Instructure(US:INST)2021-11-09 02:00Financial Data and Key Metrics Changes - Instructure reported Q3 2021 GAAP revenue of $107.2 million, representing a 31% year-over-year increase, while allocated combined receipts (ACR) reached $108.6 million, up 24% year-over-year [8][25] - Adjusted EBITDA for Q3 was $41.3 million, with an adjusted EBITDA margin of 38%, an increase from 30% in the same quarter last year [32] - Non-GAAP net income for Q3 was $33.7 million, or $0.25 per share, compared to $24.8 million, or $0.20 per share, a year ago [33] Business Line Data and Key Metrics Changes - Subscription and support revenue accounted for 90% of total revenue at $96.2 million, up 31% year-over-year, driven by the momentum in the Canvas LMS product [26] - Professional services and other revenue made up 10% of total revenue at $11.1 million, also up 31% year-over-year, due to strong implementation and training services [26] - Deferred revenue at the end of Q3 was $287.1 million, up 38% from the previous year, with remaining performance obligations (RPO) at $684 million, up 16% year-over-year [27] Market Data and Key Metrics Changes - Instructure experienced over 30% revenue growth in international markets during Q3 [16] - The K-12 segment saw strong momentum, with a notable win in a top 10 U.S. school district that chose Canvas over a competitor's free offering [15] - The higher education market continues to show strength, with institutions like Johns Hopkins University and Miami Dade College transitioning to Canvas from legacy systems [12][13] Company Strategy and Development Direction - The company is focused on digital transformation in education, leveraging federal funding dynamics and expanding its product offerings through strategic M&A [10][21] - Instructure aims to enhance its platform capabilities and increase its total addressable market (TAM) through acquisitions, such as the recent acquisition of Kimono [21][22] - The company is committed to cross-selling additional products to existing customers, with a growing percentage of new bookings coming from these opportunities [18][20] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's growth trajectory, citing strong customer demand and the ongoing digital transformation in education [10][23] - The management noted that the utilization of the Canvas platform remains significantly higher than pre-pandemic levels, indicating its critical role in education [11][53] - The company anticipates continued growth in ACR and adjusted EBITDA for Q4 and the full fiscal year 2021, with guidance provided in the earnings release [37][38] Other Important Information - The company ended Q3 with $231.8 million in cash and cash equivalents, a significant increase from the previous quarter, driven by strong cash collections [34] - Operating cash flow for Q3 was $161.2 million, compared to $100.3 million in the same quarter last year, reflecting strong financial performance [36] - The company expects to recognize revenue on approximately 77% of its RPO over the next 24 months [27] Q&A Session Summary Question: Update on customer conversations and pipeline for 2022 - Management reported consistent customer conversations, with many institutions evaluating their platforms for future needs, leading to an increase in RFPs for 2022 and 2023 [41][42] Question: Strategic value of the Kimono acquisition - The acquisition strengthens Instructure's integration capabilities with student information systems, enhancing the value proposition for partners and customers [43][44][46] Question: Pipeline of state deals for K-12 - Management highlighted strong demand in K-12, driven by significant stimulus funding and a focus on addressing learning loss through technology [50][51] Question: Impact of higher education enrollment trends - Management noted that Instructure's diversified business model mitigates risks associated with fluctuations in higher education enrollments, maintaining stable revenue streams [52][55] Question: Competitive landscape post-Blackboard-Anthology merger - Management observed that customers are still assessing the implications of the merger, but no significant changes in the competitive landscape have been noted [60][61] Question: Pricing trends in the market - Management indicated continued pricing strength in both higher education and K-12 markets, with institutions recognizing the value of quality solutions [99][100] Question: Insights from InstructureCon event - The event saw high attendance, with many prospects participating, indicating its significance as a lead generation opportunity [101][102][104] Question: Overlap between Canvas and Kimono's customer base - Management clarified that the acquisition primarily enhances integration capabilities rather than expanding the customer base directly [108][109] Question: Updates on the Impact solution - The pipeline for the Impact solution is building, with positive feedback expected as it becomes available for K-12 markets [111]