Instructure(US:INST)2022-02-18 00:58Financial Data and Key Metrics Changes - Fourth quarter GAAP revenue was $110.6 million, up 26% year-over-year, while allocated combined receipts (ACR) was $111.4 million, up 23% year-over-year [8][25] - Full year 2021 GAAP revenue was $405.4 million, up 34% year-over-year, while ACR was $414.7 million, up 28% year-over-year [8] - Fourth quarter adjusted EBITDA grew 57% year-over-year to $41.7 million, representing a 37% margin [10] - Full year 2021 adjusted EBITDA more than doubled to $146.7 million, with a conversion of 115% of full year adjusted EBITDA to adjusted unlevered free cash flow [10][33] - Total customers grew 14% year-over-year to nearly 7,000 at the end of Q4, with a net revenue retention rate of 109% in 2021 [10][31] Business Line Data and Key Metrics Changes - Subscription and support ACR accounted for 91% of fourth quarter revenue at $101 million, up 27% year-over-year, driven by momentum in core Canvas LMS products [25] - Professional services and other revenue accounted for 9% of fourth quarter revenue at $9.6 million, up 22% year-over-year, primarily due to strong implementation and training services in K-12 [25] - The company saw strong uptake of its impact solutions in both higher education and K-12 markets, with significant wins such as Walden University and Hartford County Public Schools [11][12] Market Data and Key Metrics Changes - The international market remained the fastest-growing segment, with significant deals such as Australian Catholic University replacing Moodle with Canvas [13] - The company expects the number of RFP opportunities in U.S. higher education to significantly increase in 2022, indicating a favorable market environment [21] - The Department of Education announced $41 billion in additional funding through the American Rescue Plan, which is expected to positively impact the funding environment for educational institutions [19] Company Strategy and Development Direction - The company is focused on expanding its platform and driving long-term growth through disciplined investments and strategic M&A [15][16] - A new channel partner program was launched to enhance growth in APAC, EMEA, and LatAm markets, allowing partners to offer implementation, training, and support services [17][18] - The company aims to address the complex challenges in the education sector, including fragmented user experiences and unclear ROI, through its learning platform [20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the pipeline for 2022, noting increased RFP activity in U.S. higher education and a strong outlook for K-12 [41][46] - The company anticipates that the international business will continue to grow rapidly, supported by the new channel partner program [44] - Management highlighted the importance of addressing learning loss in K-12 through assessment solutions, which are expected to see increased demand [52] Other Important Information - The company ended Q4 with $169.2 million in cash and cash equivalents, and $493.3 million in long-term debt, resulting in a net debt to trailing 12-month adjusted EBITDA ratio of 2.2 times [32] - Full year 2021 unlevered free cash flow was $156.6 million, a 124% year-over-year increase [33] - The company plans to use adjusted unlevered free cash flow as its primary cash flow metric moving forward [36] Q&A Session Summary Question: What does the pipeline look heading into 2022 across higher ed, K-12, and international segments? - Management noted continued momentum in the marketplace with a good pipeline build for 2022 and 2023, particularly in U.S. higher education [41] Question: How should we think about the contribution from the new international channel partner program? - Management indicated that the program is a long-term growth strategy and is expected to drive growth in international markets over the next two to three years [42][44] Question: What appetite do schools have for more assessment capabilities in the K-12 environment? - Management highlighted that there is significant demand for assessment solutions to address learning loss, with a focus on real-time feedback for teachers [51][52] Question: Any observations on engagement in higher education as colleges return to session? - Management reported that utilization on the platform remains high, indicating that it has become core infrastructure for teaching and learning [57] Question: How is the competitive landscape evolving in the higher ed space? - Management noted that institutions are looking to re-platform and that Canvas is well-positioned to meet the demands of modern education [63] Question: What is the current penetration of K-12 and assessment markets? - Management estimated that K-12 penetration is around 50%, with significant opportunities remaining in the assessment space [69][71] Question: What is the expected growth rate for the assessment segment? - Management indicated that the assessment segment is growing faster than the core business and is expected to continue to do so [78] Question: What is the hiring environment for tech talent? - Management acknowledged challenges in the competitive labor market but expressed confidence in their ability to attract and retain talent due to their mission and recent public offering [105]