Instructure(US:INST)2023-11-01 20:06Financial Performance - Revenue for Q3 2023 was $134.9 million, up from $122.4 million in Q3 2022, representing a growth of 20.5%[93] - Net loss for Q3 2023 was $5.5 million, an improvement from a net loss of $10.1 million in Q3 2022[93] - Adjusted EBITDA for Q3 2023 was $58.2 million, compared to $47.6 million in Q3 2022, reflecting a 22.3% increase[93] - Operating cash flow for Q3 2023 was $182.6 million, slightly up from $179.9 million in Q3 2022[93] - Free cash flow for Q3 2023 was $180.8 million, compared to $178.3 million in Q3 2022[93] - Revenue for the nine months ended September 30, 2023, was $394.8 million, an increase from $350.5 million in the same period of 2022, marking a growth of 12.6%[93] - Adjusted EBITDA for the nine months ended September 30, 2023, was $157.7 million, up from $131.0 million in the same period of 2022, a growth of 20.5%[93] - Total revenue for the three months ended September 30, 2023, was $134.9 million, a 10% increase from $122.4 million in the same period of 2022[115] - Subscription and support revenue increased by $13.4 million (12%) to $123.1 million for the three months ended September 30, 2023, driven by new customer acquisition and existing customer expansion[119] - Subscription and support revenue for the nine months ended September 30, 2023, increased by $44.0 million (14%) to $360.2 million compared to $316.1 million in the same period of 2022[121] Cost and Expenses - Total cost of revenue for the three months ended September 30, 2023, was $47.4 million, an 8% increase from $44.1 million in the same period of 2022[123] - Operating expenses for the three months ended September 30, 2023, totaled $82.9 million, representing 61% of total revenue, a decrease from 66% in the same period of 2022[117] - Total operating expenses for the nine months ended September 30, 2023, were $259.7 million, up from $235.7 million in the same period of 2022[115] - Subscription and support cost of revenue increased by $3.3 million for the three months ended September 30, 2023, primarily due to a $2.5 million increase in web hosting costs[124] - For the nine months ended September 30, 2023, subscription and support cost of revenue rose by $9.1 million, driven by a $5.8 million increase in web hosting costs and a $1.9 million increase in amortization of acquisition-related intangibles[126] - Sales and marketing expenses increased by $1.0 million for the three months ended September 30, 2023, with a notable $1.4 million rise in salaries, wages, and payroll-related benefits[129] - Research and development expenses increased by $9.4 million for the nine months ended September 30, 2023, mainly due to a $7.4 million increase in salaries, wages, and payroll-related benefits[133] - General and administrative expenses increased by $1.1 million for the three months ended September 30, 2023, attributed to a $1.7 million rise in third-party contractor and consulting costs[135] Cash Flow and Liquidity - As of September 30, 2023, the company had cash, cash equivalents, and restricted cash totaling $308.6 million, up from $190.3 million as of December 31, 2022[143] - Net cash provided by operating activities for the nine months ended September 30, 2023, was $127.0 million, compared to $121.5 million for the same period in 2022, reflecting a year-over-year increase of 4.6%[156][157] - Net cash used in investing activities during the nine months ended September 30, 2023, was $4.7 million, a significant decrease from $24.4 million in the same period of 2022, primarily due to reduced acquisition costs[159] - Net cash used in financing activities for the nine months ended September 30, 2023, was $2.8 million, compared to a net cash provided of $1.5 million in the same period of 2022, indicating a shift in financing strategy[161][162] - Free cash flow for the three months ended September 30, 2023, was $180.827 million, compared to $178.313 million for the same period in 2022, reflecting a year-over-year increase of 1.4%[171] Debt and Interest Rates - The interest rate on the Senior Term Loan increased from 6.12% as of December 31, 2022, to 8.68% as of September 30, 2023, impacting the cost of debt[97] - The company had outstanding borrowings of $492.5 million on the Senior Term Loan as of September 30, 2023, with no borrowings under the Senior Revolver[154] - The transition from LIBOR to SOFR for interest rate calculations became effective on July 5, 2023, impacting the company's credit facilities[153] - The interest rate on the Senior Revolver is 2.5%, while the Senior Term Loan bears interest at 2.75% plus a variable applicable rate[187] - The applicable rate for the Senior Term Loan was 8.68% as of September 30, 2023, compared to 6.12% on December 31, 2022[187] Strategic Initiatives - The company acquired Eesysoft, Kimono LLC, Concentric Sky, and LearnPlatform to enhance its platform capabilities and expand its market reach[91] - The company aims to grow its customer base by replacing legacy systems in North America and expanding internationally, particularly in the K-12 sector[99] - The company capitalized $4.7 million in software development costs during the nine months ended September 30, 2023, focusing on enhancing its software platform[159] Future Outlook and Risks - The company expects operating cash flows to improve as operational efficiency increases and economies of scale are realized[144] - The company anticipates continued economic uncertainty, including high inflation and labor shortages, which may impact future performance[178] - The company is focused on maintaining growth rates and customer acquisition while managing expenses effectively[180] - The company has not entered into any hedging arrangements for foreign currency risk, which may affect future financial results[185] - The company expects to face challenges related to compliance with various regulatory regimes and potential litigation risks[184] - A significant portion of the company's contracts coincides with customers' fiscal year-end of June 30, leading to seasonal fluctuations in cash flows and revenue recognition[156]