

 

 

10,806

 

 

 

9,246

 

 

Deferred tax liabilities

 

 

46,191

 

 

 

14,420

 

 

Other long-term liabilities

 

 

5,747

 

 

 

4,898

 

 

Total liabilities

 

 

1,692,502

 

 

 

872,486

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

Common stock

 

 

1,465

 

 

 

1,452

 

 

Additional paid-in capital

 

 

1,647,290

 

 

 

1,619,020

 

 

Accumulated deficit

 

 

(377,054

)

 

 

(334,980

)

 

Total stockholders’ equity

 

 

1,271,701

 

 

 

1,285,492

 

 

Total liabilities and stockholders’ equity

 

$

2,964,203

 

 

$

2,157,978

 

 

 


INSTRUCTURE HOLDINGS, INC.

 

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

 

(in thousands, except per share data)

 

 

 

Three months ended
June 30,

 

 

Six months ended
June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

 

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Subscription and support

 

$

157,569

 

 

$

118,569

 

 

$

302,226

 

 

$

237,049

 

Professional services and other

 

 

12,875

 

 

 

12,501

 

 

 

23,673

 

 

 

22,864

 

Total revenue

 

 

170,444

 

 

 

131,070

 

 

 

325,899

 

 

 

259,913

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Subscription and support

 

 

49,427

 

 

 

38,377

 

 

 

95,739

 

 

 

77,187

 

Professional services and other

 

 

9,013

 

 

 

6,912

 

 

 

17,054

 

 

 

13,934

 

Total cost of revenue

 

 

58,440

 

 

 

45,289

 

 

 

112,793

 

 

 

91,121

 

Gross profit

 

 

112,004

 

 

 

85,781

 

 

 

213,106

 

 

 

168,792

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

60,970

 

 

 

52,159

 

 

 

120,226

 

 

 

103,009

 

Research and development

 

 

31,240

 

 

 

21,482

 

 

 

58,776

 

 

 

45,184

 

General and administrative

 

 

20,985

 

 

 

14,218

 

 

 

41,375

 

 

 

28,591

 

Total operating expenses

 

 

113,195

 

 

 

87,859

 

 

 

220,377

 

 

 

176,784

 

Loss from operations

 

 

(1,191

)

 

 

(2,078

)

 

 

(7,271

)

 

 

(7,992

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

509

 

 

 

320

 

 

 

3,017

 

 

 

1,661

 

Interest expense

 

 

(26,413

)

 

 

(10,289

)

 

 

(49,009

)

 

 

(19,774

)

Other income (expense)

 

 

(518

)

 

 

402

 

 

 

(2,353

)

 

 

478

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

(189

)

 

 

 

Total other income (expense), net

 

 

(26,422

)

 

 

(9,567

)

 

 

(48,534

)

 

 

(17,635

)

Loss before income tax benefit

 

 

(27,613

)

 

 

(11,645

)

 

 

(55,805

)

 

 

(25,627

)

Income tax benefit

 

 

6,664

 

 

 

672

 

 

 

13,731

 

 

 

2,797

 

Net loss and comprehensive loss

 

$

(20,949

)

 

$

(10,973

)

 

$

(42,074

)

 

$

(22,830

)

Net loss per common share, basic and diluted

 

$

(0.14

)

 

$

(0.08

)

 

$

(0.29

)

 

$

(0.16

)

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

 

 

146,107

 

 

 

143,647

 

 

 

145,781

 

 

 

143,381

 

 


INSTRUCTURE HOLDINGS, INC.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(in thousands)

 

 

 

Three months ended
June 30,

 

 

Six months ended
June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

 

 

Operating Activities:

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(20,949

)

 

$

(10,973

)

 

$

(42,074

)

 

$

(22,830

)

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

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation of property and equipment

 

 

1,399

 

 

 

1,092

 

 

 

2,742

 

 

 

2,295

 

Amortization of intangible assets

 

 

42,898

 

 

 

35,744

 

 

 

86,224

 

 

 

71,493

 

Amortization of deferred financing costs

 

 

1,426

 

 

 

295

 

 

 

2,452

 

 

 

589

 

Stock-based compensation

 

 

15,552

 

 

 

11,676

 

 

 

27,997

 

 

 

21,311

 

Deferred income taxes

 

 

(6,777

)

 

 

(1,347

)

 

 

(14,628

)

 

 

(4,406

)

Right-of-use assets

 

 

860

 

 

 

1,312

 

 

 

216

 

 

 

2,303

 

Other

 

 

768

 

 

 

(82

)

 

 

2,127

 

 

 

184

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

(171,532

)

 

 

(144,963

)

 

 

(147,183

)

 

 

(137,334

)

Prepaid expenses and other assets

 

 

13,679

 

 

 

12,877

 

 

 

(38,782

)

 

 

(26,680

)

Deferred commissions

 

 

(2,806

)

 

 

878

 

 

 

(914

)

 

 

1,822

 

Accounts payable and accrued liabilities

 

 

14,008

 

 

 

5,459

 

 

 

3,562

 

 

 

(1,718

)

Deferred revenue

 

 

105,003

 

 

 

115,016

 

 

 

19,865

 

 

 

41,358

 

Lease liabilities

 

 

(1,750

)

 

 

(1,839

)

 

 

(307

)

 

 

(3,751

)

Other liabilities

 

 

61

 

 

 

(72

)

 

 

(1,958

)

 

 

(396

)

Net cash provided by (used in) operating activities

 

 

(8,160

)

 

 

25,073

 

 

 

(100,661

)

 

 

(55,760

)

Investing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(1,865

)

 

 

(1,573

)

 

 

(3,746

)

 

 

(2,900

)

Proceeds from sale of property and equipment

 

 

14

 

 

 

29

 

 

 

22

 

 

 

35

 

Business acquisitions, net of cash acquired

 

 

 

 

 

 

 

 

(821,739

)

 

 

 

Net cash used in investing activities

 

 

(1,851

)

 

 

(1,544

)

 

 

(825,463

)

 

 

(2,865

)

Financing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock from employee equity plans

 

 

 

 

 

 

 

 

3,228

 

 

 

3,295

 

Shares repurchased for tax withholdings on vesting of restricted stock units

 

 

(1,682

)

 

 

(1,709

)

 

 

(3,250

)

 

 

(2,988

)

Proceeds from issuance of term debt, net of discount

 

 

(427

)

 

 

 

 

 

663,892

 

 

 

 

Repayments of long-term debt

 

 

(2,993

)

 

 

(1,250

)

 

 

(5,986

)

 

 

(2,500

)

Advances from revolving credit facility

 

 

70,000

 

 

 

 

 

 

70,000

 

 

 

 

Payments for financing costs

 

 

 

 

 

(84

)

 

 

 

 

 

(84

)

Changes in customer fund deposits

 

 

1,184

 

 

 

 

 

 

389

 

 

 

 

Net cash provided by (used in) financing activities

 

 

66,082

 

 

 

(3,043

)

 

 

728,273

 

 

 

(2,277

)

Foreign currency impacts on cash, cash equivalents, restricted cash, and funds held on behalf of customers

 

 

(159

)

 

 

241

 

 

 

(1,190

)

 

 

457

 

Net increase (decrease) in cash, cash equivalents, restricted cash, and funds held on behalf of customers

 

 

55,912

 

 

 

20,727

 

 

 

(199,041

)

 

 

(60,445

)

Cash, cash equivalents, restricted cash, and funds held on behalf of customers, beginning of period

 

 

89,255

 

 

 

109,094

 

 

 

344,208

 

 

 

190,266

 

Cash, cash equivalents, restricted cash, and funds held on behalf of customers, end of period

 

$

145,167

 

 

$

129,821

 

 

$

145,167

 

 

$

129,821

 

Supplemental cash flow disclosure:

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid for taxes

 

$

2,033

 

 

$

1,638

 

 

$

3,048

 

 

$

1,819

 

Cash paid for interest on outstanding debt

 

$

24,678

 

 

$

9,578

 

 

$

40,124

 

 

$

17,674

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures incurred but not yet paid

 

$

43

 

 

$

138

 

 

$

43

 

 

$

138

 

 


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

 

INSTRUCTURE HOLDINGS, INC.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(in thousands)

 

(unaudited)

 

 

 

As of June 30,

 

 

 

2024

 

 

2023

 

Cash and cash equivalents

 

$

137,743

 

 

$

126,003

 

Restricted cash

 

 

954

 

 

 

3,818

 

Funds held on behalf of customers

 

 

6,470

 

 

 

 

Total cash, cash equivalents, restricted cash, and funds held on behalf of customers

 

$

145,167

 

 

$

129,821

 

 

RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES


 

INSTRUCTURE HOLDINGS, INC.

 

RECONCILIATION OF NON-GAAP OPERATING INCOME

 

(in thousands)

 

(unaudited)

 

 

 

Three months ended
June 30,

 

 

Six months ended
June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Loss from operations

 

$

(1,191

)

 

$

(2,078

)

 

$

(7,271

)

 

$

(7,992

)

Stock-based compensation

 

 

15,552

 

 

 

11,856

 

 

 

27,997

 

 

 

21,866

 

Transaction costs(1)

 

 

6,264

 

 

 

2,317

 

 

 

11,879

 

 

 

6,153

 

Globalization costs(2)

 

 

3,481

 

 

 

83

 

 

 

4,371

 

 

 

92

 

Restructuring costs(3)

 

 

2,724

 

 

 

1,514

 

 

 

7,654

 

 

 

4,741

 

Technology modernization costs(4)

 

 

2,246

 

 

 

695

 

 

 

4,512

 

 

 

910

 

Other non-recurring costs(5)

 

 

22

 

 

 

24

 

 

 

124

 

 

 

80

 

Amortization of acquisition-related intangibles

 

 

42,898

 

 

 

35,744

 

 

 

86,224

 

 

 

71,492

 

Non-GAAP operating income

 

$

71,996

 

 

$

50,155

 

 

$

135,490

 

 

$

97,342

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP operating margin

 

 

(0.7

)%

 

 

(1.6

)%

 

 

(2.2

)%

 

 

(3.1

)%

Non-GAAP operating margin

 

 

42.2

%

 

 

38.3

%

 

 

41.6

%

 

 

37.5

%

 

 

INSTRUCTURE HOLDINGS, INC.

 

RECONCILIATION OF NON-GAAP ADJUSTED EBITDA

 

(in thousands)

 

(unaudited)

 

 

 

Three months ended
June 30,

 

 

Six months ended
June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Net loss

 

$

(20,949

)

 

$

(10,973

)

 

$

(42,074

)

 

$

(22,830

)

Interest on outstanding debt and loss on debt extinguishment

 

 

26,495

 

 

 

10,287

 

 

 

49,280

 

 

 

19,772

 

Income tax benefit

 

 

(6,664

)

 

 

(672

)

 

 

(13,731

)

 

 

(2,797

)

Depreciation

 

 

1,399

 

 

 

1,092

 

 

 

2,742

 

 

 

2,295

 

Amortization

 

 

 

 

 

 

 

 

 

 

 

2

 

Stock-based compensation

 

 

15,552

 

 

 

11,856

 

 

 

27,997

 

 

 

21,866

 

Transaction costs(1)

 

 

6,264

 

 

 

2,317

 

 

 

11,879

 

 

 

6,153

 

Globalization costs(2)

 

 

3,481

 

 

 

83

 

 

 

4,371

 

 

 

92

 

Restructuring costs(3)

 

 

2,724

 

 

 

1,520

 

 

 

7,654

 

 

 

4,848

 

Technology modernization costs(4)

 

 

2,246

 

 

 

695

 

 

 

4,512

 

 

 

910

 

Other non-recurring costs(5)

 

 

22

 

 

 

24

 

 

 

124

 

 

 

80

 

Effects of foreign currency transaction (gains) and losses

 

 

515

 

 

 

(397

)

 

 

2,347

 

 

 

(748

)

Amortization of acquisition-related intangibles

 

 

42,898

 

 

 

35,744

 

 

 

86,224

 

 

 

71,492

 

Interest income

 

 

(563

)

 

 

(316

)

 

 

(2,962

)

 

 

(1,617

)

Adjusted EBITDA

 

$

73,420

 

 

$

51,260

 

 

$

138,363

 

 

$

99,518

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss margin

 

 

(12.3

)%

 

 

(8.4

)%

 

 

(12.9

)%

 

 

(8.8

)%

Adjusted EBITDA margin

 

 

43.1

%

 

 

39.1

%

 

 

42.5

%

 

 

38.3

%

 

 


INSTRUCTURE HOLDINGS, INC.

 

RECONCILIATION OF NON-GAAP NET INCOME

 

(in thousands, except per share data)

 

(unaudited)

 

 

 

Three months ended
June 30,

 

 

Six months ended
June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Net loss

 

$

(20,949

)

 

$

(10,973

)

 

$

(42,074

)

 

$

(22,830

)

Stock-based compensation

 

 

15,552

 

 

 

11,856

 

 

 

27,997

 

 

 

21,866

 

Amortization of acquisition-related intangibles

 

 

42,898

 

 

 

35,744

 

 

 

86,224

 

 

 

71,492

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

189

 

 

 

 

Transaction costs(1)

 

 

6,264

 

 

 

2,317

 

 

 

11,879

 

 

 

6,153

 

Globalization costs(2)

 

 

3,481

 

 

 

83

 

 

 

4,371

 

 

 

92

 

Restructuring costs(3)

 

 

2,724

 

 

 

1,520

 

 

 

7,654

 

 

 

4,848

 

Technology modernization costs(4)

 

 

2,246

 

 

 

695

 

 

 

4,512

 

 

 

910

 

Other non-recurring costs(5)

 

 

22

 

 

 

24

 

 

 

124

 

 

 

80

 

Effects of foreign currency transaction (gains) and losses

 

 

515

 

 

 

(397

)

 

 

2,347

 

 

 

(748

)

Tax effects of adjustments(6)

 

 

(18,309

)

 

 

(12,895

)

 

 

(36,103

)

 

 

(26,013

)

Non-GAAP net income

 

$

34,444

 

 

$

27,974

 

 

$

67,120

 

 

$

55,850

 

Non-GAAP net income per common share, basic

 

$

0.24

 

 

$

0.19

 

 

$

0.46

 

 

$

0.39

 

Non-GAAP net income per common share, diluted

 

$

0.23

 

 

$

0.19

 

 

$

0.46

 

 

$

0.39

 

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

 

 

146,107

 

 

 

143,647

 

 

 

145,781

 

 

 

143,381

 

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

 

 

146,656

 

 

 

145,150

 

 

 

146,461

 

 

 

144,979

 

 

 

INSTRUCTURE HOLDINGS, INC.

 

RECONCILIATION OF NON-GAAP GROSS PROFIT

 

(in thousands)

 

(unaudited)

 

 

 

Three months ended
June 30,

 

 

Six months ended
June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Gross profit

 

$

112,004

 

 

$

85,781

 

 

$

213,106

 

 

$

168,792

 

Stock-based compensation

 

 

1,735

 

 

 

1,096

 

 

 

2,944

 

 

 

1,889

 

Transaction costs(1)

 

 

264

 

 

 

495

 

 

 

436

 

 

 

675

 

Globalization costs(2)

 

 

1,027

 

 

 

 

 

 

1,267

 

 

 

 

Restructuring costs(3)

 

 

372

 

 

 

17

 

 

 

1,290

 

 

 

241

 

Technology modernization costs(4)

 

 

1,096

 

 

 

491

 

 

 

2,350

 

 

 

606

 

Amortization of acquisition-related intangibles

 

 

18,625

 

 

 

16,265

 

 

 

36,463

 

 

 

32,338

 

Non-GAAP gross profit

 

$

135,123

 

 

$

104,145

 

 

$

257,856

 

 

$

204,541

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP gross margin

 

 

65.7

%

 

 

65.4

%

 

 

65.4

%

 

 

64.9

%

Non-GAAP gross margin

 

 

79.3

%

 

 

79.5

%

 

 

79.1

%

 

 

78.7

%

 

 

INSTRUCTURE HOLDINGS, INC.

 

RECONCILIATION OF NON-GAAP SUBSCRIPTION AND SUPPORT GROSS PROFIT

 

(in thousands)

 

(unaudited)

 

 

 

Three months ended
June 30,

 

 

Six months ended
June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Subscription and support gross profit

 

$

108,142

 

 

$

80,192

 

 

$

206,487

 

 

$

159,862

 

Stock-based compensation

 

 

792

 

 

 

474

 

 

 

1,357

 

 

 

853

 

Transaction costs(1)

 

 

195

 

 

 

487

 

 

 

323

 

 

 

647

 

Globalization costs(2)

 

 

675

 

 

 

 

 

 

675

 

 

 

 

Restructuring costs(3)

 

 

230

 

 

 

11

 

 

 

764

 

 

 

30

 

Technology modernization costs(4)

 

 

1,094

 

 

 

491

 

 

 

2,272

 

 

 

606

 

Amortization of acquisition-related intangibles

 

 

18,625

 

 

 

16,265

 

 

 

36,463

 

 

 

32,338

 

Non-GAAP subscription and support gross profit

 

$

129,753

 

 

$

97,920

 

 

$

248,341

 

 

$

194,336

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP subscription and support gross margin

 

 

68.6

%

 

 

67.6

%

 

 

68.3

%

 

 

67.4

%

Non-GAAP subscription and support gross margin

 

 

82.3

%

 

 

82.6

%

 

 

82.2

%

 

 

82.0

%

 


INSTRUCTURE HOLDINGS, INC.

 

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

 

(in thousands)

 

(unaudited)

 

 

 

Three months ended
June 30,

 

 

Six months ended
June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities

 

$

(8,160

)

 

$

25,073

 

 

$

(100,661

)

 

$

(55,760

)

Purchases of property and equipment

 

 

(1,865

)

 

 

(1,573

)

 

 

(3,746

)

 

 

(2,900

)

Proceeds from disposals of property and equipment

 

 

14

 

 

 

29

 

 

 

22

 

 

 

35

 

Free cash flow

 

$

(10,011

)

 

$

23,529

 

 

$

(104,385

)

 

$

(58,625

)

Cash paid for interest on outstanding debt

 

 

24,678

 

 

 

9,578

 

 

 

40,124

 

 

 

17,674

 

Cash settled stock-based compensation

 

 

 

 

 

183

 

 

 

 

 

 

557

 

Unlevered free cash flow

 

$

14,667

 

 

$

33,290

 

 

$

(64,261

)

 

$

(40,394

)

Transaction costs(7)

 

 

3,098

 

 

 

1,611

 

 

 

10,313

 

 

 

8,370

 

Globalization costs(7)

 

 

3,415

 

 

 

83

 

 

 

4,941

 

 

 

92

 

Restructuring costs(7)

 

 

3,809

 

 

 

2,000

 

 

 

6,661

 

 

 

5,309

 

Technology modernization costs(7)

 

 

662

 

 

 

46

 

 

 

2,647

 

 

 

231

 

Other non-recurring costs(7)

 

 

33

 

 

 

32

 

 

 

118

 

 

 

95

 

Adjusted unlevered free cash flow

 

$

25,684

 

 

$

37,062

 

 

$

(39,581

)

 

$

(26,297

)

 

 

INSTRUCTURE HOLDINGS, INC.

 

RECONCILIATION OF NET DEBT

 

(in thousands)

 

(unaudited)

 

 

 

June 30,
2024

 

 

December 31,
2023

 

Long-term principal, current

 

$

11,972

 

 

$

5,000

 

Long-term principal, net of current portion

 

 

1,158,292

 

 

 

486,250

 

Borrowings under revolving credit facility

 

 

70,000

 

 

 

 

Cash, cash equivalents, restricted cash, and funds held on behalf of customers

 

 

(145,167

)

 

 

(344,208

)

Net debt

 

$

1,095,097

 

 

$

147,042

 

 

 

 

 

 

 

 

Gross leverage ratio

 

 

4.9

 

 

 

2.3

 

Net leverage ratio

 

 

4.3

 

 

 

0.7

 

 

 

INSTRUCTURE HOLDINGS, INC.

 

RECONCILIATION OF TRAILING TWELVE MONTHS NON-GAAP ADJUSTED EBITDA

 

(in thousands)

 

(unaudited)

 

 

 

Three months ended
June 30,

 

 

Three months ended
March 31,

 

 

Three months ended
December 31

 

 

Three months ended
September 30,

 

 

 

2024

 

 

2024

 

 

2023

 

 

2023

 

Net loss

 

$

(20,949

)

 

$

(21,125

)

 

$

(5,767

)

 

$

(5,481

)

Interest on outstanding debt and loss on debt extinguishment

 

 

26,495

 

 

 

22,785

 

 

 

11,382

 

 

 

10,868

 

Income tax (benefit) expense

 

 

(6,664

)

 

 

(7,067

)

 

 

459

 

 

 

(1,920

)

Depreciation

 

 

1,399

 

 

 

1,343

 

 

 

1,305

 

 

 

1,186

 

Stock-based compensation

 

 

15,552

 

 

 

12,445

 

 

 

10,575

 

 

 

11,755

 

Transaction costs(1)

 

 

6,264

 

 

 

5,615

 

 

 

5,857

 

 

 

3,502

 

Globalization costs(2)

 

 

3,481

 

 

 

890

 

 

 

54

 

 

 

381

 

Restructuring costs(3)

 

 

2,724

 

 

 

4,930

 

 

 

2,085

 

 

 

541

 

Technology modernization costs(4)

 

 

2,246

 

 

 

2,266

 

 

 

817

 

 

 

543

 

Other non-recurring costs(5)

 

 

22

 

 

 

102

 

 

 

34

 

 

 

31

 

Effects of foreign currency transaction (gains) and losses

 

 

515

 

 

 

1,832

 

 

 

(3,343

)

 

 

2,420

 

Amortization of acquisition-related intangibles

 

 

42,898

 

 

 

43,326

 

 

 

35,731

 

 

 

35,744

 

Interest income

 

 

(563

)

 

 

(2,398

)

 

 

(2,716

)

 

 

(1,346

<