Download - Instructure investor deck - nov 2017
FORWARDING LOOKING STATEMENTS & NON-GAAP MEASURES This presentation and the accompanying oral commentary contain “forward-looking” statements, within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995 that are based on our beliefs and assumptions and on information currently available to us. Forward-looking statements include information concerning our possible or assumed future results of operations and financial performance, business strategies, potential growth opportunities and the effects of competition. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “believe,” “will,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “might, ”approximately,” “expect,” “predict,” “could,” “potentially” or the negative of these terms or other similar expressions. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Important risk factors including, but not limited to, risks associated with anticipated growth in our addressable market; our potential market opportunity; competitive factors, our ability to build and expand our sales efforts, risks associated with international operations and general economic and industry conditions are described more fully in the Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, which was filed with the Securities and Exchange Commission (the “SEC”) on November 1, 2017 and other documents filed with the SEC and could cause actual results to vary from expectations. Forward-looking statements represent our management’s beliefs and assumptions only as of the date of this presentation. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons why actual results could differ materially from those anticipated in the forward-looking statements, even if new information becomes available in the future. This presentation includes certain non-GAAP financial measures as defined by the SEC rules. These non-GAAP financial measures are in addition to, and not as a substitute for or superior to measures of financial performance prepared in accordance with U.S. GAAP. There are a number of limitations related to the use of these non-GAAP financial measures versus their nearest GAAP equivalents. For example, other companies may calculate non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. As required by Regulation G, we have provided a reconciliation of those measures to the most directly comparable GAAP measures, which is available in the appendix. 2
$73M$113M
$152M
$213M
$19M
$32M
$52M
$76M
$92M
$145M
$204M
$289M
2013 2014 2015 2016
$26.1M
$44.4M
$73.2M
$110.9M
2013 2014 2015 2016
+70%
+65%
+51%
100% native cloud
1As of September 30, 2017
>100% retention revenue
THE INSTRUCTURE STORY High Growth Subscription Revenue
>3,000 customers in 50 countries1
Recurring (2016 ~88%)
Non-recurring (2016 ~12%)
5
Deferred Revenue
Backlog
Backlog & Deferred Revenue 2017 Total Addressable Market
$7.7 Billion
Headquartered in Salt Lake City with 1,000+ employees worldwide
Flagship products Canvas & Bridge
EDU
CORP
90% Customer Support Satisfaction
Offices in London, Sydney, Hong Kong, Brazil
BUILDING SUPERIOR SOFTWARE THAT MEETS EVOLVING CONSUMER DEMAND
Consumerized Collaborative
Mobile Engaging
6
SUBSTANTIAL MARKET OPPORTUNITY With Numerous Adjacencies
2016
2018
Learning Management Performance Management
Workforce Management Compensation Management Recruiting
$9.1 Billion3
$5.1 Billion4
$5.1 Billion1
$5.5 Billion2
1 Learning Management System Market. Source: MarketsandMarkets, October 2013. 2 Represents market opportunity for Performance Management, Workforce Management, Recruiting and Compensation Management. Source: IDC, June 2015. 3 Learning Management System Market. Source: MarketsandMarkets, October 2013, plus Performance Management Market. Source: IDC, June 2015. 4 Represents market opportunity for Workforce Management, Recruiting and Compensation Management. Source: IDC, June 2015. These additional markets may present opportunities for Instructure.
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Learning Management
Performance Management Workforce Management Compensation Management Recruiting
WE ARE THE CENTER OF THE LEARNING ECOSYSTEM
Corporations Schools
Information Systems/Analytics Content Applications
LEARNING MANAGEMENT SYSTEMS
Instructors Learners
8
OVER 3,000 CUSTOMERS ACROSS CATEGORIES
Hig
her E
d K
– 1
2 In
tern
atio
nal
Cor
pora
te
Used by 7 Ivy League
Schools
Used by K-12 Schools in 49 States
Serving 50+
Countries
Rapid Adoption
Since 2015
1As of September 30, 2017.
9
1
10
BRIDGE
CANVAS INTERNATIONAL
CANVAS K-12
CANVAS HIGHER ED
GROWTH STRATEGY OFFERS CONTINUED REVENUE STREAMS New Products + New Markets = Expanded TAM
2011 2012 2013 2014 2015 2016 2017
GROWTH STRATEGY OFFERS CONTINUED REVENUE STREAMS
11
BRIDGE
CANVAS INTERNATIONAL
CANVAS K-12
CANVAS HIGHER ED
NEW PRODUCTS
New Products + New Markets = Expanded TAM
2011 2012 2013 2014 2015 2016 2017 & Beyond…
INNOVATIVE MANAGEMENT
Josh Coates EMC Corp • Mozy.com • Scale Eight CEO
Steve Kaminsky Radisphere • TriZetto • Ernst & Young • McDonald’s Corporation
CFO
SVP People and Places Jeff Weber
Ancestry • The Russell Group • Shell Oil Company
FamilySearch • Microsoft
David Burggraaf SVP Engineering
Vmware • InfoTrax Systems • GE
Mitch Macfarlane COO
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Matt Kaminer Collective • Epocrates • MediMedia USA • WebMD
SVP General Counsel and Secretary
FINANCIAL HIGHLIGHTS
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Attractive Long Range Model
Strong Unit Economics
Investing for Continued Growth
Enhanced Visibility Through Multi-Year Contracts
Solid Revenue Growth
$44.4M
$73.2M
$110.9M$115.0M
2014 2015 2016 YTD
+65%
+51%
Revenue Growth
REVENUE & PROFITABILITY HISTORY 2014 – Q3 2017
1Non-GAAP gross margin is before stock-based compensation and payroll tax expense on secondary stock purchase transactions. 2Operating loss before stock-based compensation, payroll tax expense on secondary stock purchase transactions and amortization of acquisition-related intangibles
67% 68%71% 72%
2014 2015 2016 YTD
Non-GAAP Gross Margin1
(66%)
(57%)
(39%)
(24%)
2014 2015 2016 YTD
($29M) ($41M)($43M)
($27M)
Non-GAAP Operating Loss as a % of Revenue2
15
Recurring (2016 ~88%)
Non-recurring (2016 ~12%)
$32M
$52M
$76M
Dec-31-2014 Dec-31-2015 Dec-31-2016
ENHANCED VISIBILITY INTO FUTURE PERIODS 2014 – 2016 Deferred Revenue
$113M
$152M
$213M
Dec-31-2014 Dec-31-2015 Dec-31-2016
Backlog1
1Backlog represents future non-cancellable amounts to be invoiced under our agreements.
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72% 71%
60%
52%
2014 2015 2016 YTD
Non-GAAP Sales and Marketing1
(% of Revenue)
INVESTING FOR GROWTH
1Non-GAAP Sales and Marketing, Research and Development and General and Administration expenses are before stock-based compensation, payroll tax expense on secondary stock purchase transactions and amortization of acquisition-related intangibles.
38%
31%29%
27%
2014 2015 2016 YTD
Non-GAAP Research and Development1
(% of Revenue)
23%
22%
21%
17%
2014 2015 2016 YTD
Non-GAAP General and Administration1
(% of Revenue)
17
SEASONALLY STRONG Q3 LEADS TO RAPIDLY EXPANDING FCF
Non-GAAP Gross Margin2 %
1Free cash flow is a Non-GAAP measure and is derived by netting operating cash flow with the purchase of PP&E and intangibles, and proceeds from disposal of PP&E.
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1
$18.4M
($14.5M)
($21.3M)
($10.8M)
$20.1M
($17.3M)
($31.2M)
($15.7M)
$39.7M
Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17
HIGH CUSTOMER LIFETIME VALUE C
umul
ativ
e C
ontr
ibut
ion
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Lifetime Customer Acquisition Costs
Breakeven
Customer Lifetime Value
ACQUIRE RETAIN RENEW
55%67% 65% 66% 61%
-111%2011 2012 2013 2014 2015 2016
CustomerStartDate
CM%
STRONG FOUNDATION FOR BUILDING TOWARD PROFITABILITY 2016 Contribution Margin1 by customer cohort; based on Full Year 2016 revenue and expenses
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1Defined as gross margin less sales, direct marketing and account management expense. 2Lower primarily due to early adopter pricing. 3Lower primarily due to cost of services completed in 2016 for late 2015 customers. 41st year cost (2016) includes customer acquisition and implementation
2 3 4
LONG-RANGE MODEL
2013 2014 2015 2016 Long-Term
Target
1Non-GAAP cost of revenue is before stock-based compensation and payroll tax expense on secondary stock purchase transactions. 2Non-GAAP operating expenses are before stock-based compensation, payroll tax expense on secondary stock purchase transactions and amortization of acquisition-related intangibles. 21
Revenue 100% 100% 100% 100% 100%
CostofRevenue1
41% 33% 32% 29% ~25%
Non-GAAPGrossMargin
59% 67% 68% 71% ~75%
S&M2 72% 72% 71% 60% 26-28%
R&D2 36% 38% 31% 29% 15-17%
G&A2 19% 23% 22% 21% 9-10%
Non-GAAPOperatingIncome/Loss
(68%) (66%) (57%) (39%) 20-25%
INVESTMENT HIGHLIGHTS
Rapid and Widespread Customer Adoption
Substantial Market Opportunity
Native, Cloud-Based Platform
Focused on User-Experience and Simplicity
Solid Revenue Growth
Enhanced Visibility Through Multi-Year
Contracts
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Net Revenue Retention
Greater than 100%1
1 Net revenue retention rate is calculated by dividing the total revenue obtained from a particular customer in a given month by the total revenue from that customer from the same month in the immediately preceding year.
Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17
Revenue $20.9M $21.8M $23.3M $25.9M $30.1M $31.5M $34.0M $38.0M $42.9MYoY% 68% 59% 59% 63% 44% 45% 46% 47% 42%
CostofSales $6.8 $6.8 $7.3 $7.6 $8.6 $9.1 $9.6 $11.0 $12.5
GrossProfit $14.1M $15.0M $16.0M $18.3M $21.5M $22.4M $24.4M $27.1M $30.5MGM% 67% 69% 68% 71% 71% 71% 72% 71% 71%
S&M $13.2 $15.2 $16.2 $18.0 $17.8 $18.0 $19.0 $21.3 $22.1%ofRev 63% 70% 69% 70% 59% 57% 56% 56% 52%
R&D $6.5 $6.7 $7.8 $8.7 $9.3 $10.1 $11.2 $11.1 $12.6%ofRev 31% 31% 33% 34% 31% 32% 33% 29% 29%
G&A $4.5 $5.0 $5.7 $6.0 $6.7 $7.1 $7.0 $7.6 $8.3%ofRev 22% 23% 25% 23% 22% 23% 21% 20% 19%
OPEX $24.2M $26.9M $29.7M $32.8M $33.8M $35.3M $37.2M $40.0M $43.0M%ofRev 116% 123% 127% 127% 112% 112% 109% 105% 100%
OperatingLoss ($10.1M) ($11.9M) ($13.8M) ($14.5M) ($12.3M) ($12.8M) ($12.8M) ($12.9M) ($12.6M)%ofRev (48%) (55%) (59%) (56%) (41%) (41%) (38%) (34%) (29%)
Warrantliabilityexpense ($0.0) ($0.1) $0.1 $0.0 ($0.0) $0.0 ($0.0) ($0.1) ($0.0)OtherIncome/Expense ($0.1) ($0.0) ($0.0) ($0.0) ($0.0) ($0.0) $0.1 $0.1 $0.3
Lossbeforeincometaxes ($10.2M) ($12.0M) ($13.7M) ($14.5M) ($12.3M) ($12.9M) ($12.7M) ($12.9M) ($12.3M)Incometaxes ($0.0) ($0.1) ($0.0) ($0.1) ($0.0) ($0.1) ($0.0) ($0.1) ($0.1)
NetLoss ($10.2M) ($12.1M) ($13.7M) ($14.6M) ($12.3M) ($12.9M) ($12.7M) ($13.0M) ($12.4M)%ofRev (49%) (56%) (59%) (56%) (41%) (41%) (37%) (34%) (29%)
GAAP INCOME STATEMENT
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Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17
Revenue $20.9M $21.8M $23.3M $25.9M $30.1M $31.5M $34.0M $38.0M $42.9MYoY% 68% 59% 59% 63% 44% 45% 46% 47% 42%
CostofSales $6.7 $6.7 $7.2 $7.4 $8.4 $8.9 $9.4 $10.6 $12.1
GrossProfit $14.2M $15.1M $16.1M $18.5M $21.8M $22.7M $24.6M $27.4M $30.9MGM% 68% 69% 69% 72% 72% 72% 72% 72% 72%
S&M $12.8 $14.7 $15.5 $17.3 $17.0 $17.2 $18.0 $20.4 $20.9%ofRev 61% 67% 67% 67% 56% 54% 53% 54% 49%
R&D $6.2 $6.2 $7.0 $7.9 $8.3 $9.0 $10.0 $9.8 $10.9%ofRev 30% 28% 30% 30% 27% 29% 29% 26% 25%
G&A $4.3 $4.6 $5.1 $5.4 $5.9 $6.3 $6.0 $6.6 $7.3%ofRev 20% 21% 22% 21% 20% 20% 18% 17% 17%
OPEX $23.3M $25.5M $27.7M $30.6M $31.2M $32.5M $34.0M $36.8M $39.1M%ofRev 111% 117% 119% 118% 104% 103% 100% 97% 91%
OperatingLoss ($9.1M) ($10.4M) ($11.5M) ($12.1M) ($9.5M) ($9.9M) ($9.4M) ($9.4M) ($8.3M)%ofRev (43%) (48%) (49%) (47%) (31%) (31%) (28%) (25%) (19%)
NetLoss ($9.2M) ($10.5M) ($11.6M) ($12.1M) ($9.5M) ($10.0M) ($9.4M) ($9.4M) ($8.1M)%ofRev (44%) (48%) (50%) (47%) (32%) (32%) (28%) (25%) (19%)
NON GAAP INCOME STATEMENT
Non GAAP Net Operating Loss excludes change in fair value warrant liability.
25
2013 2014 2015 2016 YTDGAAPOperatingLoss ($21.8M) ($38.7M) ($52.0M) ($53.4M) ($38.3M)
AmortizationofAcquisitionRelatedIntangiblesCostofSales $- $- $- $- $-S&M - - - - -R&D - 0.0 0.0 0.0 -G&A - - - - -Total - $0.0M $0.0M $0.0M -
StockCompensationExpenseCostofSales $0.0M $0.3M $0.3M $1.0M $1.0MS&M 1.6 2.9 1.2 3.0 3.4R&D 1.6 4.0 1.4 3.9 4.4G&A 0.4 1.1 6.3 2.8 3.0Total $3.6M $8.2M $9.2M $10.7M $11.7M
PayrollTaxonSecondaryStockPurchaseCostofSales $- $0.0M $- $- $-S&M 0.3 0.5 - (0.1) (0.3)R&D 0.3 0.7 - (0.1) (0.3)G&A - 0.1 1.3 (0.1) (0.0)Total $0.5M $1.2M $1.3M ($0.2M) ($0.5M)
NonGAAPOperatingLoss ($17.7M) ($29.3M) ($41.4M) ($42.9M) ($27.1M)
GAAP TO NON-GAAP RECONCILIATION
26
2013 2014 2015 2016 YTDRevenue $26.1M $44.4M $73.2M $110.9M $115.0M
GAAPGrossMargin $15.4M $29.2M $49.1M $78.1M $81.9MAmortizationofAcquisitionRelatedIntangibles - - - - -StockCompensationExpense 0.0 0.3 0.3 1.0 1.0PayrollTaxonSecondaryStockPurchase - 0.0 - - -
NonGAAPGrossMargin $15.5M $29.6M $49.5M $79.1M $82.8MNonGAAPGrossMargin% 59% 67% 68% 71% 72%
GAAPSales&Marketing $20.7M $35.4M $53.5M $70.0M $62.4MAmortizationofAcquisitionRelatedIntangibles - - - - -StockCompensationExpense 1.6 2.9 1.2 3.0 3.4PayrollTaxonSecondaryStockPurchase 0.3 0.5 - (0.1) (0.3)
NonGAAPSales&Marketing $18.8M $32.1M $52.2M $67.0M $59.3MNonGAAPSales&Marketing% 72% 72% 71% 60% 52%
GAAPResearch&Development $11.2M $21.3M $24.2M $36.0M $34.8MAmortizationofAcquisitionRelatedIntangibles - 0.0 0.0 0.0 -StockCompensationExpense 1.6 4.0 1.4 3.9 4.4PayrollTaxonSecondaryStockPurchase 0.3 0.7 - (0.1) (0.3)
NonGAAPResearch&Development $9.4M $16.7M $22.7M $32.2M $30.7MNonGAAPResearch&Development% 36% 38% 31% 29% 27%
GAAPGeneral&Administrative $5.3M $11.3M $23.5M $25.5M $22.9MAmortizationofAcquisitionRelatedIntangibles - - - - -StockCompensationExpense 0.4 1.1 6.3 2.8 3.0PayrollTaxonSecondaryStockPurchase - 0.1 1.3 (0.1) (0.0)
NonGAAPGeneral&Administrative $4.9M $10.1M $15.9M $22.8M $20.0MNonGAAPGeneral&Administrative% 19% 23% 22% 21% 17%
GAAP TO NON-GAAP RECONCILIATION
27
Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17
NetCashProvidedbyOperatingActivities
$19.7M ($12.3M) ($18.9M) ($9.5M) $21.7M ($14.9M) ($27.7M) ($11.9M) $43.6M
PurchaseofPP&E&Intangibles,NetofDisposals
($1.3) ($2.2) ($2.4) ($1.3) ($1.5) ($2.5) ($3.4) ($3.8) ($3.9)
FreeCashFlow $18.4M ($14.5M) ($21.3M) ($10.8M) $20.1M ($17.3M) ($31.2M) ($15.7M) $39.7M
FREE CASH FLOW RECONCILIATION
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