Instructure Holdings, Inc. (INST) Bundle
Understanding Instructure Holdings, Inc. (INST) Revenue Streams
Understanding Instructure Holdings, Inc.’s Revenue Streams
Instructure Holdings, Inc. reported a total revenue of $173.2 million for the three months ended September 30, 2024, compared to $134.9 million for the same period in 2023, reflecting a year-over-year growth of 28%.
For the nine months ended September 30, 2024, the revenue was $499.1 million, up from $394.8 million in 2023, marking a 26% increase.
Revenue Breakdown by Source
The revenue streams can be categorized primarily into two segments: Subscription and Support Revenue, and Professional Services and Other Revenue.
| Revenue Source | Q3 2024 (in thousands) | Q3 2023 (in thousands) | Change Amount | Change Percentage | 9M 2024 (in thousands) | 9M 2023 (in thousands) | Change Amount | Change Percentage |
|---|---|---|---|---|---|---|---|---|
| Subscription and Support | $160,193 | $123,110 | $37,083 | 30% | $462,419 | $360,159 | $102,260 | 28% |
| Professional Services and Other | $12,971 | $11,811 | $1,160 | 10% | $36,644 | $34,675 | $1,969 | 6% |
| Total Revenue | $173,164 | $134,921 | $38,243 | 28% | $499,063 | $394,834 | $104,229 | 26% |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate showcases a consistent upward trend:
- Q3 2024 vs. Q3 2023: 28%
- 9M 2024 vs. 9M 2023: 26%
Contribution of Different Business Segments to Overall Revenue
For the nine months ended September 30, 2024, the contribution from different segments is as follows:
- Subscription and Support: 93% of total revenue
- Professional Services and Other: 7% of total revenue
Analysis of Significant Changes in Revenue Streams
There has been a notable increase in Subscription and Support revenue, primarily driven by:
- Increased adoption of solutions among existing customers.
- New customer acquisitions contributing an additional $7.8 million.
- Growth from the Parchment acquisition, accounting for $79.7 million of the revenue increase for the nine months ended September 30, 2024.
- International markets contributed 18% of the total revenue, an increase of $10.7 million.
A Deep Dive into Instructure Holdings, Inc. (INST) Profitability
A Deep Dive into Instructure Holdings, Inc.'s Profitability
Gross Profit Margin: For the three months ended September 30, 2024, the gross profit margin was 66%, compared to 65% for the same period in 2023. For the nine months ended September 30, 2024, the gross profit margin remained at 66%, compared to 65% for the nine months ended September 30, 2023.
Operating Profit Margin: The operating loss for the three months ended September 30, 2024 was $24.7 million, resulting in an operating profit margin of -14.3%. In contrast, for the three months ended September 30, 2023, the operating loss was $5.5 million, leading to an operating profit margin of -4.1%.
Net Profit Margin: The net loss for the three months ended September 30, 2024 was $24.7 million, resulting in a net profit margin of -14.3%. For the same period in 2023, the net loss was $5.5 million, yielding a net profit margin of -4.1%.
Trends in Profitability Over Time
| Period | Gross Profit Margin | Operating Profit Margin | Net Profit Margin |
|---|---|---|---|
| Q3 2024 | 66% | -14.3% | -14.3% |
| Q3 2023 | 65% | -4.1% | -4.1% |
| 9M 2024 | 66% | -13.4% | -13.4% |
| 9M 2023 | 65% | -7.2% | -7.2% |
Comparison of Profitability Ratios with Industry Averages
The industry average gross profit margin for similar companies in the educational technology sector is approximately 70%. This indicates that Instructure's gross profit margin of 66% is below the industry average. The operating and net profit margins are also lagging behind industry averages, which typically hover around -5% for operating margin and -3% for net margin.
Analysis of Operational Efficiency
Cost Management: The total cost of revenue for the three months ended September 30, 2024 was $58.8 million, an increase from $47.4 million in Q3 2023. The cost of revenue has risen due to increased operational expenditures, including a 24% increase in subscription and support costs, amounting to $49.8 million in Q3 2024.
Gross Margin Trends: The gross margin percentage for subscription and support revenue was 69% for both Q3 2024 and Q3 2023, reflecting stable operational efficiency in this segment. However, the gross margin for professional services and other revenue decreased from 40% in Q3 2023 to 31% in Q3 2024.
The overall increase in operational costs has led to a deterioration in profitability metrics, highlighting the need for improved cost management strategies.
Debt vs. Equity: How Instructure Holdings, Inc. (INST) Finances Its Growth
Debt vs. Equity: How Instructure Holdings, Inc. Finances Its Growth
As of September 30, 2024, Instructure Holdings, Inc. reported total liabilities of $1.67 billion, which includes long-term debt of $1.14 billion and current liabilities of $462.7 million.
Overview of the Company's Debt Levels
The company has several debt instruments, primarily consisting of:
- Senior Secured Credit Facilities totaling $1.17 billion as of September 30, 2024.
- Short-term debt of $2.99 million maturing in the remainder of 2024.
- Long-term debt maturities scheduled as follows:
- 2025: $11.97 million
- 2026: $11.97 million
- 2027: $11.97 million
- 2028: $1.13 billion
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio for Instructure Holdings, Inc. stands at approximately 1.31 as of September 30, 2024, calculated as total debt of $1.67 billion divided by total equity of $1.26 billion. This ratio is higher than the industry average of around 0.8, indicating a more leveraged position compared to peers.
Recent Debt Issuances and Credit Ratings
In July 2024, the company issued $70 million in debt financing under its Senior Revolver to fund the acquisition of Scribbles. The company’s credit facilities are rated at B3 by Moody's, indicating a speculative grade rating.
How the Company Balances Between Debt Financing and Equity Funding
Instructure has utilized a combination of equity and debt financing to support its growth strategy. The total equity raised through various financing rounds has reached approximately $1.66 billion. The company has maintained a balance between debt and equity financing, aiming to optimize its capital structure while funding acquisitions and operational expansions.
| Debt Type | Amount (in millions) | Maturity |
|---|---|---|
| Senior Secured Term Loan | $1,167.3 | 2024-2028 |
| Short-term Debt | $2.99 | Remainder of 2024 |
| Long-term Debt | $1,138.5 | Beyond 2028 |
As of September 30, 2024, Instructure's cash and cash equivalents totaled $203.2 million, providing liquidity to manage its debt obligations.
Assessing Instructure Holdings, Inc. (INST) Liquidity
Assessing Instructure Holdings, Inc. Liquidity
Current Ratio: As of September 30, 2024, the current ratio is calculated as follows:
| Current Assets | Current Liabilities | Current Ratio |
|---|---|---|
| $203.2 million | $462.7 million | 0.44 |
Quick Ratio: The quick ratio, which excludes inventory from current assets, also reflects a liquidity position of:
| Quick Assets | Current Liabilities | Quick Ratio |
|---|---|---|
| $203.2 million (excluding inventory) | $462.7 million | 0.44 |
Analysis of Working Capital Trends
The working capital trend over recent periods indicates:
- September 30, 2024: Current Assets: $203.2 million, Current Liabilities: $462.7 million, Working Capital: -$259.5 million
- December 31, 2023: Current Assets: $344.2 million, Current Liabilities: $350.7 million, Working Capital: -$6.5 million
Cash Flow Statements Overview
The cash flow trends for the nine months ended September 30, 2024, and 2023 are as follows:
| Cash Flow Type | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Operating Activities | $102,453 | $127,048 |
| Investing Activities | ($907,711) | ($4,666) |
| Financing Activities | $663,012 | ($2,765) |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the principal sources of liquidity are:
- Cash and Cash Equivalents: $203.2 million
- Funds Held on Behalf of Customers: $6.1 million
- Deferred Revenue: $384.0 million (current liability)
The company reported a net cash used in investing activities of $907.7 million primarily due to acquisitions. This significant outflow raises concerns about future liquidity if operational cash flow does not improve.
Operating cash flows are projected to improve as operational efficiency increases, reflecting the company’s strategy to enhance cash generation capabilities.
Is Instructure Holdings, Inc. (INST) Overvalued or Undervalued?
Valuation Analysis
The valuation analysis of Instructure Holdings, Inc. (INST) focuses on key financial metrics that help determine if the company is overvalued or undervalued. This includes examining the Price-to-Earnings (P/E), Price-to-Book (P/B), and Enterprise Value-to-EBITDA (EV/EBITDA) ratios.
Price-to-Earnings (P/E) Ratio
As of September 30, 2024, the P/E ratio is calculated based on the following:
- Net Loss for the Nine Months Ended September 30, 2024: $66.77 million
- Weighted Average Shares Outstanding: 146.07 million
- Net Loss Per Share (Basic and Diluted): $(0.46)
Given that the company is currently reporting a net loss, the P/E ratio is not applicable.
Price-to-Book (P/B) Ratio
The P/B ratio is determined using the following data:
- Total Stockholders’ Equity as of September 30, 2024: $1.26 billion
- Shares Outstanding: 147.09 million
- Book Value Per Share: $8.57
The stock price as of September 30, 2024, was approximately $23.60, leading to a P/B ratio of:
P/B Ratio: $23.60 / $8.57 = 2.75
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is calculated using the following information:
- Enterprise Value: Market Capitalization + Total Debt - Cash
- Market Capitalization (as of September 30, 2024): $23.60 147.09 million = $3.47 billion
- Total Debt: $1.17 billion
- Cash and Cash Equivalents: $203.2 million
Calculating Enterprise Value:
Enterprise Value: $3.47 billion + $1.17 billion - $203.2 million = $4.43 billion
Adjusted EBITDA for the Nine Months Ended September 30, 2024: $208.4 million
EV/EBITDA Ratio: $4.43 billion / $208.4 million = 21.25
Stock Price Trends
Over the last 12 months, Instructure's stock price has exhibited notable fluctuations:
- 12-Month High: $25.00
- 12-Month Low: $15.00
- Current Stock Price: $23.60
Dividend Yield and Payout Ratios
As of September 30, 2024, Instructure does not pay a dividend, resulting in:
- Dividend Yield: 0%
- Payout Ratio: Not applicable
Analyst Consensus
According to recent analyst reports:
- Buy Ratings: 5
- Hold Ratings: 3
- Sell Ratings: 0
The consensus indicates a strong buy recommendation based on the current valuation metrics and growth potential.
Summary Table of Key Valuation Metrics
| Metric | Value |
|---|---|
| P/E Ratio | N/A (Net Loss) |
| P/B Ratio | 2.75 |
| EV/EBITDA Ratio | 21.25 |
| 12-Month High Stock Price | $25.00 |
| 12-Month Low Stock Price | $15.00 |
| Current Stock Price | $23.60 |
| Dividend Yield | 0% |
| Analyst Consensus | Buy |
Key Risks Facing Instructure Holdings, Inc. (INST)
Key Risks Facing Instructure Holdings, Inc.
Industry Competition: The company operates in a highly competitive market, with numerous players in the cloud-based learning management systems (LMS) sector. This competition can impact pricing strategies and market share.
Regulatory Changes: Changes in education-related regulations, data privacy laws, and compliance requirements can pose significant risks. Non-compliance could lead to financial penalties and reputational damage.
Market Conditions: Economic downturns can affect the budget allocations of educational institutions, leading to reduced spending on technology solutions. This could adversely impact revenue growth.
Operational Risks: The company's recent acquisitions, including Parchment and Scribbles, introduce operational complexities. Integration challenges could hinder expected synergies and operational efficiencies.
Financial Risks: The company reported a net loss of $66.8 million for the nine months ended September 30, 2024, compared to a net loss of $28.3 million for the same period in 2023. Additionally, the total liabilities increased to $1.67 billion as of September 30, 2024, from $872.5 million in the previous year.
Strategic Risks: The pending merger agreement with KKR, which values the company at $23.60 per share, poses strategic risks. The completion of this merger is subject to regulatory approvals and could affect the company's operational focus.
| Risk Factor | Description | Financial Impact |
|---|---|---|
| Industry Competition | High competition in the LMS market affecting pricing and market share. | Potential revenue decline. |
| Regulatory Changes | Changes in compliance requirements affecting operations. | Possible financial penalties. |
| Market Conditions | Economic downturns impacting educational budgets. | Reduced revenue growth. |
| Operational Risks | Integration challenges from recent acquisitions. | Lower than expected synergies. |
| Financial Risks | Significant net losses and increasing liabilities. | Financial instability and increased debt burden. |
| Strategic Risks | Pending merger subject to regulatory approval. | Operational focus could shift post-merger. |
Mitigation Strategies: The company aims to enhance operational efficiency and reduce costs to manage financial health. As of September 30, 2024, the company had $203.2 million in cash and cash equivalents, which is crucial for meeting short-term obligations.
Deferred Revenue: As of September 30, 2024, the company reported deferred revenue of $384.0 million, indicating strong future revenue potential.
Future Growth Prospects for Instructure Holdings, Inc. (INST)
Future Growth Prospects for Instructure Holdings, Inc.
Analysis of Key Growth Drivers
The company has identified several key growth drivers, including:
- Product Innovations: The expansion of the learning management system (LMS) to include additional features and integrations.
- Market Expansions: Targeting new international markets, contributing approximately 18% of total revenue for the nine months ended September 30, 2024, an increase of $10.7 million from the previous period.
- Acquisitions: Recent acquisitions, such as Parchment and Scribbles, are expected to enhance service offerings and market reach.
Future Revenue Growth Projections and Earnings Estimates
The company reported revenue of $499.1 million for the nine months ended September 30, 2024, compared to $394.8 million for the same period in 2023, reflecting a growth of 26%.
Adjusted EBITDA for the same period increased to $208.4 million from $157.7 million, indicating strong operational efficiency.
Revenue from new customers increased by $7.8 million and from existing customers by $12.0 million during the nine months ended September 30, 2024.
Strategic Initiatives or Partnerships Driving Future Growth
Strategic initiatives include:
- Enhancing digital transformation efforts in education.
- Expanding partnerships with educational institutions globally.
Notably, the acquisition of Parchment, which accounted for $79.7 million of the revenue increase, is a significant strategic move.
Competitive Advantages Positioning the Company for Growth
The company’s competitive advantages include:
- Robust product offerings that integrate various educational tools.
- A strong brand presence in the education technology sector.
- Established customer relationships that foster loyalty and recurring revenue.
Financial Data Summary
| Metric | Q3 2024 | Q3 2023 | Change ($) | Change (%) |
|---|---|---|---|---|
| Total Revenue | $173.2 million | $134.9 million | $38.3 million | 28% |
| Net Loss | ($24.7 million) | ($5.5 million) | ($19.2 million) | 348% |
| Adjusted EBITDA | $70.1 million | $58.2 million | $11.9 million | 20% |
| Free Cash Flow | $201.5 million | $180.8 million | $20.7 million | 11% |
Future projections indicate that approximately $944.6 million of revenue is expected to be recognized from remaining performance obligations.
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Resources:
- Instructure Holdings, Inc. (INST) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Instructure Holdings, Inc. (INST)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Instructure Holdings, Inc. (INST)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.