Instructure, Inc. (INST), a SaaS company, provides applications for learning, assessment, and
performance management worldwide. Products include Canvas, a learning management system for K-12 and
higher education; Bridge, a learning and performance management suite for businesses; Arc, an online
video learning platform for academic and corporate learning; and Gauge, an assessment management system
for K-12 schools. Instructure, Inc. was founded in 2008 and is headquartered in Salt Lake City.
INST is currently trading in the low $40 range. With a $1.4B market cap and currently valued at 7x
estimated 2018 sales, INST offers an attractive combination of strong, sustained revenue growth,
excellent gross profit margin, and an attractive valuation.
2014 2015 2016 2017 2018(E)
Revenue ($M) 44.4 73.2 110.9 158.8 207.8
Gr. Profit (000) 29.2 49.1 78.1 112.4
Gr. Margin 66% 67% 70% 71%
Rev growth rate 70% 52% 43% 31%
The company placed a 2.5 million shares secondary offering in Feb, raising $110 million. With $137 M.
in cash and zero debt, the company is well financed and expects to end 2018 with the same cash balance
with which it began the year. INST may be operating cash-flow positive within the next 12 months.
According to the company’s SEC filings, INST has more than 3,000 customers, with a net revenue
retention rate in excess of 100 percent.
Instructure’s popular Canvas app (launched in 2011) has won contracts at thousands of major
universities, colleges, and K-12 systems, including all but one of the 114 California Community
Colleges, Oxford University, and the University of Michigan (Go Blue!). The unaddressed market remains
very large, however, both nationally and internationally. Instructure’s apps for enterprises are also
seeing healthy adoption, including this past quarter by Guardian Life and FranklinCovey. This is a
relatively new market for Instructure, with an enormous TAM.
I recently initiated a small position in INST and am looking to add to it.
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At first glance, any idea why their Rev is decelerating? Not very attractive and I didn’t see any reason why on the earnings release that could be a diamond in the rough scenario like we have seen with Pivotal and Twillio.
Also a dollar net retention rate of greater than 100 is a little vague. I think if it was up there like 120% or more they would be highlighting it.
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Edit: The gross profits are also $M (not 000).
Saul was invested in INST from September 2017 through November 2017
Here are his comments:
My Portfolio at the end of Sept
http://discussion.fool.com/my-portfolio-at-the-end-of-sept-32849…
Instructure is in tenth place at 4.7%, and is another new position this month. It’s another small-cap cloud-based, SaaS company, growing like mad, not making a profit yet, but rapidly taking market share from legacy services. This one does learning management systems for colleges and now for businesses. They grew revenue 50% last year and 47% last quarter.
My Portfolio at the end of Oct 2017
http://discussion.fool.com/my-portfolio-at-the-end-of-oct-2017-3…
Instructure is in tenth place at 4.9%, and was another new position this in September. It’s another small-cap cloud-based, SaaS company, growing like mad, not making a profit yet, but rapidly taking market share from legacy services. This one does learning management systems for colleges and now for businesses. They grew revenue 50% last year and 47% last quarter. They didn’t move much this quarter.
My portfolio at the end of Nov 2017
http://discussion.fool.com/my-portfolio-at-the-end-of-nov-2017-3…
I sold out of Instructure in Nov because I felt it would be years until they showed a profit, if then, in spite of everyone loving their products. I’ve toyed with taking a tiny position back, but I haven’t.
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Mr Fungi,
Thanks for sharing your info on Instructure. I’ve held a position since September 2017 and have recently increased it in size. Here’s the original post, the thread (27 posts), though old, is very helpful.
http://discussion.fool.com/why-i-bought-instructure-inst-3283437…
Also a board reader, brennanadler, mentioned his family knew an ex-CEO of Blackboard, the competitor that Instructure is taking a lot of business from. He was going to try to talk to him, but I haven’t heard if that actually happened.
Please continue to post on Instructure. I think they are a very solid company, and the valuation seems pretty low-risk, high reward, to me.
Bear
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