Instructure(US:INST)2022-08-02 02:07Financial Data and Key Metrics Changes - Instructure reported Q2 2022 GAAP revenue of $114.6 million, representing a 22% year-over-year increase, while Allocated Combined Receipts (ACR) reached $114.9 million, up 20% year-over-year [13][39] - Non-GAAP gross margins improved to 77.6%, an increase of 390 basis points year-over-year, indicating operational efficiencies [14][39] - Adjusted EBITDA for Q2 grew 28% year-over-year to $39.8 million, with a margin of 35% [14][46] - Deferred revenue at the end of Q2 was $283.3 million, up 13% year-over-year, and Remaining Performance Obligations (RPO) were $783.7 million, up 17% year-over-year [41] Business Line Data and Key Metrics Changes - Subscription and support ACR accounted for 90% of Q2 revenue at $103.2 million, up 19% year-over-year, driven by the core Canvas LMS product [40] - Professional services and other ACR made up 10% of revenue at $11.7 million, up 24% year-over-year, due to strong implementation and training services [40] Market Data and Key Metrics Changes - In the U.S. Higher Education LMS market, Canvas usage increased to 42% of institutions, up from 39% the previous year, indicating a growing market share [17] - International markets remain the fastest-growing segment, with significant agreements signed, such as with the Brazilian College of Radiology [23][24] Company Strategy and Development Direction - The company is focused on expanding its Instructure Learning Platform through R&D investments and strategic acquisitions, aiming to capture a larger share of the $30 billion market opportunity [10][15] - The channel partner program is being leveraged to enter new international markets cost-effectively [11][24] - The company plans to continue investing in R&D and sales headcount despite macroeconomic challenges, indicating a commitment to long-term growth [28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the financial model, citing solid top-line growth and strong margins [12] - The company remains insulated from macroeconomic pressures, with a diverse revenue stream that mitigates risks from enrollment declines in higher education [66][70] - Management anticipates continued demand for digital transformation in K-12 education, driven by the need for modern LMS solutions [58][66] Other Important Information - The majority of the $190 billion allocated for K-12 schools under the ESSER fund remains unspent, presenting future opportunities for technology spending [32][33] - The company hosted over 12,000 registrants at InstructureCon 2022, showcasing its brand and product improvements [34] Q&A Session Summary Question: Update on K-12 competitive environment and market penetration - Management noted that approximately 40% to 45% of the K-12 market remains unpaid, with expectations for continued growth in paid LMS adoption [60] Question: Impact of macroeconomic conditions on education customers - Management indicated that the education market is generally countercyclical, with a stable demand for digital transformation despite potential recessionary pressures [65][66] Question: Enrollment trends in higher education and their impact - Management acknowledged declining enrollments but emphasized that the shift towards online and non-traditional education mitigates the impact on their business [69][70] Question: International demand and market performance - Management confirmed that international markets, particularly APAC and Latin America, continue to show strong growth without significant changes in demand [82] Question: Assessment solutions and cross-selling opportunities - Management highlighted that the integration of assessment solutions with the LMS is a key growth driver, with significant potential for cross-selling within existing customer accounts [97][98]