Instructure(US:INST)2023-05-01 22:30Financial Data and Key Metrics Changes - First quarter revenue was $128.8 million, up 13.6% year-over-year, including an 80 basis point headwind from foreign exchange [11][16] - First quarter adjusted EBITDA grew 10.8% year-over-year to $48.3 million, representing a 37.5% margin, down from 38.2% in the first quarter of 2022 [11][31] - Deferred revenue at the end of the first quarter was $215.7 million, up 14.2% year-over-year [17] - Remaining performance obligations (RPO) were $703.7 million at the end of the first quarter, up 5% year-over-year [17] - Free cash flow for the quarter was negative $82.2 million compared to negative $67.3 million in the prior year [25] Business Line Data and Key Metrics Changes - Subscription and support accounted for 92% of first quarter revenue at $118.5 million, up 14.5% year-over-year, driven by momentum in core Canvas LMS products [21] - Professional services and other revenue accounted for 8% of first quarter revenue at $10.4 million, up 3.9% year-over-year [17] - The Learn platform acquisition exceeded expectations for the quarter, revealing significant untapped potential from both new and existing customers [9][10] Market Data and Key Metrics Changes - In North American K-12, the company holds nearly 30% market share, with strong bookings driven by recognition of products as mission critical [7] - The international market remains the fastest-growing part of the business, with strong performance from both direct business and channel partner programs [72] Company Strategy and Development Direction - The company aims to enhance its platform through organic and inorganic means, maintaining a leading position in the education technology space [10] - Focus on multi-product suites and increasing deal sizes in K-12 and higher education markets [66] - The strategy includes leveraging existing contracts to accelerate the Learn platform's growth [115] Management's Comments on Operating Environment and Future Outlook - Management noted that the teacher shortage persists, but technology is increasingly recognized as a solution to help alleviate this issue [46] - The pipeline is strong, with good coverage for the quarter and positive trends in cross-selling [49] - The company expects continued double-digit growth driven by the integration of AI into its LMS offerings [85][91] Other Important Information - The company ended the first quarter with $109.1 million in cash and $489.5 million of long-term debt, resulting in a 2.06 times net debt to trailing 12-month adjusted EBITDA ratio [18] - The company anticipates adjusted EBITDA for the full year to be in the range of $199.4 million to $203.4 million, representing an adjusted EBITDA margin of 38.5% at the midpoint [27] Q&A Session Summary Question: What is the outlook for EBITDA margins in the second half? - Management indicated confidence in expanding margins in the second half due to operational leverage [35] Question: What qualitative insights can be shared about K-12 bookings? - Management noted that while staffing shortages persist, there is increased recognition of technology's role in addressing these challenges [46][47] Question: How is ESSER funding impacting the business? - Management stated that while it is difficult to directly attribute deals to ESSER funds, the funding environment creates a favorable macro condition for K-12 sales [53][54] Question: Is there market saturation in higher education? - Management indicated that there is still significant room for growth in higher education, with many institutions still using legacy systems [55][56] Question: How is the Learn platform contributing to revenue? - Management highlighted that the Learn platform is expected to drive growth through its integration with existing contracts and the demand for evidence-based solutions [114][115]