Form 10-Q - Quarterly report [Sections 13 or 15(d)]

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-40647

Instructure Holdings, Inc.

(Exact name of registrant as specified in its charter)

    Delaware

    84-4325548

    (State or other jurisdiction of
incorporation or organization)

    (I.R.S. Employer
Identification No.)

6330 South 3000 East, Suite 700

Salt Lake City, UT 84121

(Address of principal executive offices, including zip code)

(800) 203-6755

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	INST	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer		Accelerated filer	

Non-accelerated filer		Smaller reporting company	

Emerging growth company	

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No 

As of November 6, 2024, there were 147,089,318 shares of the registrant’s common stock outstanding.

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Instructure Holdings, Inc.

Quarterly Report on Form 10-Q

For the Quarter Ended September 30, 2024

INDEX


		Page
	PART I. FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (unaudited)	3

	Condensed Consolidated Balance Sheets	3

	Condensed Consolidated Statements of Operations and Comprehensive Loss	4

	Condensed Consolidated Statements of Stockholders’ Equity	5

	Condensed Consolidated Statements of Cash Flows	7

	Notes to Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38

Item 4.	Controls and Procedures	39

	PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	40

Item 1A.	Risk Factors	40

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41

Item 3.	Default Upon Senior Securities	41

Item 4.	Mine Safety Disclosures	41

Item 5.	Other Information	41

Item 6.	Exhibits	41

SIGNATURES		43

In this Quarterly Report on Form 10-Q, “we,” “our,” “us,” “Instructure,” and the “Company” refer to Instructure Holdings, Inc. and its wholly-owned subsidiaries.

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PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

INSTRUCTURE HOLDINGS, INC.

Condensed Consolidated Balance Sheets

(in thousands, except per share amounts)

(unaudited)


	September 30,			December 31,
	2024			2023
Assets
Current assets:
Cash and cash equivalents	$	187,512		$	341,047
Funds held on behalf of customers		14,783			—
Accounts receivable—net		98,894			67,193
Prepaid expenses		38,630			12,082
Deferred commissions		14,644			13,705
Other current assets		9,200			4,797
Total current assets		363,663			438,824
Property and equipment, net		16,002			13,479
Right-of-use assets		8,314			9,002
Goodwill		1,909,041			1,265,316
Intangible assets, net		609,983			399,712
Noncurrent prepaid expenses		1,905			4,182
Deferred commissions, net of current portion		14,099			13,816
Deferred tax assets		5,624			6,739
Other assets		5,395			6,908
Total assets	$	2,934,026		$	2,157,978
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	25,576		$	23,589
Customer fund deposits		14,783			—
Accrued liabilities		36,051			23,760
Lease liabilities		5,335			7,513
Long-term debt, current		6,525			4,013
Deferred revenue		374,431			291,784
Total current liabilities		462,701			350,659
Long-term debt, net of current portion		1,138,510			482,387
Deferred revenue, net of current portion		9,611			10,876
Lease liabilities, net of current portion		9,842			9,246
Deferred tax liabilities		45,678			14,420
Other long-term liabilities		4,431			4,898
Total liabilities		1,670,773			872,486
Stockholders’ equity:
Common stock, par value $0.01 per share; 500,000 shares authorized as of September 30, 2024 and December 31, 2023; 147,089 and 145,207 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively.		1,471			1,452
Additional paid-in capital		1,663,532			1,619,020
Accumulated deficit		(401,750	)		(334,980	)
Total stockholders’ equity		1,263,253			1,285,492
Total liabilities and stockholders’ equity	$	2,934,026		$	2,157,978

See accompanying notes.

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INSTRUCTURE HOLDINGS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except per share amounts)

(unaudited)


	Three months ended September 30,						Nine months ended September 30,
	2024			2023			2024			2023
Revenue:
Subscription and support	$	160,193		$	123,110		$	462,419		$	360,159
Professional services and other		12,971			11,811			36,644			34,675
Total revenue		173,164			134,921			499,063			394,834
Cost of revenue:
Subscription and support		49,827			40,345			145,566			117,532
Professional services and other		8,955			7,082			26,009			21,016
Total cost of revenue		58,782			47,427			171,575			138,548
Gross profit		114,382			87,494			327,488			256,286
Operating expenses:
Sales and marketing		67,673			46,734			187,899			149,743
Research and development		31,874			20,688			90,650			65,872
General and administrative		26,719			15,522			68,094			44,113
Total operating expenses		126,266			82,944			346,643			259,728
Loss from operations		(11,884	)		4,550			(19,155	)		(3,442	)
Other income (expense):
Interest income		1,284			1,360			4,301			3,021
Interest expense		(26,627	)		(10,868	)		(75,636	)		(30,642	)
Other income (expense)		2,681			(2,443	)		328			(1,965	)
Loss on extinguishment of debt		—			—			(189	)		—
Total other income (expense), net		(22,662	)		(11,951	)		(71,196	)		(29,586	)
Loss before income taxes		(34,546	)		(7,401	)		(90,351	)		(33,028	)
Income tax benefit		9,850			1,920			23,581			4,717
Net loss and comprehensive loss	$	(24,696	)	$	(5,481	)	$	(66,770	)	$	(28,311	)
Net loss per common share, basic and diluted	$	(0.17	)	$	(0.04	)	$	(0.46	)	$	(0.20	)
Weighted average common shares used in computing basic and diluted net loss per common share		146,670			144,222			146,079			143,665

See accompanying notes.

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INSTRUCTURE HOLDINGS, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except per share amounts)

(unaudited)


	Common
	Stock, $0.01					Additional						Total
	Par Value					Paid-In			Accumulated			Stockholders’
	Shares			Amount		Capital			Deficit			Equity
Balances at June 30, 2024		146,471		$	1,465	$	1,647,290		$	(377,054	)	$	1,271,701
Vesting of restricted stock units		522			5		(5	)		—			—
Purchase of ESPP shares		142			1		2,754			—			2,755
Shares withheld for tax withholding on vesting of restricted stock units		(46	)		—		(1,075	)		—			(1,075	)
Stock-based compensation		—			—		14,568			—			14,568
Net loss		—			—		—			(24,696	)		(24,696	)
Balances at September 30, 2024		147,089		$	1,471	$	1,663,532		$	(401,750	)	$	1,263,253


	Common
	Stock, $0.01						Additional						Total
	Par Value						Paid-In			Accumulated			Stockholders’
	Shares			Amount			Capital			Deficit			Equity
Balances at June 30, 2023		143,991		$	1,440		$	1,597,409		$	(323,732	)		1,275,117
Vesting of restricted stock units		653			7			(7	)		—			—
Purchase of ESPP shares		127			1			2,721			—			2,722
Shares withheld for tax withholding on vesting of restricted stock units		(75	)		(1	)		(1,959	)		—			(1,960	)
Stock-based compensation		—			—			11,862			—			11,862
Net loss		—			—			—			(5,481	)		(5,481	)
Balances at September 30, 2023		144,696		$	1,447		$	1,610,026		$	(329,213	)	$	1,282,260

See accompanying notes.

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INSTRUCTURE HOLDINGS, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except per share amounts)

(unaudited)


	Common
	Stock, $0.01						Additional						Total
	Par Value						Paid-In			Accumulated			Stockholders’
	Shares			Amount			Capital			Deficit			Equity
Balances at December 31, 2023		145,207		$	1,452		$	1,619,020		$	(334,980	)	$	1,285,492
Vesting of restricted stock units		1,766			18			(18	)		—			—
Purchase of ESPP shares		308			3			5,980			—			5,983
Shares withheld for tax withholding on vesting of restricted stock units		(192	)		(2	)		(4,323	)		—			(4,325	)
Stock-based compensation		—			—			42,873			—			42,873
Net loss		—			—			—			(66,770	)		(66,770	)
Balances at September 30, 2024		147,089		$	1,471		$	1,663,532		$	(401,750	)	$	1,263,253


	Common
	Stock, $0.01						Additional						Total
	Par Value						Paid-In			Accumulated			Stockholders’
	Shares			Amount			Capital			Deficit			Equity
Balances at December 31, 2022		142,917		$	1,429		$	1,575,600		$	(300,902	)	$	1,276,127
Vesting of restricted stock units		1,674			18			(18	)		—			—
Purchase of ESPP shares		300			3			6,014			—			6,017
Shares withheld for tax withholding on vesting of restricted stock units		(195	)		(3	)		(4,943	)		—			(4,946	)
Stock-based compensation		—			—			33,373			—			33,373
Net loss		—			—			—			(28,311	)		(28,311	)
Balances at September 30, 2023		144,696		$	1,447		$	1,610,026		$	(329,213	)	$	1,282,260

See accompanying notes.

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INSTRUCTURE HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Nine months ended September 30,
	2024			2023
Operating activities:
Net loss	$	(66,770	)	$	(28,311	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation of property and equipment		4,223			3,481
Amortization of intangible assets		132,129			107,237
Amortization of deferred financing costs		3,863			889
Stock-based compensation		42,350			32,986
Deferred income taxes		(25,197	)		(7,793	)
Non-cash operating lease expense		1,063			3,348
Other		(174	)		2,853
Changes in assets and liabilities:
Accounts receivable—net		(22,684	)		(22,597	)
Prepaid expenses and other assets		(26,010	)		(15,250	)
Deferred commissions		(1,222	)		2,896
Accounts payable and accrued liabilities		2,991			(7,565	)
Deferred revenue		63,177			57,724
Lease liabilities		(2,012	)		(5,370	)
Other liabilities		(3,274	)		2,520
Net cash provided by operating activities		102,453			127,048
Investing activities:
Purchases of property and equipment		(6,179	)		(4,708	)
Proceeds from sale of property and equipment		30			42
Business acquisitions, net of cash received		(901,562	)		—
Net cash used in investing activities		(907,711	)		(4,666	)
Financing activities:
Proceeds from issuance of common stock from employee equity plans		5,983			6,018
Shares repurchased for tax withholdings on vesting of restricted stock units		(4,325	)		(4,949	)
Proceeds from issuance of term debt, net of discount		663,892			—
Payments for financing costs		—			(84	)
Advances from revolving credit facility		70,000			—
Repayment of advances from revolving credit facility		(70,000	)		—
Change in customer fund deposits		6,441			—
Repayments on long-term debt		(8,979	)		(3,750	)
Net cash provided by (used in) financing activities		663,012			(2,765	)
Foreign currency impacts on cash, cash equivalents, restricted cash, and funds held on behalf of customers		1,287			(1,246	)
Net increase (decrease) in cash, cash equivalents, restricted cash, and funds held on behalf of customers		(140,959	)		118,371
Cash, cash equivalents, restricted cash, and funds held on behalf of customers, beginning of period		344,208			190,266
Cash, cash equivalents, restricted cash, and funds held on behalf of customers, end of period	$	203,249		$	308,637
Supplemental cash flow disclosure:
Cash paid for taxes	$	3,987		$	2,657
Cash paid for interest on outstanding debt	$	65,849		$	31,455
Non-cash investing and financing activities:
Capital expenditures incurred but not yet paid	$	110		$	75

See accompanying notes.

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INSTRUCTURE HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

The following provides a reconciliation of cash, cash equivalents, restricted cash, and funds held on behalf of customers to the amounts reported on the condensed consolidated balance sheets. Restricted cash has been disclosed in Other assets as it is associated with letters of credit obtained to secure office space from our various lease agreements (in thousands):



	As of September 30,
	2024		2023

Cash and cash equivalents	$	187,512	$	304,858
Restricted cash		954		3,779
Funds held on behalf of customers		14,783		—
Total cash, cash equivalents, restricted cash, and funds held on behalf of customers	$	203,249	$	308,637

See accompanying notes.

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INSTRUCTURE HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

1. Description of Business and Basis of Presentation

Company and Background

Instructure Holdings, Inc. (the “Company,” “Instructure,” “we,” “our,” or “us”) is an education technology company dedicated to elevating student access, amplifying the power of teaching, and inspiring everyone to learn together. Instructure’s platform delivers a next-generation learning management system (“LMS”), robust assessments for learning, actionable analytics, and engaging, dynamic content. Instructure offers its platform through a Software-as-a-Service, or SaaS, business model. The Company was founded in September 2008. We are headquartered in Salt Lake City, Utah, and have wholly-owned subsidiaries in the United Kingdom, Australia, the Netherlands, Hong Kong, Sweden, Brazil, Mexico, Hungary, Ireland, Canada, Singapore, and the Philippines.

On July 25, 2024, Instructure entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Icon Parent Inc., a Delaware corporation (“Parent”), and Icon Acquisition Sub Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”). Parent and Merger Sub are each affiliates of investment funds managed by Kohlberg Kravis Roberts & Co. L.P. (“KKR”), a leading global investment firm. Pursuant to the Merger Agreement, Merger Sub will be merged with and into the Company, with the Company surviving as a wholly owned subsidiary of Parent (the “Merger”). Under, and subject to, the terms of the Merger Agreement, at the effective time of the Merger, Instructure stockholders will have the right to receive $23.60 per share in cash, without interest thereon and subject to applicable withholding taxes. The Company’s board of directors has unanimously approved the Merger Agreement and the transactions contemplated thereby and the necessary stockholder approval has been duly executed and delivered, adopting and approving the Merger Agreement and the transactions contemplated thereby. The obligations of the parties to complete the proposed Merger are subject to customary closing conditions, including, among others, the receipt of certain regulatory approvals. Effective as of 11:59 p.m. Eastern Time on September 9, 2024, the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, expired with respect to the Merger.

On September 5, 2024, Instructure filed with the SEC, a Definitive Information Statement on Schedule 14, containing more information about the Merger Agreement and the Merger.

The proposed Merger is expected to close during the second half of 2024. Upon consummation of the Merger, the Company will be a privately held company and its common stock will no longer be traded on the New York Stock Exchange.

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) applicable to interim periods, under the rules and regulations of the United States Securities and Exchange Commission (“SEC”). In the opinion of management, we have prepared the accompanying unaudited condensed consolidated financial statements on a basis substantially consistent with the audited consolidated financial statements of the Company as of and for the fiscal year ended December 31, 2023, and these condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of the interim periods presented. All intercompany balances and transactions have been eliminated in consolidation. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for any subsequent quarter or for the entire year ending December 31, 2024. The year-end balance sheet data was derived from audited financial statements, but the interim condensed consolidated balance sheet included in this Form 10-Q does not include all disclosures required under U.S. GAAP. Certain information and note disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP have been omitted under the rules and regulations of the SEC.

These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 21, 2024 (the “2023 10-K”).

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Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Such estimates, which we evaluate on an on-going basis, include provisions for credit losses, useful lives for property and equipment and intangible assets, valuation allowances for net deferred income tax assets, acquisition related estimates, our assessment for impairment of goodwill, intangible assets, and other long-lived assets, the standalone selling price of performance obligations, timing of professional services revenue recognition, and the determination of the period of benefit for deferred commissions. We base our estimates on historical experience and on various other assumptions which we believe to be reasonable.

Operating Segments

We operate in a single operating segment: cloud-based learning management, assessment and performance systems. Operating segments are defined as components of an enterprise for which separate financial information is regularly evaluated by the chief operating decision makers (“CODM”), which are our chief executive officer and chief financial officer, in deciding how to allocate resources and assess performance. Our CODM evaluate our financial information and resources and assess the performance of these resources on a consolidated basis. Since we operate in one operating segment, all required financial segment information can be found in the condensed consolidated financial statements.

2. Summary of Significant Accounting Policies

A summary of the Company’s significant accounting policies is discussed in “Note 1 – Description of Business and Summary of Significant Accounting Policies” of the 2023 10-K. There have been no significant changes to these policies during the nine months ended September 30, 2024, except as noted below.

Revenue Recognition

We generate revenue primarily from two main sources: (1) subscription and support revenue, which is comprised of SaaS fees from customers accessing our learning platform and usage of our credential management platform, and from customers purchasing additional support beyond the standard support that is included in the basic SaaS fees; and (2) related professional services revenue, which is comprised of training, implementation services and other types of professional services. Consistent with ASC 606, Revenue from Contracts with Customers, revenue is recognized when control of these services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services. The timing of revenue recognition may differ from the timing of invoicing our customers. We record an unbilled receivable, which is included within accounts receivable—net on our consolidated balance sheets, when revenue is recognized prior to invoicing.

We determined revenue recognition through the following steps:

•

Identification of the contract, or contracts, with a customer

•

Identification of the performance obligations in the contract

•

Determination of the transaction price

•

Allocation of the transaction price to the performance obligations in the contract

•

Recognition of revenue when, or as, we satisfy a performance obligation

The following describes the nature of our primary types of revenue and the revenue recognition policies and significant payment terms as they pertain to the types of transactions we enter into with our customers.

Subscription and Support

Subscription and support revenue is derived from fees from customers to access and use our learning platform and our credential management platform, and support beyond the standard support that is included with all subscriptions. The terms of our subscriptions do not provide customers the right to take possession of the software. Subscription and support revenue from our learning platform is generally recognized on a ratable basis over the contract term. Payments from customers are primarily due annually in advance. Subscription and support revenue from our credential management platform is generally recognized based on the proportion of credentials transferred to the total estimated credentials to be transferred over the contract period. Customers choose to access and use the credential management platform through subscription contracts by committing to guaranteed minimum payments with excess volume billed in arrears, or through transactional contracts where payment generally occurs once an order is placed. The Company records pass through fees for transactional contracts on a net revenue basis, as the Company does not have control over the credential and is therefore acting as the agent.

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Professional Services and Other

Professional services and other revenue is derived from implementation, training, and consulting services. Our professional services are typically considered distinct from the related subscription services as the promise to transfer the subscription can be fulfilled independently from the promise to deliver the professional services (i.e., customer receives standalone functionality from the subscription and the customer obtains the intended benefit of the subscription without the professional services). Professional services arrangements are billed in advance, and revenue from these arrangements is typically recognized over time as the services are rendered, using an efforts-expended input method. Implementation services also include nonrefundable upfront setup fees, which are allocated to the remaining performance obligations.

Contracts with Multiple Performance Obligations

Many of our contracts with customers contain multiple performance obligations. We account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price (“SSP”) basis. We determine the SSP based on our overall pricing objectives by reviewing our significant pricing practices, including discounting practices, geographical locations, the size and volume of our transactions, the customer type, price lists, our pricing strategy, and historical standalone sales. SSP is analyzed on a periodic basis to identify if we have experienced significant changes in our selling prices.

Deferred Commissions

Sales commissions earned by our sales force, as well as related payroll taxes, are considered incremental and recoverable costs of obtaining a contract with a customer. These costs are deferred and then amortized on a straight-line basis over a period of benefit that we have determined to be generally four years. We determined the period of benefit by taking into consideration our customer contracts, our technology and other factors. Amortization of deferred commissions is included in sales and marketing expenses in the accompanying condensed consolidated statements of operations and comprehensive loss.

Deferred Revenue

Deferred revenue consists of billings and payments received in advance of revenue recognition generated by our subscription and support services and professional services and other, as described above.

Funds Held on Behalf of Customers and Customer Fund Deposits

Funds held on behalf of customers and customer fund deposits represent cash that is either received or in-transit from credential requestors via third-party credit card processors and other payment methods. The Company generally remits payment to customers within 30 to 60 days following the purchase of a credential. Funds held on behalf of customers represent the total amount due to customers, and as such, a liability for the same amount is recorded to customer fund deposits. The funds held on behalf of customers are not available for general business use by the Company.

Recent Accounting Pronouncements

Issued accounting pronouncements

In November 2023, the FASB issued Accounting Standards Update (“ASU”) No. 2023-07, Improvements to Reportable Segment Disclosures (Topic 280), which updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the CODM and included within each reported measure of a segment's profit or loss. The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. We do not expect the adoption of this guidance to have a material impact on our condensed consolidated financial statements and related notes.

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In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures (Topic 740), which requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. We do not expect the adoption of this guidance to have a material impact on our condensed consolidated financial statements and related notes.

3. Net Loss Per Share

A reconciliation of the denominator used in the calculation of basic and diluted net loss per share is as follows (in thousands, except per share amounts):


	Three months ended September 30,						Nine months ended September 30,
	2024			2023			2024			2023
Numerator:
Net loss	$	(24,696	)	$	(5,481	)	$	(66,770	)	$	(28,311	)
Denominator:
Weighted-average common shares outstanding—basic		146,670			144,222			146,079			143,665
Dilutive effect of share equivalents resulting from unvested restricted stock units and shares for issuance under employee stock purchase plan		—			—			—			—
Weighted-average common shares outstanding—diluted		146,670			144,222			146,079			143,665
Net loss per common share, basic and diluted	$	(0.17	)	$	(0.04	)	$	(0.46	)	$	(0.20	)

For the three and nine months ended September 30, 2024 and 2023, we incurred net losses and, therefore, the effect of our restricted stock units (“RSUs”) and of shares issuable under the employee stock purchase plan were not included in the calculation of diluted net loss per share as the effect would be anti-dilutive. See Note 10. “Stock-Based Compensation” for additional discussion regarding shares issuable under the employee stock purchase plan due to the Merger. The following table contains share totals with a potentially dilutive impact (in thousands):



	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023
Restricted stock units		6,715		5,222		6,715		5,222
Shares issuable under employee stock purchase plan		—		33		—		33
Total		6,715		5,255		6,715		5,255

4. Property and Equipment

Property and equipment consisted of the following (in thousands):


	September 30,			December 31,
	2024			2023
Computer and office equipment	$	6,484		$	5,437
Capitalized software development costs		18,799			13,556
Furniture and fixtures		1,161			1,153
Leasehold improvements and other		4,549			6,270
Total property and equipment		30,993			26,416
Less accumulated depreciation and amortization		(14,991	)		(12,937	)
Total	$	16,002		$	13,479

Accumulated amortization for capitalized software development costs was $7.3 million and $4.7 million at September 30, 2024 and December 31, 2023, respectively. Amortization expense for capitalized software development costs for the three and nine months ended September 30, 2024 was $0.9 million and $2.6 million, respectively, and for the three and nine months ended September 30, 2023 was $0.7 million and $1.8 million, respectively, and is recorded within subscription and support cost of revenue on the condensed consolidated statements of operations and comprehensive loss.

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5. Acquisitions

2024 Acquisitions

On February 1, 2024, we acquired all outstanding shares of PCS Holdings, LLC (“Parchment”), the world's largest academic credentialing platform and network. By adding Parchment to the Instructure Learning Platform, we provide a verifiable and comprehensive digital passport of achievement records and outcomes for learners.

At the time of the acquisition, we recorded a provisional net deferred tax liability of $46.6 million in purchase accounting due to the step up in book basis of intangible assets as a result of the stock acquisition. We expect the net deferred tax liability to decrease as book amortization expense is recognized on the acquisition-related intangible assets. The conclusions below will remain provisional until the Parchment tax returns are filed.

During the third quarter of 2024, a measurement period adjustment of $0.9 million was made to the total purchase consideration, with a corresponding increase to goodwill, in connection with the completion of the Parchment post-closing statement. The following table summarizes the preliminary estimated fair values of the consideration transferred, assets acquired and liabilities assumed as of the date of the Parchment acquisition (in thousands):


Consideration transferred
Cash paid	$	832,172
Escrow		2,000
Total purchase consideration	$	834,172

Identifiable assets acquired
Cash and cash equivalents	$	5,445
Funds held on behalf of customers		6,081
Accounts receivable		9,746
Prepaid expenses and other assets		3,331
Property and equipment		212
Right-of-use assets		375
Intangible assets: developed technology		45,800
Intangible assets: trade name		12,500
Intangible assets: customer relationships		240,000
Total assets acquired	$	323,490

Liabilities assumed
Accounts payable and accrued liabilities	$	9,676
Customer fund deposits		6,081
Lease liabilities		430
Deferred revenue		17,478
Deferred tax liabilities		46,574
Other liabilities		2,807
Total liabilities assumed	$	83,046
Goodwill		593,728
Total purchase consideration	$	834,172

The following unaudited pro forma condensed combined financial information (in thousands) presents the results of operations of Instructure as if the Parchment acquisition occurred as of January 1, 2023. The unaudited pro forma results may not necessarily reflect actual results of operations that would have been achieved, nor are they necessarily indicative of future results of operations. The unaudited pro forma results reflect the elimination of historical intangible amortization expense incurred by Parchment and the step-up amortization adjustments for the fair value of intangible assets acquired, the elimination of historical interest expense incurred by Parchment on its debt and the incurrence of interest expense related to the issuance of debt in connection with the Parchment acquisition, and transaction expenses, nonrecurring post-combination compensation expense and the related adjustment to the income tax provision.


	Three months ended September 30,			Nine months ended September 30,
	2023			2024			2023
Total revenue	$	163,546		$	509,120		$	475,739
Net loss	$	(22,363	)	$	(66,616	)	$	(78,201	)

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Actual revenue and net income recorded on Instructure's condensed combined statement of operations and comprehensive loss for Parchment during the three months ended September 30, 2024 was $32.6 million and $3.6 million, respectively, and $83.4 million and $7.0 million during the nine months ended September 30, 2024, respectively.

On July 1, 2024, Instructure acquired all outstanding equity interests of Community Software Solutions, LLC (“Scribbles”), a leading provider of credentialing and records management to K-12 school districts across the United States, in an all cash transaction. The purchase was financed through a combination of cash on hand and $70.0 million of debt financing under the Company's Senior Revolver, which was repaid in full on July 25, 2024. The purpose of the transaction is to bolster the scale and reach of the Instructure Learning Platform as learners are engaged throughout their lifelong learning journey, facilitating evidence of learning and streamlining the educational process for educators and learners during key transitions.

At the time of the acquisition, we recorded a provisional net deferred tax liability of $11.0 million in purchase accounting due to the step up in book basis of intangible assets as a result of the stock acquisition. We expect the net deferred tax liability to decrease as book amortization expense is recognized on the acquisition-related intangible assets. The allocations below will remain provisional until tax returns are filed for Scribbles.

The following table summarizes the preliminary estimated fair values of the consideration transferred, assets acquired and liabilities assumed as of the date of the Scribbles acquisition (in thousands):


Consideration transferred
Cash paid	$	80,782
Escrow		1,000
Total purchase consideration	$	81,782

Identifiable assets acquired
Cash and cash equivalents	$	605
Funds held on behalf of customers		2,261
Accounts receivable		332
Prepaid expenses and other assets		168
Property and equipment		22
Intangible assets: developed technology		3,100
Intangible assets: trade name		500
Intangible assets: customer relationships		40,500
Total assets acquired	$	47,488

Liabilities assumed
Accounts payable and accrued liabilities	$	1,720
Customer fund deposits		2,261
Deferred revenue		727
Deferred tax liabilities		10,995
Total liabilities assumed	$	15,703
Goodwill		49,997
Total purchase consideration	$	81,782

Actual revenue and net income recorded on Instructure's condensed combined statement of operations and comprehensive loss for Scribbles during the three and nine months ended September 30, 2024 are not material.

For all periods presented, the excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired is recorded as goodwill, of which $235.0 million is expected to be deductible for tax purposes from the Parchment acquisition. The goodwill generated from acquisitions is attributable to the expected synergies to be achieved following the consummation of the business combination and the assembled workforce values. The fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions. Developed technology represents the estimated fair value of the acquired existing technology and is being amortized over its estimated useful life of five years. Amortization of developed technology is included in subscription and support cost of revenue expenses in the accompanying condensed consolidated statements of operations and comprehensive loss. The trade names acquired are amortized over the estimated useful life of one to ten years. Customer relationships represent the estimated fair value of the acquired customer bases and are amortized over the estimated useful life of seven to ten years. Amortization of trade names and customer relationships is included in sales and marketing expenses in the accompanying condensed consolidated statements of operations and comprehensive loss. Non-compete agreements are amortized over an estimated useful life of three years and amortization of non-compete agreements is included in research and development expenses in the accompanying condensed consolidated statements of operations and comprehensive loss.

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6. Goodwill and Intangible Assets

Goodwill activity was as follows (in thousands):


	Total
Balance as of December 31, 2023	$	1,265,316
Additions - see Note 5. “Acquisitions”		643,725
Balance as of September 30, 2024	$	1,909,041

Intangible assets consisted of the following (in thousands):


	Weighted-Average Remaining Useful Life	September 30, 2024							December 31, 2023
		Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net

Software	0 Months	$	21	$	(21	)	$	—	$	21	$	(21	)	$	—
Trade names	63 Months		139,100		(60,832	)		78,268		126,100		(49,336	)		76,764
Developed technology	32 Months		374,200		(287,905	)		86,295		325,300		(232,662	)		92,638
Customer relationships	81 Months		731,900		(286,500	)		445,400		451,400		(221,123	)		230,277
Non-compete agreements	15 Months		50		(30	)		20		50		(17	)		33
Total		$	1,245,271	$	(635,288	)	$	609,983	$	902,871	$	(503,159	)	$	399,712

Amortization expense for intangible assets was $45.9 million and 132.1 million, respectively, for the three and nine months ended September 30, 2024, and $35.7 million and 107.2 million, respectively, for the three and nine months ended September 30, 2023.

Based on the recorded intangible assets at September 30, 2024, estimated amortization expense is expected to be as follows (in thousands):


	Amortization
	Expense
Years Ending December 31,
Remainder of 2024	$	45,905
2025		140,656
2026		120,302
2027		80,564
2028		57,616
Thereafter		164,940
Total	$	609,983

7. Credit Facility

On October 29, 2021, we entered into a credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, (the “2021 Credit Agreement”) governing our senior secured credit facilities (the “Senior Secured Credit Facilities”), consisting of a $500.0 million initial senior secured term loan facility (the “Senior Term Loan”) and a $125.0 million senior secured revolving credit facility (the “Senior Revolver”). The proceeds from the Senior Secured Credit Facilities were used, in addition to cash on hand, to (1) refinance, in full, all existing indebtedness under our initial credit agreement entered into in March of 2020 with a syndicate of lenders and Golub Capital Markets LLC (the “2021 Refinancing”), (2) pay certain fees and expenses incurred in connection with the entry into the 2021 Credit Agreement and the Refinancing, and (3) finance working capital needs of the Company and its subsidiaries for general corporate purposes.

All of the Company’s obligations under the Senior Secured Credit Facilities are guaranteed by the subsidiary guarantors named therein. The Senior Revolver includes a $10.0 million sublimit for the issuance of letters of credit. Any issuance of letters of credit will reduce the amount available under the Senior Revolver. As of September 30, 2024, we had no outstanding borrowings under our Senior Revolver.

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The Senior Term Loan has a seven-year maturity and the Senior Revolver has a five-year maturity. Commencing June 30, 2022, we were required to repay the Senior Term Loan portion of the Senior Secured Credit Facilities in quarterly principal installments of 0.25% of the aggregate original principal amount of the Senior Term Loan at closing, with the balance payable at maturity. We are also required to pay an unused commitment fee to the lenders under the Senior Revolver at the Applicable Commitment Fee of the average daily unutilized commitments. The Applicable Commitment Fee ranges from 0.40% to 0.50% subject to the Company’s Consolidated First Lien Net Leverage Ratio.

On June 21, 2023, we entered into the first amendment to the 2021 Credit Agreement (the “Amended 2021 Credit Agreement”) whereby all borrowings denominated in U.S. dollars and that incur interest or fees using the Eurocurrency Rate, which are determined by reference to the London Interbank Offered Rate (“LIBOR”), have been replaced with the Secured Overnight Financing Rate (“SOFR”). For SOFR loans, the loans denominated in dollars now bear interest at the Adjusted Term SOFR Rate, which is equal to the Term SOFR Reference Rate, as published by the CME Term SOFR Administrator, plus the Term SOFR Adjustment as dictated by the interest rate period elected by the Company. The Term SOFR Adjustment ranges from 0.11448% to 0.42826% per annum. The Applicable Rate (x) for the Initial Term Loans remains at 2.75% per annum for SOFR loans and (y) for the Revolving Credit Facility remains at 2.50% per annum with applicable step downs. The transition from LIBOR to SOFR became effective on July 5, 2023. All other terms and conditions in place under the 2021 Credit Agreement on the effective date of the Amended 2021 Credit Agreement remained unchanged and in full effect.

The Amended 2021 Credit Agreement contains a financial covenant solely with respect to the Senior Revolver. If the outstanding amounts under the Senior Revolver exceed 35% of the aggregate amount of the Senior Revolver commitments, we are required to maintain at the end of each fiscal quarter a Consolidated Net Leverage Ratio of not more than 7.75 to 1.00. As of September 30, 2024, there were no borrowings outstanding under the Senior Revolver. The Company had $125.0 million of availability under the Senior Revolver as of September 30, 2024.

On February 1, 2024, we entered into the second amendment to the 2021 Credit Agreement as previously amended by the Amended 2021 Credit Agreement (the “Amended 2023 Credit Agreement”), by and among the Company and certain of its subsidiaries, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders named therein. Pursuant to the Amended 2023 Credit Agreement, among certain other amendments, the lenders agreed, severally and not jointly, to extend additional 2023 Incremental Term Loans (the “2023 Incremental Term Loans”) to Instructure under the 2021 Credit Agreement in an aggregate principal amount equal to $685.0 million. The Company used the proceeds of the 2023 Incremental Term Loans, borrowed under the 2021 Credit Agreement, to finance (i) the cash consideration for the acquisition of Parchment, and (ii) fees and costs incurred in connection with the acquisition and related transactions. The Senior Secured Credit Facilities, together with the Amended 2023 Credit Agreement, comprise our amended senior secured credit facilities (the “Amended Senior Secured Credit Facilities”).

As a result of the 2023 Incremental Term Loans, the Company capitalized $4.4 million and $16.3 million of debt discount costs incurred in connection with the Amended 2023 Credit Agreement in long-term debt, current and long-term debt, net of current portion, respectively, on the condensed consolidated balance sheets. The Company recognized $1.4 million and $3.8 million of amortization of debt discount costs for the three and nine months ended September 30, 2024, respectively, and $0.3 million and $0.8 million for the three and nine months ended September 30, 2023, respectively, which is recorded as interest expense in the accompanying condensed consolidated statements of operations and comprehensive loss. At September 30, 2024 and December 31, 2023, the Company had an aggregate principal amount outstanding of $1,167.3 million and $491.3 million, respectively, under the Amended Senior Secured Credit Facilities, bearing interest at 8.07% and 8.68%, respectively. The Company had $22.2 million and $4.9 million of unamortized debt discount costs at September 30, 2024 and December 31, 2023, respectively, which is recorded as a reduction of the debt balance on the Company’s condensed consolidated balance sheets.

As a result of the 2021 Refinancing, the Company capitalized $0.2 million and $0.8 million of deferred issuance costs incurred in connection with the Senior Revolver in other current assets and other assets, respectively, on the condensed consolidated balance sheets. The Company recognized $47.0 thousand and $0.1 million of amortization of debt issuance costs for the three and nine months ended September 30, 2024, respectively, and $47.0 thousand, and $0.1 million for the three and nine months ended September 30, 2023, respectively, which is recorded as interest expense in the accompanying condensed consolidated statements of operations and comprehensive loss. The Company had $0.4 million and $0.5 million of unamortized debt issuance costs at September 30, 2024 and December 31, 2023, respectively, which are included in other current assets and other assets on the Company’s condensed consolidated balance sheets.

The Amended Senior Secured Credit Facilities contain customary negative covenants. At September 30, 2024, the Company was in compliance with all applicable covenants pertaining to the Amended Senior Secured Credit Facilities.

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The maturities of outstanding debt as of September 30, 2024, are as follows (in thousands):


	Amount
Years Ending December 31,
Remainder of 2024	$	2,993
2025		11,972
2026		11,972
2027		11,972
2028		1,128,362
Thereafter		—
Total	$	1,167,271

8. Revenue

We have one operating segment, which is our cloud-based learning, assessment, development and engagement systems. Our customers consist of K-12 and Higher Education institutions that purchase our Canvas LMS, which includes assessments, analytics, learning content, and credentials. The following table presents the Company’s disaggregated revenues by geographic region, based on the physical location of the customer (in thousands):



	Three months ended September 30,						Nine months ended September 30,
	2024			2023			2024			2023

United States	$	141,717		$	107,583		$	408,067		$	314,547
Foreign		31,447			27,338			90,996			80,287
Total revenue	$	173,164		$	134,921		$	499,063		$	394,834
Percentage of revenue generated outside of the United States		18	%		20	%		18	%		20	%

Deferred Revenue and Performance Obligations

During the three and nine months ended September 30, 2024, 67% and 55% of revenue recognized was included in our deferred revenue balance at June 30, 2024 and December 31, 2023, respectively. During the three and nine months ended September 30, 2023, 80% and 64% of revenue recognized was included in our deferred revenue balance at June 30, 2023 and December 31, 2022, respectively.

Transaction Price Allocated to the Remaining Performance Obligations

As of September 30, 2024, approximately $944.6 million of revenue is expected to be recognized from remaining performance obligations. We expect to recognize revenue on approximately 77% of our remaining performance obligations over the next 24 months, with the balance recognized thereafter.

Concentration of Credit Risk, Significant Customers and Provision for Credit Losses

There were no customers with revenue as a percentage of total revenue exceeding 10% for the periods presented.

As of September 30, 2024 and December 31, 2023 there were no customers with outstanding net accounts receivable balances as a percentage of total outstanding net accounts receivable greater than 10%.

Our provisions for credit loss balances at September 30, 2024 and December 31, 2023 were $1.8 million and $2.0 million, respectively.

9. Deferred Commissions

Deferred commissions primarily consist of sales commissions that are capitalized as incremental contract origination costs and were $28.7 million and $27.5 million as of September 30, 2024 and December 31, 2023, respectively. Amortization expense for deferred commissions was $5.7 million and $14.9 million for the three and nine months ended September 30, 2024, respectively, and $4.4 million and $14.5 million for the three and nine months ended September 30, 2023, respectively. There was no impairment of deferred commissions during these periods.

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10. Stock-Based Compensation

As of September 30, 2024 and December 31, 2023, there were 500,000,000 shares of common stock authorized. As of September 30, 2024 and December 31, 2023, there were 147,089,318 and 145,207,497 shares of common stock issued and outstanding, respectively.

Employee Equity Plans

The Instructure Parent, LP Incentive Equity Plan (the “2020 Plan”) was terminated in July 2021 in connection with the Company’s initial public offering (the “IPO”). As of the IPO date, 6,126,802 unvested incentive units were exchanged for 3,496,739 RSUs under the 2021 Omnibus Incentive Plan (the “2021 Plan”). These RSUs generally vested in 11 equal quarterly installments commencing September 1, 2021.

In July 2021, our board of directors adopted the 2021 Plan and no shares remain available for issuance under the 2020 Plan. A total of 18,000,000 shares of the Company's common stock were initially reserved for issuance under the 2021 Plan. Pursuant to the terms of the 2021 Plan, the share reserve increased by 5,808,300 shares in January 2024. As of September 30, 2024, we had 21,801,632 shares of common stock available for future grants under the 2021 Plan.

In July 2021, our board of directors adopted, and our stockholders approved the 2021 Employee Stock Purchase Plan (the “2021 ESPP”), which allows eligible employees to purchase shares of our common stock at a discount through payroll deductions of up to 15% of their eligible compensation, subject to any plan limitations. Each new offering period begins on or about March 1 and September 1 and is approximately six months in duration. On each purchase date, eligible employees can purchase our common stock at a price per share equal to 85% of the lesser of (1) the fair market value of our common stock on the offering date or (2) the fair market value of our common stock on the purchase date. A total of 1,900,000 shares of the Company’s common stock were initially reserved for issuance under the 2021 ESPP. Pursuant to the terms of the 2021 ESPP, the share reserve increased by 1,452,075 shares in January 2024. As of September 30, 2024, 5,162,907 shares of common stock were available for purchase under the 2021 ESPP. As a result of the entry into the Merger Agreement, we ceased withholding payroll deductions after our most recent purchase date on September 3, 2024, and pending the completion of the Merger, and we do not anticipate future offerings of our common stock under the 2021 ESPP.

During the three months ended September 30, 2024, we granted 234,170 RSUs to employees under the 2021 Plan. Each RSU entitles the recipient to receive one share of the Company’s common stock upon vesting. The RSUs are subject to time-based service requirements and generally vest over a four-year service period. The grant date fair value of the RSUs granted during the three months ended September 30, 2024 ranged from $24.49 to $25.0, which represents the closing stock price for the underlying common stock on the respective grant dates, with an aggregate fair value of $5.7 million.

The following two tables present stock-based compensation by award type and classification of stock-based compensation expense recorded within our condensed consolidated statements of operations and comprehensive loss (in thousands):



	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023

Restricted stock units	$	14,113	$	11,343	$	41,351	$	32,420
Shares issuable under employee stock purchase plan		238		412		997		1,201
Total stock-based compensation	$	14,351	$	11,755	$	42,348	$	33,621



	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023

Subscription and support cost of revenue	$	750	$	459	$	2,107	$	1,312
Professional services and other cost of revenue		864		603		2,451		1,639
Sales and marketing		4,170		3,145		11,612		9,142
Research and development		4,469		3,792		13,047		10,446
General and administrative		4,098		3,756		13,131		11,082
Total stock-based compensation	$	14,351	$	11,755	$	42,348	$	33,621

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Restricted Stock Units

The following table summarizes the activity of RSUs for the nine months ended September 30, 2024 (in thousands, except per unit amounts):


	RSUs			Weighted Average Grant Date Fair Value Per Unit
Unvested and outstanding at December 31, 2023		4,470		$	23.68
Granted		4,335			21.99
Vested		(1,445	)		22.75
Forfeited or canceled		(645	)		22.93
Unvested and outstanding at September 30, 2024		6,715		$	22.86

As of September 30, 2024 and December 31, 2023, total unrecognized compensation cost related to unvested RSUs amounted to $138.8 million and $95.1 million, respectively, which is expected to be recognized over a weighted average period of 2.9 years and 2.9 years, respectively.

The following table summarizes the activity of the incentive units granted under the 2020 Plan, subsequent to their conversion into RSUs under the 2021 Plan, for the nine months ended September 30, 2024 (in thousands, except per unit amounts):


	RSUs			Weighted Average Grant Date Fair Value Per Unit
Unvested and outstanding at December 31, 2023		320		$	12.30
Vested		(320	)		12.30
Unvested and outstanding at September 30, 2024		—

There were no incentive units granted subsequent to December 31, 2021 under the 2020 Plan. As of September 30, 2024 and December 31, 2023, we had less than $0.1 million and $2.4 million, respectively, of unrecognized stock-based compensation expense related to unvested incentive units exchanged for RSUs that are expected to be recognized over a weighted-average period of 0.2 and 0.3 years, respectively.

2021 ESPP

The following table summarizes the assumptions relating to 2021 ESPP purchase rights used in a Black-Scholes option pricing model for the three months ended September 30, 2024 and 2023:


	Three months ended September 30,
	2024	2023
Dividend yield	None	None
Volatility	18%	18 - 25%
Risk-free interest rate	5.27%	5.20 - 5.47%
Expected life (years)	0.5	0.5

11. Income Taxes

Utilization of the net operating loss carryforwards and credits may be subject to substantial annual limitation due to the ownership change limitations provided by Section 382 of the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization.

We file tax returns in the United States, the United Kingdom, Australia, the Netherlands, Hong Kong, Sweden, Brazil, Mexico, Hungary, China, Singapore, Ireland, Canada and various state jurisdictions. All of our tax years remain open to examination by major taxing jurisdictions to which we are subject, as carryforward attributes generated in past years may still be adjusted upon examination by the Internal Revenue Service or state and foreign tax authorities if they have or will be used in future periods.

We believe that we have provided adequate reserves for our income tax uncertainties in all open tax years. We do not expect our gross unrecognized tax benefits to change significantly in the next 12 months.

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12. Fair Value of Financial Instruments

The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked to offer prices. Fair value measurements do not include transaction costs. The fair value hierarchy prioritizes the quality and reliability of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined into the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

There were no transfers between Level 1 and Level 2 of the fair value measurement hierarchy during the period ended September 30, 2024 and December 31, 2023.

Instruments Not Recorded at Fair Value on a Recurring Basis

We estimate the fair value of our Senior Term Loan and 2023 Incremental Term Loans carried at face value, less unamortized discount costs, quarterly for disclosure purposes. The estimated fair value of our Senior Term Loan, 2023 Incremental Term Loans, and Senior Revolver is determined by Level 2 inputs, observable market-based inputs or unobservable inputs that are corroborated by market data. As of September 30, 2024, the fair value of our Senior Term Loan and 2023 Incremental Term Loans was $1,145.0 million. The carrying amounts of our cash, prepaid expenses, other current assets, and accrued liabilities approximate their current fair value because of their nature and relatively short maturity dates or durations.

13. Leases

The Company leases office space under non-cancelable operating leases with lease terms ranging from one to six years. These leases require monthly lease payments that may be subject to annual increases throughout the lease term. The Company subleases four of its locations. The first sublease expired in the second quarter of 2023, the second sublease expired in the second quarter of 2024, and the third and fourth sublease terms had 51 months and 16 months remaining as of September 30, 2024, respectively. The subleases do not have an option for renewal.

During the first quarter of 2024, the Company vacated multiple floors of its leased office space at its headquarters in Salt Lake City, Utah, with the intention of subleasing the vacated office space. As a result, the Company recognized a loss on exit of leased properties of $1.9 million in the first quarter of 2024, of which $0.4 million was recognized in subscription and support cost of revenue, $0.3 million in professional services and other cost of revenue, $0.6 million in sales and marketing, $0.4 million in research and development, and $0.2 million in general and administrative in our condensed consolidated statements of operations and comprehensive loss. Additionally, during the first quarter of 2024, the Company amended its lease for the remaining office space that it currently occupies at its headquarter location by extending the lease term from March 1, 2024 through February 28, 2029. As a result, the Company recorded a right-of-use asset and lease liability of $3.2 million during the first quarter of 2024.

Operating lease right-of-use assets and operating lease liabilities are recognized at the lease commencement date based on the present value of the lease payments over the lease term. Right-of-use assets also include adjustments related to prepaid or deferred lease payments and lease incentives. As most of our leases do not provide an implicit interest rate, we use our incremental borrowing rate based on information available at the lease commencement date to determine the present value of lease payments.

The Company performed evaluations of its contracts and determined that each of its identified leases are operating leases. The components of total lease costs were as follows (in thousands):



	Three months ended September 30,						Nine months ended September 30,
	2024			2023			2024			2023

Operating lease cost, gross	$	1,211		$	1,641		$	3,801		$	4,938
Variable lease cost, gross(1)		656			491			1,723			1,988
Sublease income		(228	)		(256	)		(721	)		(830	)
Total lease costs(2)	$	1,639		$	1,876		$	4,803		$	6,096

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(1)

Variable rent expense was not included within the measurement of the Company’s operating right-of-use assets and lease liabilities. Variable rent expense is comprised primarily of the Company’s proportionate share of operating expenses, property taxes and insurance and is classified as lease expense due to the Company’s election to not separate lease and non-lease components.

(2)

Short-term lease costs for the three and nine months ended September 30, 2024 and 2023 were not significant and are not included in the table above.

Cash paid for amounts included in the measurement of operating lease liabilities for the three and nine months ended September 30, 2024 were $1.4 million and $4.2 million, respectively, and for the three and nine months ended September 30, 2023 were $1.9 million and $6.5 million, respectively. Cash paid for amounts included in the measurement of operating lease liabilities was included in operating activities in the condensed consolidated statements of cash flows.

As of September 30, 2024, the maturities of the Company’s operating lease liabilities were as follows (in thousands):


Remainder of 2024	$	2,080
2025		5,466
2026		4,121
2027		3,160
2028		2,295
2029 and thereafter		200
Total lease payments		17,322
Less:
Imputed interest		(2,145	)
Lease liabilities		15,177
Tenant improvement reimbursements included in the measurement of lease liabilities but not yet received		(414	)
Lease liabilities, net	$	14,763

As of September 30, 2024 and December 31, 2023, the weighted average remaining lease term was 3.3 and 3.1 years, respectively, and the weighted average discount rate used to determine operating lease liabilities was 8.21% and 8.22% as of September 30, 2024 and December 31, 2023, respectively.

14. Commitments and Contingencies

Non-cancelable purchase obligations

As of September 30, 2024, our outstanding non-cancelable purchase obligations with a term of 12 months or longer related to cloud infrastructure and business analytic services in the ordinary course of business totaled $0.5 million for fiscal year 2024, $60.0 million per year for fiscal years 2025 through 2027, and $65.0 million for fiscal year 2028. During the three months ended September 30, 2024, we recognized $13.7 million in subscription and support cost of revenue, $0.6 million in research and development, and $0.1 million in professional services and other cost of revenue in our condensed consolidated statements of operations and comprehensive loss related to our non-cancelable purchase obligations, and during the nine months ended September 30, 2024 we recognized $40.9 million in subscription and support cost of revenue, $1.5 million in research and development, and $0.3 million in professional services and other cost of revenue in our condensed consolidated statements of operations and comprehensive loss related to our non-cancelable purchase obligations.

Letters of Credit and Collateral Arrangements

As of September 30, 2024 and December 31, 2023, we had a total of $1.0 million and $3.2 million, respectively, of letters of credit outstanding that were issued for purposes of securing certain of the Company’s obligations under facility leases.

Litigation

We are involved in various legal proceedings and claims, including challenges to trademarks, from time to time. If we determine that it is probable that a loss has been incurred and the amount is reasonably estimable, we will record a liability in our condensed consolidated financial statements. If only a range of estimated losses can be determined, we accrue an amount within the range that, in our judgment, reflects the most likely outcome; if none of the estimates within that range is a better estimate than any other amount, we accrue the low end of the range.

The Company has received two complaints by purported stockholders of the Company filed in the Delaware Court of Chancery seeking to compel inspection of books and records related to the Merger. We are currently unable to predict the outcome of this matter, and as a result, potential losses, if any, cannot be estimated.

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Although the results of litigation and claims are inherently unpredictable and uncertain, management does not believe that the outcome of our various legal proceedings, if determined adversely to us, individually or in the aggregate, would have a material impact on our financial statements.

15. Related-Party Transactions

In conjunction with the Amended 2023 Credit Agreement and the 2023 Incremental Term Loans, during the first quarter of 2024, the Company paid affiliates of Thoma Bravo, LLC $1.5 million in arrangement fees. Refer to Note 7. “Credit Facility” for additional information regarding the Amended 2023 Credit Agreement and the 2023 Incremental Term Loans.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis together with the financial statements and the related notes to those statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, and our audited Consolidated Financial Data for the year ended December 31, 2023 and the related notes thereto, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 21, 2024 (the “2023 10-K”). The following discussion contains forward-looking statements. See the “Forward-Looking Statements” section of this Quarterly Report on Form 10-Q.

Overview

From the inception of a teacher’s lesson through a student’s mastery of a concept, Instructure personalizes, simplifies, organizes, and automates the entire learning lifecycle through the power of technology. Our platform delivers the elements that leaders, teachers, and learners need – a next-generation LMS, robust assessments for learning, actionable analytics, and engaging, dynamic course content. Schools standardize on Instructure’s solutions as the core of their learning platform because we bring together all of the tools that students, teachers, parents, and administrators need to create an accessible, engaging and modern learning environment. Our platform is cloud-native, built on open technologies, and scalable across thousands of institutions and tens of millions of users worldwide. Instructure is the LMS market share leader in both Higher Education and paid K-12, with over 8,000 global customers, representing Higher Education institutions and K-12 districts and schools in more than 100 countries. We are maniacally focused on our customers and enhancing the teaching and learning experience. As such, we continuously innovate to grow the functionality and capabilities of our platform, including through acquisitions. Our platform becomes the invaluable digital infrastructure behind our customers’ instructional workflows. We acquired Parchment in February 2024, the world's largest academic credentialing platform and network. By adding Parchment to the Instructure Learning Platform, we provide a verifiable and comprehensive digital passport of achievement records and outcomes for learners. On July 1, 2024, we acquired Scribbles, a leading provider of credentialing and records management to K-12 school districts across the United States. The purpose of the transaction is to bolster the scale and reach of the Instructure Learning Platform, facilitating evidence of learning and streamlining the educational process for educators and learners during key transitions. Integration efforts for Scribbles have commenced. Identification of Parchment’s and Scribbles’ global customer count within Instructure's ecosystem is ongoing as part of our go-to-market alignment and integration efforts.

Since our founding in 2008, we have expanded our platform from the core LMS to include a broad set of offerings targeting all aspects of teaching, learning, and credentialing. As our platform has grown, we have become more strategic to schools as they seek vendor consolidation, best of breed solutions, and integrated offerings to serve teachers and students.

This discussion and analysis reflects our financial condition and results of operations for the three and nine months ended September 30, 2024 and 2023.

For the three months ended September 30, 2024 and 2023:

•

Our revenue was $173.2 million and $134.9 million, respectively.

•

Our net loss was $24.7 million and $5.5 million, respectively.

•

Our adjusted EBITDA was $70.1 million and $58.2 million, respectively.

•

Our operating cash flow was $203.9 million and $182.6 million, respectively.

•

Our free cash flow was $201.5 million and $180.8 million, respectively.

For the nine months ended September 30, 2024 and 2023:

•

Our revenue was $499.1 million and $394.8 million, respectively.

•

Our net loss was $66.8 million and $28.3 million, respectively.

•

Our adjusted EBITDA was $208.4 million and $157.7 million, respectively.

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•

Our operating cash flow was $102.5 million and $127.0 million, respectively.

•

Our free cash flow was $96.3 million and $122.4 million, respectively.

Adjusted EBITDA and free cash flow are non-GAAP measures. See “Non-GAAP Financial Measures” for definitions and reconciliations to the most closely comparable GAAP measures.

Take-Private Merger Agreement

On July 25, 2024, Instructure entered into the Merger Agreement with Parent and Merger Sub. Parent and Merger Sub are each affiliates of investment funds managed by KKR, a leading global investment firm. Pursuant to the Merger Agreement, Merger Sub will be merged with and into the Company, with the Company surviving as a wholly owned subsidiary of Parent. Under, and subject to, the terms of the Merger Agreement, at the effective time of the Merger, Instructure stockholders will have the right to receive $23.60 per share in cash, without interest thereon and subject to applicable withholding taxes. The Company’s board of directors has unanimously approved the Merger Agreement and the transactions contemplated thereby and the necessary stockholder approval has been duly executed and delivered, adopting and approving the Merger Agreement and the transactions contemplated thereby. The obligations of the parties to complete the proposed Merger are subject to customary closing conditions, including, among others, the receipt of certain regulatory approvals. Effective as of 11:59 p.m. Eastern Time on September 9, 2024, the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, expired with respect to the Merger.

On September 5, 2024, Instructure filed with the SEC, a Definitive Information Statement on Schedule 14, containing more information about the Merger Agreement and the Merger.

The proposed Merger is expected to close during the second half of 2024, although Instructure cannot assure completion by any particular date, if at all. Upon consummation of the Merger, the Company will be a privately held company and its common stock will no longer be traded on the New York Stock Exchange.

Macroeconomic Conditions and Trends

Adverse macroeconomic conditions, including but not limited to high inflation, slower economic growth, changes to fiscal and monetary policy, and high interest rates could impact our business and customer spending. Certain of our customers may be negatively impacted by these events.

We have continued to experience high usage on our platform as our customers continue to embrace remote learning platforms and demand for our products remains high. These factors have generated a positive impact to our gross margin.

Instructure has witnessed a noteworthy surge in the volume of Non-Traditional use case projects entering the market. The expanding Non-Traditional student segment presents a substantial growth opportunity, and we believe Instructure is strategically positioned to seize this market share. Leveraging the awareness gained from Kindergarten through Higher Ed utilization and Instructure's product competencies in credentialing, further enhances our advantage in capturing this evolving market.

The U.S dollar has fluctuated relative to foreign currencies upon the U.S. Federal Reserve's lowering the federal funds interest rate. Our reported expenses have immaterially decreased as a result. The interest rate applicable to our Senior Term Loan decreased slightly from 8.68% as of December 31, 2023 to 8.07% as of September 30, 2024. These items have not had a material impact on our results of operations to date.

Key Factors Affecting Our Performance

Our historical financial performance has been, and we expect our financial performance in the future to be, driven by the following trends and our ability to:

Increase Adoption of Cloud-Based Software by Higher Education and K-12 Institutions

Our ability to increase market adoption of our platform is driven by the overall adoption of cloud applications and infrastructure by academic institutions. We believe that Higher Education and K-12 institutions continue to be poised to accelerate the pace of cloud adoption to support near-term online educational needs as a result of continued adoption of remote education and continued digital transformation in education, to withstand future challenges. Academic institutions that relied upon on-premise solutions to support remote operations faced significant delays at the height of the pandemic. To be prepared for any similar future health crisis, institutions must make a fundamental shift to adopt cloud-based collaboration solutions. In order to continue providing a high-quality education and support in-person, remote, and hybrid learning. As the leader in the market for cloud-based learning technology, we believe the imperative for these institutions to adopt cloud infrastructure will increase demand for our platform and broaden our customer base.

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Grow Our Customer Base

We believe there is significant opportunity to grow our customer base in Higher Education and K-12. The growth of our Higher Education customer base is primarily dependent on the replacement of legacy systems with our cloud-native platform in North America and our continued expansion efforts internationally. The growth of our K-12 customer base is primarily dependent on our ability to surround currently implemented free solutions with our learning platform and, in connection therewith, monetize demand for our broad capabilities. We intend to expand our customer base by continuing to make targeted and prudent investments in sales and marketing and customer support.

Cross-sell into our Existing Customer Base

Most of our customers initially engage with us using our Canvas LMS solution, and then we are generally able to cross-sell our other solutions as these customers become aware of the benefits of our broad capabilities, including learning, assessments, analytics, student success, program management, digital courseware, and global online learning. Our future revenue growth is dependent upon our ability to expand our customers’ use of our learning platform. Our ability to increase sales to existing customers depends on a number of factors, including customer satisfaction, competition, pricing, economic conditions, and spending by customers.

Key Components of Results of Operations

Revenue

Subscription revenue is derived from customers using our learning platform and is driven primarily by the number of customers, the number of users at each customer, the price of our applications, and renewals. Support revenue is derived from customers purchasing additional support beyond the standard support that is included in the basic SaaS fee. Our contracts typically vary in length between one and five years. Subscriptions and support are non-cancelable and are billed in advance on an annual basis. All subscription and support fees billed are initially recorded in deferred revenue and recognized ratably over the subscription term. Revenue derived from the use of our credential management platform is also subscription and support revenue, and is generally recognized based on the proportion of credentials transferred to the total estimated credentials to be transferred over the contract period. Customers choose to access and use the credential management platform through subscription contracts by committing to guaranteed minimum payments with excess volume billed in arrears, or through transactional contracts where payment generally occurs once an order is placed. The Company records pass through fees for transactional contracts on a net revenue basis, as the Company does not have control over the credential and is therefore acting as the agent.

Professional services and other revenue are derived primarily from training, implementation, and other professional fees, which generally take anywhere from 30 to 90 days to complete depending on customer-side complexity and timelines. These services include regularly scheduled and highly-structured activities to ensure customers progress toward better utilizing our applications. Most of these interactions take place over the phone and through the use of web meeting technology. Because we have determined the implementation services are distinct, they are recognized over time as the services are rendered, using an efforts-expended input method. Implementation services also include nonrefundable upfront setup fees, which are allocated to the remaining performance obligations.

Instructure offers customers training services for an incremental fee which focus on creating confidence among users so they can be successful with our applications. Most training is performed remotely using web meeting technology, while the remainder is delivered in person. Because we have determined that training offerings are distinct from other performance obligations, we record training revenue upon the delivery of the service which can vary based on the nature of the training purchased. For trainings that are delivered live, revenue is recognized upon delivery. The Company offers customers unlimited access to online training services for a defined period of time, whereby revenue is recognized ratably over the defined contract term.

In addition to our implementation and training offerings, we provide consulting services for custom application development, integrations, content services and change management consulting. These services are architected to boost customer adoption of our applications and to drive usage of features and capabilities that are unique to our company. We have determined that these services are distinct. Professional services revenue is typically recognized over time as the services are rendered, using an efforts-expended input method.

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Cost of Revenue

Cost of subscription and support revenue consists primarily of the costs of our cloud hosting provider and other third-party service providers, employee-related costs including payroll, benefits and stock-based compensation expense for our operations and customer support teams, amortization of capitalized software development costs and acquired technology, costs associated with our print operations, and allocated overhead costs, which we define as rent, facilities and costs related to information technology. Our technology acquired through mergers and acquisitions is measured at its estimated fair value and is amortized over its estimated useful life, which is five years.

Cost of professional services and other revenue consists primarily of personnel costs of our professional services organization, including salaries, benefits, travel, bonuses and stock-based compensation, as well as allocated overhead costs.

Operating Expenses

Sales and Marketing. Sales and marketing expenses consist primarily of personnel costs of our sales and marketing employees, including sales commissions and incentives, benefits and stock-based compensation expense, marketing programs, including lead generation, costs of our annual InstructureCon user conference, acquisition-related amortization expenses and allocated overhead costs. We defer and amortize on a straight-line basis sales commission costs related to acquiring new contracts over a period of benefit that we have determined to be generally four years. Customer relationships represent the estimated fair value of the acquired customer bases and are amortized over the estimated useful life of seven to ten years. The trade names acquired are amortized over the estimated useful lives ranging from one to ten years.

Research and Development. Research and development expenses consist primarily of personnel costs of our development team, including payroll, benefits and stock-based compensation expense and allocated overhead costs. We capitalize certain software development costs that are attributable to developing new applications, features and adding incremental functionality to our platform. We amortize these costs to subscription and support cost of revenue in the condensed consolidated statements of operations and comprehensive loss over the estimated life of the new application or incremental functionality, which is generally three years.

General and Administrative. General and administrative expenses consist of personnel costs and related expenses for executive, finance, legal, human resources, recruiting, employee-related information technology, administrative personnel, including payroll, benefits and stock-based compensation expense; professional fees for external legal, accounting and other consulting services; and allocated overhead costs.

Other Income (Expense), net

Other income (expense), net consists primarily of interest income, interest expense, and the impact of foreign currency transaction gains and losses. Interest expense is related to fees incurred to have access to our credit facilities. As we have expanded our international operations, our exposure to fluctuations in foreign currencies has increased.

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Income Tax Benefit

We are subject to income taxes in the United States and foreign jurisdictions in which we do business. These foreign jurisdictions have statutory tax rates different from those in the United States. Accordingly, our effective tax rates will vary depending on the relative proportion of foreign to U.S. income and changes in tax laws. The income tax benefit at September 30, 2024 consists of decreases in U.S. Federal and state deferred tax liabilities due to current year pretax book loss, net of valuation allowance released.

Results of Operations

The following tables set forth our results of operations for the periods presented and as a percentage of our total revenue for those periods. The data has been derived from the unaudited condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q which include, in our opinion, all adjustments, consisting only of normal recurring adjustments, that we consider necessary for a fair presentation of the financial position and results of operations for the interim periods presented. The period-to-period comparison of financial results is not necessarily indicative of financial results to be achieved in future periods.



	Three months ended September 30,						Nine months ended September 30,
	2024			2023			2024			2023
	(in thousands)
Revenue:
Subscription and support	$	160,193		$	123,110		$	462,419		$	360,159
Professional services and other		12,971			11,811			36,644			34,675
Total revenue		173,164			134,921			499,063			394,834
Cost of revenue:
Subscription and support(1) (2) (3)		49,827			40,345			145,566			117,532
Professional services and other(1) (3)		8,955			7,082			26,009			21,016
Total cost of revenue		58,782			47,427			171,575			138,548
Gross profit		114,382			87,494			327,488			256,286
Operating expenses:
Sales and marketing(1) (2) (3)		67,673			46,734			187,899			149,743
Research and development(1) (2) (3)		31,874			20,688			90,650			65,872
General and administrative(1) (3)		26,719			15,522			68,094			44,113
Total operating expenses		126,266			82,944			346,643			259,728
Loss from operations		(11,884	)		4,550			(19,155	)		(3,442	)
Other income (expense):
Interest income		1,284			1,360			4,301			3,021
Interest expense		(26,627	)		(10,868	)		(75,636	)		(30,642	)
Other income (expense)(3)		2,681			(2,443	)		328			(1,965	)
Loss on extinguishment of debt(3)		—			—			(189	)		—
Total other income (expense), net		(22,662	)		(11,951	)		(71,196	)		(29,586	)
Loss before income taxes		(34,546	)		(7,401	)		(90,351	)		(33,028	)
Income tax benefit		9,850			1,920			23,581			4,717
Net loss	$	(24,696	)	$	(5,481	)	$	(66,770	)	$	(28,311	)

(1)

Includes stock-based compensation as follows:


	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023
	(in thousands)
Cost of revenue:
Subscription and support	$	750	$	459	$	2,107	$	1,312
Professional services and other		864		603		2,451		1,639
Sales and marketing		4,170		3,145		11,612		9,142
Research and development		4,469		3,792		13,047		10,446
General and administrative		4,098		3,756		13,131		11,082
Total stock-based compensation	$	14,351	$	11,755	$	42,348	$	33,621

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(2)

Includes amortization of acquisition-related intangibles as follows:


	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023
	(in thousands)
Cost of revenue:
Subscription and support	$	18,780	$	16,265	$	55,243	$	48,603
Sales and marketing		27,120		19,475		76,873		58,620
Research and development		5		4		13		13
Total amortization of acquisition-related intangibles	$	45,905	$	35,744	$	132,129	$	107,236

(3)

Includes transaction, globalization, restructuring, technology modernization, other non-recurring costs, foreign currency gains and losses, and loss on extinguishment of debt as follows:


	Three months ended September 30,					Nine months ended September 30,
	2024		2023			2024		2023
	(in thousands)
Cost of revenue:
Subscription and support	$	2,199	$	767		$	6,233	$	2,050
Professional services and other		423		(4	)		1,732		235
Sales and marketing		1,728		391			6,566		3,760
Research and development		4,189		1,745			10,816		6,727
General and administrative		11,735		2,099			23,467		4,202
Other income (expense)		2,690		(2,420	)		343		(1,779	)
Loss on extinguishment of debt		—		—			189		—
Total costs for transaction, globalization, restructuring, technology modernization, other non-recurring costs, and foreign currency gains and losses	$	17,584	$	7,418		$	48,660	$	18,753

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	Three months ended September 30,		Nine months ended September 30,
	2024	2023	2024	2023
	(as a percentage of total revenue)
Revenue:
Subscription and support	93%	91%	93%	91%
Professional services and other	7	9	7	9
Total revenue	100	100	100	100
Cost of revenue:
Subscription and support	29	30	29	30
Professional services and other	5	5	5	5
Total cost of revenue	34	35	34	35
Gross profit	66	65	66	65
Operating expenses:
Sales and marketing	39	35	38	38
Research and development	18	15	18	17
General and administrative	15	11	14	11
Total operating expenses	72	61	70	66
Loss from operations	(6)	4	(4)	(1)
Other income (expense):
Interest income	1	1	1	1
Interest expense	(15)	(8)	(15)	(8)
Other income (expense)	2	(2)	—	—
Loss on extinguishment of debt	—	—	—	—
Total other income (expense), net	(12)	(9)	(14)	(7)
Loss before income taxes	(18)	(5)	(18)	(8)
Income tax benefit	6	1	5	1
Net loss	(12)%	(4)%	(13)%	(7)%

Comparison of the three and nine months ended September 30, 2024 and three and nine months ended September 30, 2023.

Revenue



	Three months ended September 30,				Change					Nine months ended September 30,				Change
	2024		2023		Amount		%			2024		2023		Amount		%
	(dollars in thousands)
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	%

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Three month change

Subscription and support revenue increased $37.1 million for the three months ended September 30, 2024. The increase is due to expanded use of our solutions, including among new and existing customers. For the three months ended September 30, 2024, revenue from new customers increased by $3.7 million, revenue from existing customers remained flat, and revenue from Parchment accounted for $30.5 million of the increase. Included in those figures, international markets contributed 18% of the total revenue for the three months ended September 30, 2024, an increase of $4.1 million. Use of our solutions expanded as a result of the need for continued digital transformation in education and targeted sales and marketing efforts in new and existing markets.

Professional services and other revenue increased $1.2 million for the three months ended September 30, 2024. The increase is due to contributions from the acquisition of Parchment.

Nine month change

Subscription and support revenue increased $102.3 million for the nine months ended September 30, 2024. The increase is due to expanded use of our solutions, including among new and existing customers. For the nine months ended September 30, 2024, revenue from new customers increased by $7.8 million, revenue from existing customers increased by $12.0 million, and revenue from Parchment accounted for $79.7 million of the increase. Included in those figures, international markets contributed 18% of the total revenue for the nine months ended September 30, 2024, an increase of $10.7 million. Use of our solutions expanded as a result of the need for continued digital transformation in education and targeted sales and marketing efforts in new and existing markets.

Professional services and other revenue increased $2.0 million for the nine months ended September 30, 2024. The increase is due to contributions from the acquisition of Parchment.

Cost of Revenue and Gross Margin



	Three months ended September 30,						Change					Nine months ended September 30,						Change
	2024			2023			Amount		%			2024			2023			Amount		%
	(dollars in thousands)
Cost of revenue:
Subscription and support	$	49,827		$	40,345		$	9,482		24	%	$	145,566		$	117,532		$	28,034		24	%
Professional services and other		8,955			7,082			1,873		26			26,009			21,016			4,993		24
Total cost of revenue	$	58,782		$	47,427		$	11,355		24	%	$	171,575		$	138,548		$	33,027		24	%
Gross margin percentage
Subscription and support revenue		69	%		67	%							69	%		67	%
Professional services and other		31			40								29			39
Total gross margin		66			65								66			65

Three month change

Subscription and support cost of revenue increased $9.5 million for the three months ended September 30, 2024 due to an increase in amortization of acquisition-related intangibles of $2.5 million, an increase in web hosting costs of $0.6 million, an increase in salaries, wages, and payroll-related benefits of $1.6 million, an increase in stock-based compensation of $0.3 million, an increase in bonus expense of $0.2 million, an increase in systems and hardware costs of $0.3 million, an increase in amortization of capitalized software costs of $0.3 million, and other insignificant increases totaling $0.3 million. Additionally, subscription and support cost of revenue increased $3.4 million due to the addition of Parchment's printing operations and merchant fees.

Professional services and other cost of revenue increased $1.9 for the three months ended September 30, 2024 due to an increase in salaries, wages, and payroll-related benefits of $1.4 million, an increase in stock-based compensation of $0.3 million, and an increase in third-party contractor and consulting costs of $0.3 million. These increases were offset by a decrease of $0.1 million in systems and hardware costs.

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Nine month change

Subscription and support cost of revenue increased $28.0 million for the nine months ended September 30, 2024 due to an increase in web hosting costs of $3.6 million, an increase in amortization of acquisition-related intangibles of $6.7 million, an increase in salaries, wages, and payroll-related benefits of $5.1 million, an increase in stock-based compensation of $0.8 million, an increase in bonuses of $0.4 million, an increase of $0.3 million due to exit of leased properties, an increase in amortization of capitalized software costs of $0.8 million, an increase in systems and hardware costs of $0.8 million, an increase of $0.4 million in software expense, an increase of $0.4 million in deferred costs of revenue, and an increase in third-party contractor and consulting costs of $0.1 million. Additionally, subscription and support cost of revenue increased $8.6 million due to the addition of Parchment's printing operations and merchant fees.

Professional services and other cost of revenue increased $5.0 million for the nine months ended September 30, 2024 due to an increase in salaries, wages, and payroll-related benefits of $2.1 million, an increase in stock-based compensation of $0.5 million, an increase in bonuses of $0.2 million, an increase of $0.4 million in third-party contractor and consulting costs, and an increase of $0.3 million due to exit of leased properties. These increases were offset by a decrease of $0.2 million in systems and hardware costs.

Operating Expenses

Sales and Marketing



	Three months ended September 30,				Change					Nine months ended September 30,				Change
	2024		2023		Amount		%			2024		2023		Amount		%
	(dollars in thousands)
Sales and marketing	$	67,673	$	46,734	$	20,939		45	%	$	187,899	$	149,743	$	38,156		25	%

Three month change

Sales and marketing expenses increased $20.9 million for the three months ended September 30, 2024 due to an increase in salaries, wages, and payroll-related benefits of $3.8 million, an increase in amortization of acquisition-related intangibles of $7.6 million, an increase in stock-based compensation of $1.0 million, an increase in bonuses of $0.8 million, an increase in commission expense of $1.6 million, an increase in systems and hardware expense of $0.4 million, an increase in employee-related expense of $0.2 million, an increase in marketing expenses, including tradeshows and conferences, of $3.5 million, an increase in third-party contractor and consulting costs of $1.3 million, an increase in travel expenses of $0.5 million, and other insignificant increases of $0.2 million.

Nine month change

Sales and marketing expenses increased $38.2 million for the nine months ended September 30, 2024 due to an increase in salaries, wages, and payroll-related benefits of $8.3 million, an increase in amortization of acquisition-related intangibles of $18.3 million, an increase in stock-based compensation of $2.5 million, an increase in bonuses of $1.3 million, an increase in commission expense of $1.4 million, an increase in systems and hardware expenses of $1.1 million, an increase in employee-related expense of $1.2 million, an increase in third-party contractor and consulting costs of $1.0 million, an increase in marketing expenses, including tradeshows and conferences, of $2.2 million, an increase in travel expenses of $0.4 million, and an increase in exit of leased properties of $0.5 million.

Research and Development



	Three months ended September 30,				Change					Nine months ended September 30,				Change
	2024		2023		Amount		%			2024		2023		Amount		%
	(dollars in thousands)
Research and development	$	31,874	$	20,688	$	11,186		54	%	$	90,650	$	65,872	$	24,778		38	%

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Three month change

Research and development expenses increased $11.2 million for the three months ended September 30, 2024 due to an increase in salaries, wages, and payroll-related benefits of $5.9 million, an increase in stock-based compensation of $0.7 million, an increase in bonuses of $1.1 million, an increase in third-party contractor and consulting costs of $1.8 million, an increase in systems and hardware of $0.9 million, an increase in software expenses of $0.2 million, an increase in travel expenses of $0.3 million, and other insignificant increases of $0.3 million.

Nine month change

Research and development expenses increased $24.8 million for the nine months ended September 30, 2024 due to an increase in salaries, wages, and payroll-related benefits of $14.0 million, an increase in stock-based compensation of $2.6 million, an increase in bonus expenses of $1.8 million, an increase in systems and hardware expenses of $1.9 million, and increase in employee related expenses of $0.7 million, an increase in third-party contractor and consulting costs of $2.5 million, an increase of $0.5 million due to exit of leased properties, an increase in travel expenses of $0.5 million, and other insignificant increases of $0.3 million.

General and Administrative



	Three months ended September 30,				Change					Nine months ended September 30,				Change
	2024		2023		Amount		%			2024		2023		Amount		%
	(dollars in thousands)
General and administrative	$	26,719	$	15,522	$	11,197		72	%	$	68,094	$	44,113	$	23,981		54	%

Three month change

General and administrative expenses increased by $11.2 million for the three months ended September 30, 2024 due to increases in third-party contractor and consulting costs of $8.3 million, an increase in salaries, wages, and payroll-related benefits of $1.1 million, an increase in stock-based compensation of $0.3 million, an increase in bonuses of $1.3 million, an increase in systems and hardware expenses of $0.1 million, and other insignificant increases of $0.1 million.

Nine month change

General and administrative expenses increased by $24.0 million for the nine months ended September 30, 2024 due to increases in third-party contractor and consulting costs of $16.5 million, an increase in salaries, wages, and payroll-related benefits of $3.3 million, an increase in stock-based compensation of $2.1 million, an increase in bonus expenses of $1.9 million, an increase in sales tax expenses of $0.5 million, an increase in systems and hardware expenses of $0.3 million, and an increase in travel expenses of $0.1 million. These increases were offset by a decrease in business insurance expenses of $0.7 million.

Other Income (Expense), Net



	Three months ended September 30,						Change						Nine months ended September 30,						Change
	2024			2023			Amount			%			2024			2023			Amount			%
	(dollars in thousands)
Other income (expense), net	$	(22,662	)	$	(11,951	)	$	(10,711	)		90	%	$	(71,196	)	$	(29,586	)	$	(41,610	)		141	%

Three month change

Other income (expense), net includes interest income and expense and the impact of foreign currency transaction gains and losses. Other income (expense), net increased $10.7 million for the three months ended September 30, 2024 as a result of increased interest expense of $15.7 million due to additional borrowings on our Senior Term Loan (as defined below). This increase was offset by an decrease in expense of $5.1 million related to realized and unrealized foreign currency losses, and a decrease in interest income of $0.1 million.

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Nine month change

Other income (expense), net includes interest income and expense, the impact of foreign currency transaction gains and losses, losses on extinguishment of debt, and gains and losses related to the disposal of fixed assets. Other income (expense), net increased $41.6 million for the nine months ended September 30, 2024 as a result of increased interest expense of $45.0 million due to additional borrowings on our Senior Term Loan (as defined below) and an increase of $0.2 million due to loss on extinguishment of debt. These increases were offset by a decrease in expense of $2.1 million related to realized and unrealized foreign currency losses, an increase in interest income of $1.3 million and a gain of $0.2 million related to disposal of fixed assets.

Income Tax Benefit


	Three months ended September 30,				Change					Nine months ended September 30,				Change
	2024		2023		Amount		%			2024		2023		Amount		%
	(dollars in thousands)
Income tax benefit	$	9,850	$	1,920	$	7,930		413	%	$	23,581	$	4,717	$	18,864		400	%

Three month change

Income tax benefit increased $7.9 million for the three months ended September 30, 2024. Income tax benefit consists of current and deferred taxes for U.S. and foreign income taxes. The increase is due to forecasted net loss related to the Parchment acquisition.

Nine month change

Income tax benefit increased $18.9 million for the nine months ended September 30, 2024. Income tax benefit consists of current and deferred taxes for U.S. and foreign income taxes. The increase is due to forecasted net loss related to the Parchment acquisition.

Liquidity and Capital Resources

As of December 31, 2023 our principal sources of liquidity were cash, cash equivalents, and restricted cash, and, as of September 30, 2024 our principal sources of liquidity were cash, cash equivalents, restricted cash, and funds held on behalf of customers. For September 30, 2024 and December 31, 2023, these amounts totaled $203.2 million and $344.2 million, respectively, which were held for working capital purposes, as well as the available balance of our Senior Revolver (as defined below). As of September 30, 2024 and December 31, 2023, our cash equivalents were comprised of money market funds. We expect our operating cash flows to improve as we increase our operational efficiency and experience economies of scale.

We have financed our operations through cash received from operations and debt financing. We believe our existing cash and cash equivalents, our Amended Senior Secured Credit Facilities (as defined below) and cash provided by sales of our solutions and services will be sufficient to meet our working capital, capital expenditure and cash needs for at least the next 12 months and beyond. Our future capital requirements will depend on many factors including our growth rate, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced products and services offerings, the continuing market acceptance of our products, and the timing and closing of the Merger, including the magnitude of the costs related to the Merger. In the future, we may enter into arrangements to acquire or invest in complementary businesses, services and technologies.

Our material cash requirements from known contractual and other obligations primarily consist of payments under our Amended Senior Secured Credit Facilities and operating facility lease obligations, including certain letters of credit. See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forth in our 2023 10-K for more details.

We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in new technologies, this could reduce our ability to compete successfully and harm our results of operations.

A portion of our customers pay in advance for subscriptions, a portion of which is recorded as deferred revenue. Deferred revenue consists of the unearned portion of billed fees for our subscriptions, which is later recognized as revenue in accordance with our revenue recognition policy. As of September 30, 2024, we had deferred revenue of $384.0 million, of which $374.4 million was recorded as a current liability and is expected to be recorded to revenue in the next 12 months, provided all other revenue recognition criteria have been met. As of December 31, 2023, we had deferred revenue of $302.7 million, of which $291.8 million was recorded as a current liability.

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The following table shows our cash flows for the nine months ended September 30, 2024 and 2023:



	Nine months ended September 30,
	2024			2023
	(in thousands)
Net cash provided by operating activities	$	102,453		$	127,048
Net cash used in investing activities		(907,711	)		(4,666	)
Net cash provided by (used in) financing activities		663,012			(2,765	)

Our cash flows are subject to seasonal fluctuations. A significant portion of our contracts have terms that coincide with our customers’ typical fiscal year-end of June 30. Historical experience has shown an increase in new and renewed contracts as well as anniversary billings, all of which immediately precede the beginning of our academic customers’ typical fiscal year-end. We typically invoice SaaS fees annually upfront with credit terms of net 30 or 60 days. In turn, our cash flows from operations are affected by this seasonality and are typically reflected in higher cash flow, accounts receivable and deferred revenue balances for the second and third quarter of each year.

Credit Facility

On October 29, 2021, we entered into a credit agreement with JPMorgan Chase Bank, N.A., as administrative agent (the “2021 Credit Agreement”), governing our senior secured credit facilities (the “Senior Secured Credit Facilities”), consisting of a $500.0 million senior secured term loan facility (the “Senior Term Loan”) and a $125.0 million senior secured revolving credit facility (the “Senior Revolver”). The proceeds from the Senior Secured Credit Facilities were used, in addition to cash on hand, to (1) refinance, in full, all existing indebtedness under our initial credit agreement entered into in March 2020 with a syndicate of lenders and Golub Capital Markets LLC (the “Refinancing”), (2) pay certain fees and expenses incurred in connection with the entry into the 2021 Credit Agreement and the Refinancing, and (3) finance working capital needs of the Company and its subsidiaries for general corporate purposes.

All of the Company’s obligations under the Senior Secured Credit Facilities are guaranteed by the subsidiary guarantors named therein. The Senior Revolver includes borrowing capacity available for letters of credit. Any issuance of letters of credit will reduce the amount available under the Senior Revolver. As of September 30, 2024 there were no borrowings outstanding under the Senior Revolver.

On June 21, 2023, we entered into the first amendment to the 2021 Credit Agreement (the “Amended 2021 Credit Agreement”) whereby all borrowings denominated in U.S. dollars and that incur interest or fees using the Eurocurrency Rate, which are determined by reference to the London Interbank Offered Rate (“LIBOR”), have been replaced with the Secured Overnight Financing Rate (“SOFR”). For SOFR loans, the loans denominated in dollars now bear interest at the Adjusted Term SOFR Rate, which is equal to the Term SOFR Reference Rate, as published by the CME Term SOFR Administrator, plus the Term SOFR Adjustment as dictated by the interest rate period elected by the Company. The Term SOFR Adjustment ranges from 0.11448% to 0.42826% per annum. The Applicable Rate (x) for the Initial Term Loans remains at 2.75% per annum for SOFR loans and (y) for the Revolving Credit Facility remains at 2.5% per annum with applicable step downs. The transition from LIBOR to SOFR became effective on July 5, 2023. All other terms and conditions in place under the 2021 Credit Agreement on the effective date of the Amended 2021 Credit Agreement remained unchanged and in full effect.

On February 1, 2024, we entered into the second amendment to the 2021 Credit Agreement as previously amended by the Amended 2021 Credit Agreement (the “Amended 2023 Credit Agreement”), by and among the Company and certain of its subsidiaries, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders named therein. Pursuant to the Amended 2023 Credit Agreement, among certain other amendments, the lenders agreed, severally and not jointly, to extend additional 2023 Incremental Term Loans (as defined in the 2021 Credit Agreement) (the “2023 Incremental Term Loans”) to Instructure under the 2021 Credit Agreement in an aggregate principal amount equal to $685.0 million. The Company used the proceeds of the 2023 Incremental Term Loans, borrowed under the 2021 Credit Agreement, to finance (i) the cash consideration for the acquisition of Parchment, and (ii) fees and costs incurred in connection with the acquisition and related transactions. The Senior Secured Credit Facilities, together with the Amended 2023 Credit Agreement, comprise our amended senior secured credit facilities (the “Amended Senior Secured Credit Facilities”).

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As of September 30, 2024, we had outstanding borrowings of $1,167.3 million on the Senior Term Loan and the 2023 Incremental Term Loans, no outstanding borrowings under our Senior Revolver and $1.0 million outstanding under letters of credit.

Operating Activities

Net cash used in operating activities consists of net loss adjusted for certain non-cash items, including stock-based compensation, depreciation and amortization and other non-cash charges, net.

Net cash provided by operating activities during the nine months ended September 30, 2024 was $102.5 million, which was attributable to a net loss of $77.3 million adjusted for certain non-cash items, including $42.4 million of stock-based compensation expense, $136.4 million of depreciation and amortization, $3.9 million of amortization of debt discount and issuance costs, and $1.1 million of right-of-use assets. These amounts were offset by a decrease of $14.6 million to deferred income taxes, and a decrease in other non-cash items of $0.2 million. Working capital sources of cash included a net increase of $40.5 million in deferred revenue and accounts receivable resulting from the seasonality of our business where a significant number of our customer agreements occur in the second and third quarter each year, with a significant portion of our cash collections taking place in the third quarter. Prepaid expenses and other current assets increased by $26.0 million, while accounts payable and accrued liabilities increased by $3.0 million, lease liabilities decreased by $2.0 million, other liabilities decreased by $2.3 million, and deferred commissions increased by $1.2 million.

Net cash provided by operating activities during the nine months ended September 30, 2023 was $127.0 million, which was attributable to a net loss of $28.3 million adjusted for certain non-cash items, including $33.0 million of stock-based compensation expense, $110.7 million of depreciation and amortization, $0.9 million of amortization of debt discount and issuance costs and $2.9 million in other non-cash items. These amounts were offset by a decrease of $7.8 million to deferred income taxes. Working capital sources of cash included a net increase of $35.1 million in deferred revenue and accounts receivable resulting from the seasonality of our business where a significant number of our customer agreements occur in the second and third quarter each year. Prepaid expenses and other current assets decreased by $15.3 million, while accounts payable and accrued liabilities decreased by $7.6 million, lease liabilities decreased by $5.4 million, other liabilities increased by $2.5 million, deferred commissions decreased by $2.9 million, and right-of-use assets decreased by $3.3 million.

Investing Activities

Our investing activities have consisted primarily of business acquisitions, property and equipment purchases for computer-related equipment and capitalization of software development costs. Capitalized software development costs are related to new applications or improvements to our existing software platform that expand the functionality for our customers.

Net cash used in investing activities during the nine months ended September 30, 2024 was $907.7 million, consisting of purchases of property and equipment of $6.2 million and business acquisitions, net of cash received, of $822.6 million related to the acquisition of Parchment and $78.9 million related to the acquisition of Scribbles.

Net cash used in investing activities during the nine months ended September 30, 2023 was $4.7 million, consisting of purchases of property and equipment of $4.7 million.

Financing Activities

Our financing activities have consisted of proceeds from issuance of common stock from employee equity plans, shares withheld for tax withholdings on vesting of RSUs, borrowings and repayments of long-term debt, and changes in customer fund deposits.

Net cash provided by financing activities during the nine months ended September 30, 2024 was $663.0 million, which consisted of borrowings under the 2023 Incremental Term Loans, net of discount, of $663.9 million, borrowings under the Senior Revolver of $70.0 million, repayment of borrowing under the Senior Revolver of $70.0 million, $6.0 million in proceeds from the issuance of common stock from the employee stock purchase plan, and $6.4 million increase in customer fund deposits, offset by $4.3 million of shares repurchased for tax withholdings on vesting of RSUs, and $9.0 million in repayments on long-term debt.

Net cash used in financing activities during the nine months ended September 30, 2023 was $2.8 million, which consisted of $6.0 million in proceeds from the issuance of common stock from employee equity plans, offset by $4.9 million of shares repurchased for tax withholdings on vesting of RSUs, $0.1 million of financing costs, and $3.8 million in payments on long-term debt.

Critical Accounting Estimates

Our condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.

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For information on our critical accounting estimates, see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forth in our 2023 10-K.

Recent Accounting Pronouncement

For information on recent accounting pronouncements, see Note 2. “Summary of Significant Accounting Policies—Recent Accounting Pronouncements” in the notes to the condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

Non-GAAP Financial Measures

In addition to our results determined in accordance with U.S. GAAP, we believe the following non-GAAP measures are useful in evaluating our operating performance and liquidity. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance and assists in comparisons with other companies, some of which use similar non-GAAP financial information to supplement their U.S. GAAP results. The non-GAAP financial information is presented for supplemental informational purposes only and should not be considered a substitute for financial information presented in accordance with U.S. GAAP and may be different from similarly-titled non-GAAP measures used by other companies. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with U.S. GAAP. Investors are encouraged to review the related U.S. GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable U.S. GAAP financial measures.

Non-GAAP Operating Income

We define non-GAAP operating income as loss from operations excluding the impact of stock-based compensation, transaction costs, globalization costs, restructuring costs, technology modernization costs, other non-recurring costs, and amortization of acquisition-related intangibles that we do not believe are reflective of our ongoing operations. We believe non-GAAP operating income is useful in evaluating our operating performance compared to that of other companies in our industry, as this metric generally eliminates the effects of certain items that may vary for different companies for reasons unrelated to overall operating performance. Although we exclude the amortization of acquisition-related intangibles from this non-GAAP measure, management believes it is important for investors to understand that such intangible assets were recorded as part of purchase accounting and contribute to revenue generation.

The following table provides a reconciliation of loss from operations to non-GAAP operating income for each of the periods indicated:


	Three months ended September 30,					Nine months ended September 30,
	2024			2023		2024			2023
	(in thousands)
Income (loss) from operations		(11,884	)		4,550		(19,155	)		(3,442	)
Stock-based compensation		14,351			11,755		42,348			33,621
Transaction costs(1)		13,092			3,502		24,971			9,655
Globalization costs(2)		3,846			381		8,217			473
Restructuring costs(3)		1,328			541		8,982			5,282
Technology modernization costs(4)		1,944			543		6,456			1,453
Other non-recurring costs (5)		64			31		188			111
Amortization of acquisition-related intangibles		45,905			35,744		132,129			107,236
Non-GAAP operating income	$	68,646		$	57,047	$	204,136		$	154,389

(1)

Represents expenses incurred with third parties as part of the Company’s merger and acquisition activity, including due diligence, closing and post-closing integration activities. For the three and nine months ended September 30, 2024, also includes expenses incurred in connection with the Merger.

(2)

Represents one-time expenses incurred in the Company's recent efforts to develop and mobilize a global workforce to better support its broadening customer base and expanding international operations.

(3)

Consists of restructuring-related costs, including executive recruiting, severance charges, and other workforce realignment costs. In addition, lease termination costs and disposal of fixed asset charges related to the Company's real estate consolidation efforts. The Company continues to execute a remote-first strategy, closing offices, inclusive of those acquired in merger and acquisition activity, and reducing office space globally. Beginning in 2023, the Company began restructuring its executive team.

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(4)

Includes costs that are one-time in nature related to technology modernization to allow the Company's customers and users to have a more cohesive experience on its learning platform as a result of the various technologies acquired from historical acquisitions.

(5)

Represents expenses incurred for services provided by Thoma Bravo and their affiliates.

Free Cash Flow

We define free cash flow as net cash provided by operating activities less purchases of property and equipment and intangible assets, net of proceeds from disposals of property and equipment. We believe free cash flow facilitates period-to-period comparisons of liquidity. We consider free cash flow to be an important measure because it measures the amount of cash we generate and reflects changes in working capital. We use free cash flow in conjunction with traditional U.S. GAAP measures as part of our overall assessment of our liquidity, including the preparation of our annual operating budget and quarterly forecasts, to evaluate the effectiveness of our business strategies, and to communicate with our board of directors concerning our liquidity.

The following table provides a reconciliation of net cash provided by operating activities to free cash flow for each of the periods indicated:


	Three months ended September 30,						Nine months ended September 30,
	2024			2023			2024			2023
	(in thousands)
Net cash provided by operating activities	$	203,895		$	182,628		$	102,453		$	127,048
Purchases of property and equipment and intangible assets		(2,433	)		(1,808	)		(6,179	)		(4,708	)
Proceeds from disposals of property and equipment		8			7			30			42
Free cash flow	$	201,470		$	180,827		$	96,304		$	122,382

Adjusted EBITDA

EBITDA is defined as earnings before debt-related costs, including interest and loss on debt extinguishment, benefit for taxes, depreciation, and amortization. We further adjust EBITDA to exclude certain items of a significant or unusual nature, including stock-based compensation, transaction costs, globalization costs, restructuring costs, technology modernization costs, other non-recurring costs, effects of foreign currency transaction losses, amortization of acquisition-related intangibles, and interest income. Although we exclude the amortization of acquisition-related intangibles from this non-GAAP measure, management believes that it is important for investors to understand that such intangible assets were recorded as part of purchase accounting and contribute to revenue generation.

We believe that adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management team and board of directors. In addition, it provides a useful measure for period-to-period comparisons of our business, as it removes the effect of certain non-cash expenses and certain variable charges.

Adjusted EBITDA has limitations as a financial measure, should be considered as supplemental in nature, and is not meant as a substitute for the related financial information prepared in accordance with U.S. GAAP.

The following table presents a reconciliation of net loss to adjusted EBITDA for each of the periods indicated:



	Three months ended September 30,						Nine months ended September 30,
	2024			2023			2024			2023
	(in thousands)
Net loss	$	(24,696	)	$	(5,481	)	$	(66,770	)	$	(28,311	)
Interest on outstanding debt and loss on debt extinguishment		26,627			10,868			75,825			30,640
Benefit for taxes		(9,850	)		(1,920	)		(23,581	)		(4,717	)
Depreciation		1,481			1,186			4,223			3,481
Amortization		—			—			—			2
Stock-based compensation		14,351			11,755			42,348			33,621
Transaction costs(1)		13,092			3,502			24,971			9,655
Globalization costs(2)		3,846			381			8,217			473
Restructuring costs(3)		1,328			541			8,982			5,389
Technology modernization costs(4)		1,944			543			6,456			1,453
Other non-recurring costs(5)		64			31			188			111
Effects of foreign currency transaction (gains) and losses		(2,690	)		2,420			(343	)		1,672
Amortization of acquisition-related intangibles		45,905			35,744			132,129			107,236
Interest income		(1,271	)		(1,346	)		(4,232	)		(2,963	)
Adjusted EBITDA	$	70,131		$	58,224		$	208,413		$	157,742

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(1)

Represents expenses incurred with third parties as part of the Company’s merger and acquisition activity, including due diligence, closing and post-closing integration activities.

(2)

Represents one-time expenses incurred in the Company's recent efforts to develop and mobilize a global workforce to better support its broadening customer base and expanding international operations.

(3)

(4)

(5)

Represents expenses incurred for services provided by Thoma Bravo and their affiliates.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. All statements other than statements of historical facts are “forward-looking statements” for purposes of these provisions, including those relating to future events or our future financial performance and financial guidance. In some cases, you can identify forward-looking statements by terminology such as “may,” “might,” “will,” “should,” “expect,” “plan,” “anticipate,” “project,” “believe,” “estimate,” “predict,” “potential,” “intend” or “continue,” the negative of terms like these or other comparable terminology, and other words or terms of similar meaning in connection with any discussion of future operating or financial performance. For example, all statements we make relating to our current expectations relating to the Merger and the transactions, contemplated by the Merger agreement, estimated and projected costs, expenditures, cash flows, growth rates and financial results, our plans and objectives for future operations, growth initiatives, or strategies, industry, market and macroeconomic expectations, or future business and product capabilities are forward-looking statements. These statements are only predictions. You should not place undue reliance on our forward-looking statements. These statements are not guarantees of future performance and are subject to future events, risks and uncertainties, many of which are beyond our control, or currently unknown to us. Our assumptions may turn out to be inaccurate and cause actual events or results to differ materially from our expectation or projections. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected, including:

•

the risk that the proposed Merger may not be completed in a timely manner or at all, which may adversely affect the Company’s business and the price of the common stock;

•

the occurrence of any event, change or other circumstance or condition that could give rise to the termination of the Merger Agreement, including in circumstances requiring the Company to pay a termination fee;

•

the ability of Parent and Merger Sub to obtain the necessary financing arrangements set forth in the commitment letters received in connection with the Merger;

•

the effects or outcomes of litigation relating to the Merger instituted against the parties to the Merger Agreement or their respective directors, managers or officers;

•

certain restrictions during the pendency of the Merger that may impact the Company’s ability to pursue certain business opportunities or strategic transactions;

•

uncertainty as to timing of completion of the Merger;

•

risks that the benefits of the Merger are not realized when and as expected;

•

the continued economic uncertainty, including persistent inflation, labor shortages, high interest rates, foreign currency exchange volatility, concerns of economic slowdown or recession, reduced spending or suspension of investment in new or enhanced projects and geopolitical instability;

•

risks associated with failing to continue our recent growth rates, including our ability to acquire new customers and successfully retain existing customers;

•

the effects of the increased usage of, or interruptions or performance problems associated with, our learning platform;

•

the impact on our business by health pandemics or epidemics;

•

the history of losses and expectation that we will not be profitable for the foreseeable future;

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•

the impact to our revenues and operating results if we are unable to acquire new customers, successfully retain existing customers, expand sales to existing customers or develop new products;

•

our ability to grow our business effectively, to scale our business and to manage our expenses;

•

risks and uncertainties associated with potential acquisitions;

•

the competitiveness of the market in which we operate;

•

our reliance on our management team and other key employees;

•

risks related our brand recognition and reputation;

•

the impact of potential information technology or data security breaches or other cyberattacks or other disruptions;

•

risks associated with our use of open source software, including that we make a substantial portion of the source code for Canvas available under the terms of an open source license;

•

our ability to obtain, maintain, protect and enforce our intellectual property and proprietary rights;

•

our ability to comply with regulations applicable to us;

•

risks related to our estimates of market opportunity and our ability to change our pricing models, if necessary to compete successfully; and;

•

other factors disclosed in the section entitled “Risk Factors” in the 2023 10-K.

We derive many of our forward-looking statements from our operating budgets and forecasts, which are based on many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by this cautionary statement as well as other cautionary statements that are made from time to time in our other SEC filings and public communications. You should evaluate all forward-looking statements made in this report in the context of these risks and uncertainties.

We caution you that the important factors referenced above may not contain all of the factors that are important to you. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect. The forward-looking statements included in this report are made only as of the date hereof. We undertake no obligation to update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in foreign currency exchange rates and interest rates and inflation. We do not hold or issue financial instruments for trading purposes.

Foreign Currency Exchange Risk

Our reporting currency is the U.S. dollar. Due to our international operations, we have foreign currency risks related to operating expense denominated in currencies other than the U.S. dollar, particularly the euro. Most of our sales are denominated in U.S. dollars, and therefore our revenue is not currently subject to significant foreign currency risk. Our operating expenses are denominated in the currencies of the countries in which our operations are located, which are primarily in the United States, Europe, Australia, and New Zealand. Our condensed consolidated results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates. To date, we have not entered into any hedging arrangements with respect to foreign currency risk or other derivative financial instruments. For the three and nine months ended September 30, 2024, a hypothetical 10% change in foreign currency exchange rates applicable to our business would not have had a material impact on our condensed consolidated financial statements.

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Interest Rate Risk

We had cash, cash equivalents, restricted cash, and funds held on behalf of customers of $203.2 million and $344.2 million as of September 30, 2024 and December 31, 2023, respectively, consisting of cash and money market accounts in highly rated financial institutions. With the exception of cash, these interest-earning instruments carry a degree of interest rate risk. To date, fluctuations in our interest income have not been significant. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure. Due to the short-term nature of these investments, we have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates.

At September 30, 2024 and December 31, 2023, we also had in place a $125.0 million Senior Revolver and approximately $1,167.3 million and $491.3 million outstanding on our Senior Term Loan and 2023 Incremental Term Loans, respectively. As of September 30, 2024 and December 31, 2023, we had no outstanding borrowings under our Senior Revolver. The Senior Revolver bears interest at 2.5% plus a variable applicable rate, whereas the Senior Term Loan and 2023 Incremental Term Loans bear interest at 2.75% plus a variable applicable rate. At September 30, 2024 and December 31, 2023, the applicable rate for the Senior Term Loan and 2023 Incremental Term Loans was 8.07% and 8.68%, respectively.

We have an agreement to maintain cash balances at a financial institution of no less than $1.0 million as collateral for several letters of credit for the purpose of securing certain of the Company’s obligations under facility leases.

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures. Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, have evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were designed to, and were effective to, provide assurance at a reasonable level that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Changes in internal control over financial reporting. There were no changes in our internal control over financial reporting during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent limitation on the effectiveness of internal control. The effectiveness of any system of internal control over financial reporting, including ours, is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, any system of internal control over financial reporting, including ours, no matter how well designed and operated, can only provide reasonable, not absolute assurances. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business but cannot assure you that such improvements will be sufficient to provide us with effective internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are, and from time to time may be, party to litigation and subject to claims. As our growth continues, we may become party to an increasing number of litigation matters and claims. The outcome of litigation and claims cannot be predicted with certainty, and the resolution of these matters could materially affect our future results of operations, cash flows or financial position. For a description of our material legal proceedings, see Note 14, Commitments and Contingencies in the financial statements included in this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors

A discussion of the material factors that make an investment in us risky is included in the section entitled “Risk Factors” included in our 2023 10-K and set forth below.

Uncertainties associated with the Merger could adversely affect our business, results of operations and financial condition.

On July 25, 2024, Instructure entered into the Merger Agreement. Pursuant to the Merger Agreement, Merger Sub will be merged with and into the Company, with the Company surviving as a wholly owned subsidiary of Parent.

The closing of the Merger is subject to certain conditions, including (i) certain approvals and clearances by government authorities and (iii) other customary conditions for a transaction of this type, such as the absence of any legal restraint prohibiting the consummation of the transactions and the absence of any Company Material Adverse Effect (as defined in the Merger Agreement). Even though effective as of 11:59 p.m. Eastern Time on September 9, 2024, the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, expired with respect to the Merger, there are other regulatory agencies from which certain regulatory approvals and clearances will be sought. These agencies have broad discretion in administering the governing regulations. As a condition to their clearance of the Merger, agencies may impose requirements, limitations or costs or require divestitures or place restrictions on the conduct of the parties’ business. These requirements, limitations, costs, divestitures or restrictions could jeopardize or delay the consummation of the Merger. The parties to the Merger Agreement may not receive the necessary approvals for the transaction or receive them within the expected timeframe. In addition, the Merger may fail to close for other reasons.

The announcement and pendency of the Merger, as well as any delays in the expected timeframe, could cause disruption in and create uncertainties, which could have an adverse effect on our business, results of operations and financial condition, regardless of whether the Merger is completed. These risks include, but are not limited to:

•

an adverse effect on our relationship with vendors, customers, and employees, including if our vendors, customers or others attempt to negotiate changes in existing business relationships, consider entering into business relationships with parties other than us, delay or defer decisions concerning their business with us, or terminate their existing business relationships with us during the pendency of the Merger;

•

a diversion of a significant amount of management time and resources towards the completion of the Merger;

•

being subject to certain restrictions on the conduct of our business;

•

possibly foregoing certain business opportunities that we might otherwise pursue absent the pending Merger; and

•

difficulties attracting and retaining key employees.

Failure to complete the Merger could adversely affect our business and the market price of our shares of common stock.

The closing of the Merger may not occur on the expected timeline or at all. The Merger Agreement contains certain termination rights for us and Parent, including, among others (i) if the Merger is not consummated by 11:59 p.m., New York City time, on March 25, 2025 (the “Termination Date”), (ii) if the other party breaches its representations, warranties or covenants in a manner that would cause certain conditions to the closing set forth in the Merger Agreement to not be satisfied and fails to timely cure such breach within the period provided by the terms of the Merger Agreement, or (iii) if any judgment, law or order prohibiting the Merger has become final and non-appealable.

If the Merger Agreement is terminated and the Merger is not consummated, the price of our common stock may decline and you may not recover your investment or receive a price for your shares similar to what has been offered pursuant to the Merger. In addition, if the Merger Agreement is validly terminated by Parent under certain circumstances set forth in the Merger Agreement, the Company will be required to pay Parent a termination fee equal to $109.0 million. If the Company is required to pay this termination fee, such fee, together with costs incurred to execute the Merger Agreement and pursue the Merger, could have a material adverse effect on the Company’s financial condition and results of operations.

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The Merger Agreement contains provisions that limit our ability to pursue alternatives to the Merger.

Under the Merger Agreement, we are restricted from soliciting, initiating, proposing or encouraging or facilitating alternative acquisition proposals from third parties and/or, subject to certain exceptions set forth in the Merger Agreement, providing non-public information to third parties in response to any inquiries regarding, or the submission of any proposal or offer that constitutes, or would reasonably be expected to lead to, any Acquisition Proposal (as defined in the Merger Agreement). These provisions could discourage a third party that may have an interest in acquiring all or a significant part of our business from considering or proposing that acquisition, even if such third party were prepared to pay consideration with a higher value than the value of the consideration in the Merger.

We are subject to certain restrictions on the conduct of our business under the terms of the Merger Agreement.

Under the terms of the Merger Agreement, we have agreed to certain restrictions on the operations of our business. We have agreed to limit the conduct of our business to those actions undertaken in the ordinary course of business and to refrain from, among other things, incurring debt; entering into, adopting, amending, modifying or terminating any material Employee Plans (as defined in the Merger Agreement); increasing the compensation of any director, officer or employee or hiring or terminating any employee (other than for cause); settling certain legal proceedings; changing our methods, principles or practices of financial accounting; and incurring certain capital expenditures, in each case, subject to certain exceptions set forth in the Merger Agreement. Because of these restrictions, we may be prevented from undertaking certain actions with respect to the conduct of our business that we might otherwise have taken if not for the Merger Agreement.

Lawsuits filed against us and the members of our Board of Directors arising out of the Merger may delay or prevent the consummation of the Merger.

Putative stockholder complaints, including stockholder class action complaints, and other complaints filed against us, our Board of Directors, parties involved in the Merger and others in connection with the transactions contemplated by the Merger Agreement may delay or prevent the consummation of the Merger. The Company has received two complaints by purported stockholders of the Company filed in the Delaware Court of Chancery seeking to compel inspection of books and records related to the Merger. We are currently unable to predict the outcome of this matter. It is possible that additional complaints may be filed challenging the actions of our Board of Directors or challenging the Merger. The outcome of any such complaints or any litigation is uncertain, and we may not be successful in defending against these claims or any such future claims. Whether or not any claims are successful, this type of litigation could delay or prevent the Merger, divert the attention of our management and employees from our day-to-day business, and otherwise adversely affect our business, results of operations, and financial condition. Additionally, if a plaintiff is successful in obtaining an injunction prohibiting completion of the Merger, then that injunction may delay or prevent the Merger from being completed, which may exacerbate the other risks described herein and adversely affect our business, operating results and financial condition.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Insider Trading Arrangements

During the quarter ended September 30, 2024, none of our directors or officers (as defined in Section 16 of the Exchange Act), adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” (each as defined in Item 408(a) and (c) of Regulation S-K).

Item 6. Exhibits

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EXHIBIT INDEX


Exhibit Number		Description
2.1*		Agreement and Plan of Merger, by and among Instructure Holdings, Inc., Icon Parent Inc. and Icon Acquisition Sub Inc., dated July 25, 2024(1)
3.1		Second Amended and Restated Certificate of Incorporation of Instructure Holdings, Inc., filed July 23, 2021(2)
3.2		Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation of Instructure Holdings, Inc., filed May 30, 2023 (3)
3.3		Amended and Restated Bylaws of Instructure Holdings, Inc., effective July 21, 2021(4)
10.1		Executive Agreement, dated as of June 25, 2021, by and between Mitch Benson and Instructure, Inc.(5)
31.1		Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**		Certification of the Principal Executive Officer and Principal Financial Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH		Inline XBRL Taxonomy Extension Schema
101.CAL		Inline XBRL Taxonomy Extension Calculation
101.DEF		Inline XBRL Extension Definition
101.LAB		Inline XBRL Taxonomy Extension Label
101.PRE		Inline XBRL Taxonomy Extension Presentation
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company hereby agrees to furnish supplementally a copy of any omitted schedule to the SEC upon request.

** Document has been furnished, is not deemed filed and is not to be incorporated by reference into any of the Company’s filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, irrespective of any general incorporation language contained in any such filing.

(1) Incorporated by reference to Exhibit 2.1 on Form 8-K filed on July 25, 2024

(2) Incorporated by reference to Exhibit 3.1 on Form 8-K filed on July 21, 2021

(3) Incorporated by reference to Exhibit 3.3 on Form 10-Q filed on August 2, 2023

(4) Incorporated by reference to Exhibit 3.2 on Form 8-K filed on July 21, 2021

(5) Incorporated by reference to Exhibit 10.1 on Form 10-Q filed on August 2, 2024

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	Instructure Holdings, Inc.

Date: November 8, 2024	By:	/s/Peter Walker
		Peter Walker
		Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer)

Exhibit 31.1

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Steve Daly, certify that:

I have reviewed this quarterly report on Form 10-Q of Instructure Holdings, Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


Date: November 8, 2024	By:	/s/ Steve Daly
		Steve Daly
		Chief Executive Officer (Principal Executive Officer)

Exhibit 31.2

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Peter Walker, certify that:

I have reviewed this quarterly report on Form 10-Q of Instructure Holdings, Inc.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


Date: November 8, 2024	By:	/s/ Peter Walker
		Peter Walker
		Chief Financial Officer (Principal Financial Officer)

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), Steve Daly, Chief Executive Officer of Instructure Holdings, Inc. (the “Company”), and Peter Walker, Chief Financial Officer of the Company, each hereby certifies that, to the best of his knowledge:

(1) The Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2024 (the “Quarterly Report”), to which this Certification is attached as Exhibit 32.1, fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and

(2) The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date: November 8, 2024	By:	/s/ Steve Daly
		Steve Daly
		Chief Executive Officer (Principal Executive Officer)


Date: November 8, 2024	By:	/s/ Peter Walker
		Peter Walker
		Chief Financial Officer (Principal Financial Officer)

Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Sep. 30, 2024	Nov. 06, 2024
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Sep. 30, 2024
Document Fiscal Year Focus	2024
Current Fiscal Year End Date	--12-31
Document Fiscal Period Focus	Q3
Entity Registrant Name	Instructure Holdings, Inc.
Entity Central Index Key	0001841804
Securities Act File Number	001-40647
Entity Tax Identification Number	84-4325548
Entity Current Reporting Status	Yes
Entity Shell Company	false
Entity Filer Category	Accelerated Filer
Entity Interactive Data Current	Yes
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Address, Address Line One	6330 South 3000 East
Entity Address, Address Line Two	Suite 700
Entity Address, City or Town	Salt Lake City
Entity Address, State or Province	UT
Entity Incorporation, State or Country Code	DE
Entity Address, Postal Zip Code	84121
Local Phone Number	203-6755
City Area Code	800
Title of 12(b) Security	Common Stock, par value $0.01 per share
Trading Symbol	INST
Security Exchange Name	NYSE
Entity Common Stock, Shares Outstanding		147,089,318

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Current assets:
Cash and cash equivalents	$ 187,512	$ 341,047
Funds held on behalf of customers	14,783	0
Accounts receivable-net	98,894	67,193
Prepaid expenses	38,630	12,082
Deferred commissions	14,644	13,705
Other current assets	9,200	4,797
Total current assets	363,663	438,824
Property and equipment, net	16,002	13,479
Right-of-use assets	8,314	9,002
Goodwill	1,909,041	1,265,316
Intangible assets, net	609,983	399,712
Noncurrent prepaid expenses	1,905	4,182
Deferred commissions, net of current portion	14,099	13,816
Deferred tax assets	5,624	6,739
Other assets	5,395	6,908
Total assets	2,934,026	2,157,978
Current liabilities:
Accounts payable	25,576	23,589
Customer fund deposits	14,783	0
Accrued liabilities	36,051	23,760
Lease liabilities	5,335	7,513
Long-term debt, current	6,525	4,013
Deferred revenue	374,431	291,784
Total current liabilities	462,701	350,659
Long-term debt, net of current portion	1,138,510	482,387
Deferred revenue, net of current portion	9,611	10,876
Lease liabilities, net of current portion	9,842	9,246
Deferred tax liabilities	45,678	14,420
Other long-term liabilities	4,431	4,898
Total liabilities	1,670,773	872,486
Stockholders’ equity:
Common stock, par value $0.01 per share; 500,000 shares authorized as of September 30, 2024 and December 31, 2023; 147,089 and 145,207 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively.	1,471	1,452
Additional paid-in capital	1,663,532	1,619,020
Accumulated deficit	(401,750)	(334,980)
Total stockholders’ equity	1,263,253	1,285,492
Total liabilities and stockholders’ equity	$ 2,934,026	$ 2,157,978

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Sep. 30, 2024	Dec. 31, 2023
Statement of Financial Position [Abstract]
Common stock par value	$ 0.01	$ 0.01
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares, issued	147,089,000	145,207,000
Common stock, shares, outstanding	147,089,000	145,207,000

Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Revenue:
Total revenue	$ 173,164	$ 134,921	$ 499,063	$ 394,834
Cost of revenue:
Total cost of revenue	58,782	47,427	171,575	138,548
Gross profit	114,382	87,494	327,488	256,286
Operating expenses:
Sales and marketing	67,673	46,734	187,899	149,743
Research and development	31,874	20,688	90,650	65,872
General and administrative	26,719	15,522	68,094	44,113
Total operating expenses	126,266	82,944	346,643	259,728
Loss from operations	(11,884)	4,550	(19,155)	(3,442)
Other income (expense):
Interest income	1,284	1,360	4,301	3,021
Interest expense	(26,627)	(10,868)	(75,636)	(30,642)
Other income (expense)	2,681	(2,443)	328	(1,965)
Loss on extinguishment of debt	0	0	(189)	0
Total other income (expense), net	(22,662)	(11,951)	(71,196)	(29,586)
Loss before income taxes	(34,546)	(7,401)	(90,351)	(33,028)
Income tax benefit	9,850	1,920	23,581	4,717
Net loss and comprehensive loss	$ (24,696)	$ (5,481)	$ (66,770)	$ (28,311)
Net loss per common share, basic	$ (0.17)	$ (0.04)	$ (0.46)	$ (0.2)
Net loss per common share, diluted	$ (0.17)	$ (0.04)	$ (0.46)	$ (0.2)
Weighted average common shares used in computing - basic	146,670	144,222	146,079	143,665
Weighted average common shares used in computing - diluted	146,670	144,222	146,079	143,665
Subscription and Support
Revenue:
Total revenue	$ 160,193	$ 123,110	$ 462,419	$ 360,159
Cost of revenue:
Total cost of revenue	49,827	40,345	145,566	117,532
Professional Services and Other
Revenue:
Total revenue	12,971	11,811	36,644	34,675
Cost of revenue:
Total cost of revenue	$ 8,955	$ 7,082	$ 26,009	$ 21,016

Condensed Consolidated Statements of Shareholders' Equity (Unaudited) - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Accumulated Deficit
Balance at Dec. 31, 2022	$ 1,276,127	$ 1,429	$ 1,575,600	$ (300,902)
Balance, shares at Dec. 31, 2022		142,917
Vesting of restricted stock units, net		$ 18	(18)
Vesting of restricted stock units, shares		1,674
Purchase of ESPP shares	6,017	$ 3	6,014
Purchase of ESPP shares, Shares		300
Shares withheld for tax withholding on vesting of restricted stock units	(4,946)	$ (3)	(4,943)
Shares withheld for tax withholding on vesting of restricted stock units, shares		(195)
Stock-based compensation	33,373		33,373
Net Income (Loss)	(28,311)			(28,311)
Balance at Sep. 30, 2023	1,282,260	$ 1,447	1,610,026	(329,213)
Balance, shares at Sep. 30, 2023		144,696
Balance at Jun. 30, 2023	1,275,117	$ 1,440	1,597,409	(323,732)
Balance, shares at Jun. 30, 2023		143,991
Vesting of restricted stock units, net		$ 7	(7)
Vesting of restricted stock units, shares		653
Purchase of ESPP shares	2,722	$ 1	2,721
Purchase of ESPP shares, Shares		127
Shares withheld for tax withholding on vesting of restricted stock units	(1,960)	$ (1)	(1,959)
Shares withheld for tax withholding on vesting of restricted stock units, shares		(75)
Stock-based compensation	11,862		11,862
Net Income (Loss)	(5,481)			(5,481)
Balance at Sep. 30, 2023	1,282,260	$ 1,447	1,610,026	(329,213)
Balance, shares at Sep. 30, 2023		144,696
Balance at Dec. 31, 2023	1,285,492	$ 1,452	1,619,020	(334,980)
Balance, shares at Dec. 31, 2023		145,207
Vesting of restricted stock units, net		$ 18	(18)
Vesting of restricted stock units, shares		1,766
Purchase of ESPP shares	5,983	$ 3	5,980
Purchase of ESPP shares, Shares		308
Shares withheld for tax withholding on vesting of restricted stock units	(4,325)	$ (2)	(4,323)
Shares withheld for tax withholding on vesting of restricted stock units, shares		(192)
Stock-based compensation	42,873		42,873
Net Income (Loss)	(66,770)			(66,770)
Balance at Sep. 30, 2024	1,263,253	$ 1,471	1,663,532	(401,750)
Balance, shares at Sep. 30, 2024		147,089
Balance at Jun. 30, 2024	1,271,701	$ 1,465	1,647,290	(377,054)
Balance, shares at Jun. 30, 2024		146,471
Vesting of restricted stock units, net		$ 5	(5)
Vesting of restricted stock units, shares		522
Purchase of ESPP shares	2,755	$ 1	2,754
Purchase of ESPP shares, Shares		142
Shares withheld for tax withholding on vesting of restricted stock units	(1,075)		(1,075)
Shares withheld for tax withholding on vesting of restricted stock units, shares		(46)
Stock-based compensation	14,568		14,568
Net Income (Loss)	(24,696)			(24,696)
Balance at Sep. 30, 2024	$ 1,263,253	$ 1,471	$ 1,663,532	$ (401,750)
Balance, shares at Sep. 30, 2024		147,089

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023
Operating activities:
Net loss	$ (66,770)	$ (28,311)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation of property and equipment	4,223	3,481
Amortization of intangible assets	132,129	107,237
Amortization of deferred financing costs	3,863	889
Stock-based compensation	42,350	32,986
Deferred income taxes	(25,197)	(7,793)
Non-cash operating lease expense	1,063	3,348
Other	(174)	2,853
Changes in assets and liabilities:
Accounts receivable - net	(22,684)	(22,597)
Prepaid expenses and other assets	(26,010)	(15,250)
Deferred commissions	(1,222)	2,896
Accounts payable and accrued liabilities	2,991	(7,565)
Deferred revenue	63,177	57,724
Lease liabilities	(2,012)	(5,370)
Other liabilities	(3,274)	2,520
Net cash provided by operating activities	102,453	127,048
Investing activities:
Purchases of property and equipment	(6,179)	(4,708)
Proceeds from sale of property and equipment	30	42
Business acquisitions, net of cash received	(901,562)	0
Net cash used in investing activities	(907,711)	(4,666)
Financing activities:
Proceeds from issuance of common stock from employee equity plans	5,983	6,018
Shares repurchased for tax withholdings on vesting of restricted stock units	(4,325)	(4,949)
Proceeds from issuance of term debt, net of discount	663,892	0
Payments for financing costs	0	(84)
Advances from revolving credit facility	70,000	0
Repayment of advances from revolving credit facility	(70,000)	0
Change in customer fund deposits	6,441	0
Repayments on long-term debt	(8,979)	(3,750)
Net cash provided by (used in) financing activities	663,012	(2,765)
Foreign currency impacts on cash, cash equivalents, restricted cash, and funds held on behalf of customers	1,287	(1,246)
Net increase (decrease) in cash, cash equivalents, restricted cash, and funds held on behalf of customers	(140,959)	118,371
Cash, cash equivalents, restricted cash, and funds held on behalf of customers, beginning of period	344,208	190,266
Cash, cash equivalents, restricted cash, and funds held on behalf of customers, end of period	203,249	308,637
Supplemental cash flow disclosure:
Cash paid for taxes	3,987	2,657
Cash paid for interest on outstanding debt	65,849	31,455
Non-cash investing and financing activities:
Capital expenditures incurred but not yet paid	110	75
Reconciliation of cash, cash equivalents, restricted cash, and funds held on behalf of customers:
Cash and cash equivalents	187,512	304,858
Restricted cash	954	3,779
Funds held on behalf of customers	14,783	0
Total cash, cash equivalents, restricted cash, and funds held on behalf of customers	$ 203,249	$ 308,637

Pay vs Performance Disclosure - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
Pay vs Performance Disclosure - USD ($) $ in Thousands	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Pay vs Performance Disclosure
Net Income (Loss)	$ (24,696)	$ (5,481)	$ (66,770)	$ (28,311)

Insider Trading Arrangements	3 Months Ended
Insider Trading Arrangements	Sep. 30, 2024
Trading Arrangements, by Individual
Rule 10b5-1 Arrangement Adopted	false
Non-Rule 10b5-1 Arrangement Adopted	false
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false

Description of Business and Basis of Presentation	9 Months Ended
Description of Business and Basis of Presentation	Sep. 30, 2024
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Description of Business and Basis of Presentation	1. Description of Business and Basis of Presentation Company and Background Instructure Holdings, Inc. (the “Company,” “Instructure,” “we,” “our,” or “us”) is an education technology company dedicated to elevating student access, amplifying the power of teaching, and inspiring everyone to learn together. Instructure’s platform delivers a next-generation learning management system (“LMS”), robust assessments for learning, actionable analytics, and engaging, dynamic content. Instructure offers its platform through a Software-as-a-Service, or SaaS, business model. The Company was founded in September 2008. We are headquartered in Salt Lake City, Utah, and have wholly-owned subsidiaries in the United Kingdom, Australia, the Netherlands, Hong Kong, Sweden, Brazil, Mexico, Hungary, Ireland, Canada, Singapore, and the Philippines. On July 25, 2024, Instructure entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Icon Parent Inc., a Delaware corporation (“Parent”), and Icon Acquisition Sub Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”). Parent and Merger Sub are each affiliates of investment funds managed by Kohlberg Kravis Roberts & Co. L.P. (“KKR”), a leading global investment firm. Pursuant to the Merger Agreement, Merger Sub will be merged with and into the Company, with the Company surviving as a wholly owned subsidiary of Parent (the “Merger”). Under, and subject to, the terms of the Merger Agreement, at the effective time of the Merger, Instructure stockholders will have the right to receive $23.60 per share in cash, without interest thereon and subject to applicable withholding taxes. The Company’s board of directors has unanimously approved the Merger Agreement and the transactions contemplated thereby and the necessary stockholder approval has been duly executed and delivered, adopting and approving the Merger Agreement and the transactions contemplated thereby. The obligations of the parties to complete the proposed Merger are subject to customary closing conditions, including, among others, the receipt of certain regulatory approvals. Effective as of 11:59 p.m. Eastern Time on September 9, 2024, the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, expired with respect to the Merger. On September 5, 2024, Instructure filed with the SEC, a Definitive Information Statement on Schedule 14, containing more information about the Merger Agreement and the Merger. The proposed Merger is expected to close during the second half of 2024. Upon consummation of the Merger, the Company will be a privately held company and its common stock will no longer be traded on the New York Stock Exchange. Basis of Presentation The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) applicable to interim periods, under the rules and regulations of the United States Securities and Exchange Commission (“SEC”). In the opinion of management, we have prepared the accompanying unaudited condensed consolidated financial statements on a basis substantially consistent with the audited consolidated financial statements of the Company as of and for the fiscal year ended December 31, 2023, and these condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of the interim periods presented. All intercompany balances and transactions have been eliminated in consolidation. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for any subsequent quarter or for the entire year ending December 31, 2024. The year-end balance sheet data was derived from audited financial statements, but the interim condensed consolidated balance sheet included in this Form 10-Q does not include all disclosures required under U.S. GAAP. Certain information and note disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP have been omitted under the rules and regulations of the SEC. These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 21, 2024 (the “2023 10-K”). Use of Estimates The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Such estimates, which we evaluate on an on-going basis, include provisions for credit losses, useful lives for property and equipment and intangible assets, valuation allowances for net deferred income tax assets, acquisition related estimates, our assessment for impairment of goodwill, intangible assets, and other long-lived assets, the standalone selling price of performance obligations, timing of professional services revenue recognition, and the determination of the period of benefit for deferred commissions. We base our estimates on historical experience and on various other assumptions which we believe to be reasonable. Operating Segments We operate in a single operating segment: cloud-based learning management, assessment and performance systems. Operating segments are defined as components of an enterprise for which separate financial information is regularly evaluated by the chief operating decision makers (“CODM”), which are our chief executive officer and chief financial officer, in deciding how to allocate resources and assess performance. Our CODM evaluate our financial information and resources and assess the performance of these resources on a consolidated basis. Since we operate in one operating segment, all required financial segment information can be found in the condensed consolidated financial statements.

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2024

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Revenue Recognition

We determined revenue recognition through the following steps:

•

Identification of the contract, or contracts, with a customer

•

Identification of the performance obligations in the contract

•

Determination of the transaction price

•

Allocation of the transaction price to the performance obligations in the contract

•

Recognition of revenue when, or as, we satisfy a performance obligation

Subscription and Support

Professional Services and Other

Contracts with Multiple Performance Obligations

Deferred Commissions

Deferred Revenue

Funds Held on Behalf of Customers and Customer Fund Deposits

Recent Accounting Pronouncements

Issued accounting pronouncements

Net Loss Per Share

9 Months Ended

Sep. 30, 2024

Earnings Per Share [Abstract]

Net Loss Per Share

3. Net Loss Per Share

A reconciliation of the denominator used in the calculation of basic and diluted net loss per share is as follows (in thousands, except per share amounts):


	Three months ended September 30,						Nine months ended September 30,
	2024			2023			2024			2023
Numerator:
Net loss	$	(24,696	)	$	(5,481	)	$	(66,770	)	$	(28,311	)
Denominator:
Weighted-average common shares outstanding—basic		146,670			144,222			146,079			143,665
Dilutive effect of share equivalents resulting from unvested restricted stock units and shares for issuance under employee stock purchase plan		—			—			—			—
Weighted-average common shares outstanding—diluted		146,670			144,222			146,079			143,665
Net loss per common share, basic and diluted	$	(0.17	)	$	(0.04	)	$	(0.46	)	$	(0.20	)



	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023
Restricted stock units		6,715		5,222		6,715		5,222
Shares issuable under employee stock purchase plan		—		33		—		33
Total		6,715		5,255		6,715		5,255

Property and Equipment

9 Months Ended

Sep. 30, 2024

Property, Plant and Equipment [Abstract]

Property and Equipment

4. Property and Equipment

Property and equipment consisted of the following (in thousands):


	September 30,			December 31,
	2024			2023
Computer and office equipment	$	6,484		$	5,437
Capitalized software development costs		18,799			13,556
Furniture and fixtures		1,161			1,153
Leasehold improvements and other		4,549			6,270
Total property and equipment		30,993			26,416
Less accumulated depreciation and amortization		(14,991	)		(12,937	)
Total	$	16,002		$	13,479

Acquisitions

9 Months Ended

Sep. 30, 2024

Business Combinations [Abstract]

Acquisitions

5. Acquisitions

2024 Acquisitions


Consideration transferred
Cash paid	$	832,172
Escrow		2,000
Total purchase consideration	$	834,172

Identifiable assets acquired
Cash and cash equivalents	$	5,445
Funds held on behalf of customers		6,081
Accounts receivable		9,746
Prepaid expenses and other assets		3,331
Property and equipment		212
Right-of-use assets		375
Intangible assets: developed technology		45,800
Intangible assets: trade name		12,500
Intangible assets: customer relationships		240,000
Total assets acquired	$	323,490

Liabilities assumed
Accounts payable and accrued liabilities	$	9,676
Customer fund deposits		6,081
Lease liabilities		430
Deferred revenue		17,478
Deferred tax liabilities		46,574
Other liabilities		2,807
Total liabilities assumed	$	83,046
Goodwill		593,728
Total purchase consideration	$	834,172


	Three months ended September 30,			Nine months ended September 30,
	2023			2024			2023
Total revenue	$	163,546		$	509,120		$	475,739
Net loss	$	(22,363	)	$	(66,616	)	$	(78,201	)


Consideration transferred
Cash paid	$	80,782
Escrow		1,000
Total purchase consideration	$	81,782

Identifiable assets acquired
Cash and cash equivalents	$	605
Funds held on behalf of customers		2,261
Accounts receivable		332
Prepaid expenses and other assets		168
Property and equipment		22
Intangible assets: developed technology		3,100
Intangible assets: trade name		500
Intangible assets: customer relationships		40,500
Total assets acquired	$	47,488

Liabilities assumed
Accounts payable and accrued liabilities	$	1,720
Customer fund deposits		2,261
Deferred revenue		727
Deferred tax liabilities		10,995
Total liabilities assumed	$	15,703
Goodwill		49,997
Total purchase consideration	$	81,782

Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2024

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

6. Goodwill and Intangible Assets

Goodwill activity was as follows (in thousands):


	Total
Balance as of December 31, 2023	$	1,265,316
Additions - see Note 5. “Acquisitions”		643,725
Balance as of September 30, 2024	$	1,909,041

Intangible assets consisted of the following (in thousands):


	Weighted-Average Remaining Useful Life	September 30, 2024							December 31, 2023
		Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net

Software	0 Months	$	21	$	(21	)	$	—	$	21	$	(21	)	$	—
Trade names	63 Months		139,100		(60,832	)		78,268		126,100		(49,336	)		76,764
Developed technology	32 Months		374,200		(287,905	)		86,295		325,300		(232,662	)		92,638
Customer relationships	81 Months		731,900		(286,500	)		445,400		451,400		(221,123	)		230,277
Non-compete agreements	15 Months		50		(30	)		20		50		(17	)		33
Total		$	1,245,271	$	(635,288	)	$	609,983	$	902,871	$	(503,159	)	$	399,712

Based on the recorded intangible assets at September 30, 2024, estimated amortization expense is expected to be as follows (in thousands):


	Amortization
	Expense
Years Ending December 31,
Remainder of 2024	$	45,905
2025		140,656
2026		120,302
2027		80,564
2028		57,616
Thereafter		164,940
Total	$	609,983

Credit Facility

9 Months Ended

Sep. 30, 2024

Line of Credit Facility [Abstract]

Credit Facility

7. Credit Facility

The maturities of outstanding debt as of September 30, 2024, are as follows (in thousands):


	Amount
Years Ending December 31,
Remainder of 2024	$	2,993
2025		11,972
2026		11,972
2027		11,972
2028		1,128,362
Thereafter		—
Total	$	1,167,271

Revenue

9 Months Ended

Sep. 30, 2024

Geographic Areas, Revenues from External Customers [Abstract]

Revenue

8. Revenue



	Three months ended September 30,						Nine months ended September 30,
	2024			2023			2024			2023

United States	$	141,717		$	107,583		$	408,067		$	314,547
Foreign		31,447			27,338			90,996			80,287
Total revenue	$	173,164		$	134,921		$	499,063		$	394,834
Percentage of revenue generated outside of the United States		18	%		20	%		18	%		20	%

Deferred Revenue and Performance Obligations

Transaction Price Allocated to the Remaining Performance Obligations

Concentration of Credit Risk, Significant Customers and Provision for Credit Losses

There were no customers with revenue as a percentage of total revenue exceeding 10% for the periods presented.

As of September 30, 2024 and December 31, 2023 there were no customers with outstanding net accounts receivable balances as a percentage of total outstanding net accounts receivable greater than 10%.

Our provisions for credit loss balances at September 30, 2024 and December 31, 2023 were $1.8 million and $2.0 million, respectively.

Deferred Commissions

9 Months Ended

Sep. 30, 2024

Deferred Costs [Abstract]

Deferred Commissions

9. Deferred Commissions

Stock-Based Compensation

9 Months Ended

Sep. 30, 2024

Share-Based Payment Arrangement [Abstract]

Stock-Based Compensation

10. Stock-Based Compensation

Employee Equity Plans



	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023

Restricted stock units	$	14,113	$	11,343	$	41,351	$	32,420
Shares issuable under employee stock purchase plan		238		412		997		1,201
Total stock-based compensation	$	14,351	$	11,755	$	42,348	$	33,621



	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023

Subscription and support cost of revenue	$	750	$	459	$	2,107	$	1,312
Professional services and other cost of revenue		864		603		2,451		1,639
Sales and marketing		4,170		3,145		11,612		9,142
Research and development		4,469		3,792		13,047		10,446
General and administrative		4,098		3,756		13,131		11,082
Total stock-based compensation	$	14,351	$	11,755	$	42,348	$	33,621

Restricted Stock Units

The following table summarizes the activity of RSUs for the nine months ended September 30, 2024 (in thousands, except per unit amounts):


	RSUs			Weighted Average Grant Date Fair Value Per Unit
Unvested and outstanding at December 31, 2023		4,470		$	23.68
Granted		4,335			21.99
Vested		(1,445	)		22.75
Forfeited or canceled		(645	)		22.93
Unvested and outstanding at September 30, 2024		6,715		$	22.86


	RSUs			Weighted Average Grant Date Fair Value Per Unit
Unvested and outstanding at December 31, 2023		320		$	12.30
Vested		(320	)		12.30
Unvested and outstanding at September 30, 2024		—

2021 ESPP

The following table summarizes the assumptions relating to 2021 ESPP purchase rights used in a Black-Scholes option pricing model for the three months ended September 30, 2024 and 2023:


	Three months ended September 30,
	2024	2023
Dividend yield	None	None
Volatility	18%	18 - 25%
Risk-free interest rate	5.27%	5.20 - 5.47%
Expected life (years)	0.5	0.5

Income Taxes

9 Months Ended

Sep. 30, 2024

Income Tax Disclosure [Abstract]

Income Taxes

11. Income Taxes

Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2024

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

12. Fair Value of Financial Instruments

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

There were no transfers between Level 1 and Level 2 of the fair value measurement hierarchy during the period ended September 30, 2024 and December 31, 2023.

Instruments Not Recorded at Fair Value on a Recurring Basis

Leases

9 Months Ended

Sep. 30, 2024

Leases [Abstract]

Leases

13. Leases

The Company performed evaluations of its contracts and determined that each of its identified leases are operating leases. The components of total lease costs were as follows (in thousands):



	Three months ended September 30,						Nine months ended September 30,
	2024			2023			2024			2023

Operating lease cost, gross	$	1,211		$	1,641		$	3,801		$	4,938
Variable lease cost, gross(1)		656			491			1,723			1,988
Sublease income		(228	)		(256	)		(721	)		(830	)
Total lease costs(2)	$	1,639		$	1,876		$	4,803		$	6,096

(1)

(2)

Short-term lease costs for the three and nine months ended September 30, 2024 and 2023 were not significant and are not included in the table above.

As of September 30, 2024, the maturities of the Company’s operating lease liabilities were as follows (in thousands):


Remainder of 2024	$	2,080
2025		5,466
2026		4,121
2027		3,160
2028		2,295
2029 and thereafter		200
Total lease payments		17,322
Less:
Imputed interest		(2,145	)
Lease liabilities		15,177
Tenant improvement reimbursements included in the measurement of lease liabilities but not yet received		(414	)
Lease liabilities, net	$	14,763

Commitments and Contingencies

9 Months Ended

Sep. 30, 2024

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

14. Commitments and Contingencies

Non-cancelable purchase obligations

Letters of Credit and Collateral Arrangements

Litigation

Related Party Transactions

9 Months Ended

Sep. 30, 2024

Related - Party Transactions

15. Related-Party Transactions

Description of Business and Basis of Presentation (Policies)	9 Months Ended
	Sep. 30, 2024
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Company and Background	Company and Background Instructure Holdings, Inc. (the “Company,” “Instructure,” “we,” “our,” or “us”) is an education technology company dedicated to elevating student access, amplifying the power of teaching, and inspiring everyone to learn together. Instructure’s platform delivers a next-generation learning management system (“LMS”), robust assessments for learning, actionable analytics, and engaging, dynamic content. Instructure offers its platform through a Software-as-a-Service, or SaaS, business model. The Company was founded in September 2008. We are headquartered in Salt Lake City, Utah, and have wholly-owned subsidiaries in the United Kingdom, Australia, the Netherlands, Hong Kong, Sweden, Brazil, Mexico, Hungary, Ireland, Canada, Singapore, and the Philippines. On July 25, 2024, Instructure entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Icon Parent Inc., a Delaware corporation (“Parent”), and Icon Acquisition Sub Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”). Parent and Merger Sub are each affiliates of investment funds managed by Kohlberg Kravis Roberts & Co. L.P. (“KKR”), a leading global investment firm. Pursuant to the Merger Agreement, Merger Sub will be merged with and into the Company, with the Company surviving as a wholly owned subsidiary of Parent (the “Merger”). Under, and subject to, the terms of the Merger Agreement, at the effective time of the Merger, Instructure stockholders will have the right to receive $23.60 per share in cash, without interest thereon and subject to applicable withholding taxes. The Company’s board of directors has unanimously approved the Merger Agreement and the transactions contemplated thereby and the necessary stockholder approval has been duly executed and delivered, adopting and approving the Merger Agreement and the transactions contemplated thereby. The obligations of the parties to complete the proposed Merger are subject to customary closing conditions, including, among others, the receipt of certain regulatory approvals. Effective as of 11:59 p.m. Eastern Time on September 9, 2024, the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, expired with respect to the Merger. On September 5, 2024, Instructure filed with the SEC, a Definitive Information Statement on Schedule 14, containing more information about the Merger Agreement and the Merger. The proposed Merger is expected to close during the second half of 2024. Upon consummation of the Merger, the Company will be a privately held company and its common stock will no longer be traded on the New York Stock Exchange.
Basis of Presentation	Basis of Presentation The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) applicable to interim periods, under the rules and regulations of the United States Securities and Exchange Commission (“SEC”). In the opinion of management, we have prepared the accompanying unaudited condensed consolidated financial statements on a basis substantially consistent with the audited consolidated financial statements of the Company as of and for the fiscal year ended December 31, 2023, and these condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of the interim periods presented. All intercompany balances and transactions have been eliminated in consolidation. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for any subsequent quarter or for the entire year ending December 31, 2024. The year-end balance sheet data was derived from audited financial statements, but the interim condensed consolidated balance sheet included in this Form 10-Q does not include all disclosures required under U.S. GAAP. Certain information and note disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP have been omitted under the rules and regulations of the SEC. These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 21, 2024 (the “2023 10-K”).
Use of Estimates	Use of Estimates The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Such estimates, which we evaluate on an on-going basis, include provisions for credit losses, useful lives for property and equipment and intangible assets, valuation allowances for net deferred income tax assets, acquisition related estimates, our assessment for impairment of goodwill, intangible assets, and other long-lived assets, the standalone selling price of performance obligations, timing of professional services revenue recognition, and the determination of the period of benefit for deferred commissions. We base our estimates on historical experience and on various other assumptions which we believe to be reasonable.
Operating Segments	Operating Segments We operate in a single operating segment: cloud-based learning management, assessment and performance systems. Operating segments are defined as components of an enterprise for which separate financial information is regularly evaluated by the chief operating decision makers (“CODM”), which are our chief executive officer and chief financial officer, in deciding how to allocate resources and assess performance. Our CODM evaluate our financial information and resources and assess the performance of these resources on a consolidated basis. Since we operate in one operating segment, all required financial segment information can be found in the condensed consolidated financial statements.

Summary of Significant Accounting Policies (Policies)	9 Months Ended
Summary of Significant Accounting Policies (Policies)	Sep. 30, 2024
Accounting Policies [Abstract]
Revenue Recognition	Revenue Recognition We generate revenue primarily from two main sources: (1) subscription and support revenue, which is comprised of SaaS fees from customers accessing our learning platform and usage of our credential management platform, and from customers purchasing additional support beyond the standard support that is included in the basic SaaS fees; and (2) related professional services revenue, which is comprised of training, implementation services and other types of professional services. Consistent with ASC 606, Revenue from Contracts with Customers, revenue is recognized when control of these services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services. The timing of revenue recognition may differ from the timing of invoicing our customers. We record an unbilled receivable, which is included within accounts receivable—net on our consolidated balance sheets, when revenue is recognized prior to invoicing. We determined revenue recognition through the following steps: • Identification of the contract, or contracts, with a customer • Identification of the performance obligations in the contract • Determination of the transaction price • Allocation of the transaction price to the performance obligations in the contract • Recognition of revenue when, or as, we satisfy a performance obligation The following describes the nature of our primary types of revenue and the revenue recognition policies and significant payment terms as they pertain to the types of transactions we enter into with our customers. Subscription and Support Subscription and support revenue is derived from fees from customers to access and use our learning platform and our credential management platform, and support beyond the standard support that is included with all subscriptions. The terms of our subscriptions do not provide customers the right to take possession of the software. Subscription and support revenue from our learning platform is generally recognized on a ratable basis over the contract term. Payments from customers are primarily due annually in advance. Subscription and support revenue from our credential management platform is generally recognized based on the proportion of credentials transferred to the total estimated credentials to be transferred over the contract period. Customers choose to access and use the credential management platform through subscription contracts by committing to guaranteed minimum payments with excess volume billed in arrears, or through transactional contracts where payment generally occurs once an order is placed. The Company records pass through fees for transactional contracts on a net revenue basis, as the Company does not have control over the credential and is therefore acting as the agent. Professional Services and Other Professional services and other revenue is derived from implementation, training, and consulting services. Our professional services are typically considered distinct from the related subscription services as the promise to transfer the subscription can be fulfilled independently from the promise to deliver the professional services (i.e., customer receives standalone functionality from the subscription and the customer obtains the intended benefit of the subscription without the professional services). Professional services arrangements are billed in advance, and revenue from these arrangements is typically recognized over time as the services are rendered, using an efforts-expended input method. Implementation services also include nonrefundable upfront setup fees, which are allocated to the remaining performance obligations. Contracts with Multiple Performance Obligations Many of our contracts with customers contain multiple performance obligations. We account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price (“SSP”) basis. We determine the SSP based on our overall pricing objectives by reviewing our significant pricing practices, including discounting practices, geographical locations, the size and volume of our transactions, the customer type, price lists, our pricing strategy, and historical standalone sales. SSP is analyzed on a periodic basis to identify if we have experienced significant changes in our selling prices. Deferred Commissions Sales commissions earned by our sales force, as well as related payroll taxes, are considered incremental and recoverable costs of obtaining a contract with a customer. These costs are deferred and then amortized on a straight-line basis over a period of benefit that we have determined to be generally four years. We determined the period of benefit by taking into consideration our customer contracts, our technology and other factors. Amortization of deferred commissions is included in sales and marketing expenses in the accompanying condensed consolidated statements of operations and comprehensive loss. Deferred Revenue Deferred revenue consists of billings and payments received in advance of revenue recognition generated by our subscription and support services and professional services and other, as described above.
Funds Held on Behalf of Customers and Customer Fund Deposits	Funds Held on Behalf of Customers and Customer Fund Deposits Funds held on behalf of customers and customer fund deposits represent cash that is either received or in-transit from credential requestors via third-party credit card processors and other payment methods. The Company generally remits payment to customers within 30 to 60 days following the purchase of a credential. Funds held on behalf of customers represent the total amount due to customers, and as such, a liability for the same amount is recorded to customer fund deposits. The funds held on behalf of customers are not available for general business use by the Company.
Recent Accounting Pronouncements	Recent Accounting Pronouncements Issued accounting pronouncements In November 2023, the FASB issued Accounting Standards Update (“ASU”) No. 2023-07, Improvements to Reportable Segment Disclosures (Topic 280), which updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the CODM and included within each reported measure of a segment's profit or loss. The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. We do not expect the adoption of this guidance to have a material impact on our condensed consolidated financial statements and related notes. In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures (Topic 740), which requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. We do not expect the adoption of this guidance to have a material impact on our condensed consolidated financial statements and related notes.

Net Loss Per Share (Tables)

9 Months Ended

Sep. 30, 2024

Earnings Per Share [Abstract]

Summary of Reconciliation of the Denominator Used in the Calculation of Basic and Diluted Loss Per Share

A reconciliation of the denominator used in the calculation of basic and diluted net loss per share is as follows (in thousands, except per share amounts):


	Three months ended September 30,						Nine months ended September 30,
	2024			2023			2024			2023
Numerator:
Net loss	$	(24,696	)	$	(5,481	)	$	(66,770	)	$	(28,311	)
Denominator:
Weighted-average common shares outstanding—basic		146,670			144,222			146,079			143,665
Dilutive effect of share equivalents resulting from unvested restricted stock units and shares for issuance under employee stock purchase plan		—			—			—			—
Weighted-average common shares outstanding—diluted		146,670			144,222			146,079			143,665
Net loss per common share, basic and diluted	$	(0.17	)	$	(0.04	)	$	(0.46	)	$	(0.20	)

Summary of Shares Excluded from Calculation of Diluted Loss Per Share with a Potential Dilutive Impact

The following table contains share totals with a potentially dilutive impact (in thousands):



	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023
Restricted stock units		6,715		5,222		6,715		5,222
Shares issuable under employee stock purchase plan		—		33		—		33
Total		6,715		5,255		6,715		5,255

Property and Equipment (Tables)

9 Months Ended

Sep. 30, 2024

Property, Plant and Equipment Assets Held-for-Sale Disclosure [Abstract]

Schedule of Property and Equipment, Net

Property and equipment consisted of the following (in thousands):


	September 30,			December 31,
	2024			2023
Computer and office equipment	$	6,484		$	5,437
Capitalized software development costs		18,799			13,556
Furniture and fixtures		1,161			1,153
Leasehold improvements and other		4,549			6,270
Total property and equipment		30,993			26,416
Less accumulated depreciation and amortization		(14,991	)		(12,937	)
Total	$	16,002		$	13,479

Acquisitions (Tables)

9 Months Ended

Sep. 30, 2024

Business Acquisition [Line Items]

Schedule of Pro-forma Condensed Combined Financial Information


	Three months ended September 30,			Nine months ended September 30,
	2023			2024			2023
Total revenue	$	163,546		$	509,120		$	475,739
Net loss	$	(22,363	)	$	(66,616	)	$	(78,201	)

PCS Holdings, LLC [Member]

Business Acquisition [Line Items]

Schedule of Fair Value of Assets Acquired and Liabilities Assumed

The following table summarizes the preliminary estimated fair values of the consideration transferred, assets acquired and liabilities assumed as of the date of the Parchment acquisition (in thousands):


Consideration transferred
Cash paid	$	832,172
Escrow		2,000
Total purchase consideration	$	834,172

Identifiable assets acquired
Cash and cash equivalents	$	5,445
Funds held on behalf of customers		6,081
Accounts receivable		9,746
Prepaid expenses and other assets		3,331
Property and equipment		212
Right-of-use assets		375
Intangible assets: developed technology		45,800
Intangible assets: trade name		12,500
Intangible assets: customer relationships		240,000
Total assets acquired	$	323,490

Liabilities assumed
Accounts payable and accrued liabilities	$	9,676
Customer fund deposits		6,081
Lease liabilities		430
Deferred revenue		17,478
Deferred tax liabilities		46,574
Other liabilities		2,807
Total liabilities assumed	$	83,046
Goodwill		593,728
Total purchase consideration	$	834,172

Community Software Solutions LLC [Member]

Business Acquisition [Line Items]

Schedule of Fair Value of Assets Acquired and Liabilities Assumed


Consideration transferred
Cash paid	$	80,782
Escrow		1,000
Total purchase consideration	$	81,782

Identifiable assets acquired
Cash and cash equivalents	$	605
Funds held on behalf of customers		2,261
Accounts receivable		332
Prepaid expenses and other assets		168
Property and equipment		22
Intangible assets: developed technology		3,100
Intangible assets: trade name		500
Intangible assets: customer relationships		40,500
Total assets acquired	$	47,488

Liabilities assumed
Accounts payable and accrued liabilities	$	1,720
Customer fund deposits		2,261
Deferred revenue		727
Deferred tax liabilities		10,995
Total liabilities assumed	$	15,703
Goodwill		49,997
Total purchase consideration	$	81,782

Goodwill and Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2024

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill

Goodwill activity was as follows (in thousands):


	Total
Balance as of December 31, 2023	$	1,265,316
Additions - see Note 5. “Acquisitions”		643,725
Balance as of September 30, 2024	$	1,909,041

Schedule of Intangible Assets

Intangible assets consisted of the following (in thousands):


	Weighted-Average Remaining Useful Life	September 30, 2024							December 31, 2023
		Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net

Software	0 Months	$	21	$	(21	)	$	—	$	21	$	(21	)	$	—
Trade names	63 Months		139,100		(60,832	)		78,268		126,100		(49,336	)		76,764
Developed technology	32 Months		374,200		(287,905	)		86,295		325,300		(232,662	)		92,638
Customer relationships	81 Months		731,900		(286,500	)		445,400		451,400		(221,123	)		230,277
Non-compete agreements	15 Months		50		(30	)		20		50		(17	)		33
Total		$	1,245,271	$	(635,288	)	$	609,983	$	902,871	$	(503,159	)	$	399,712

Schedule of Estimated Amortization Expense

Based on the recorded intangible assets at September 30, 2024, estimated amortization expense is expected to be as follows (in thousands):


	Amortization
	Expense
Years Ending December 31,
Remainder of 2024	$	45,905
2025		140,656
2026		120,302
2027		80,564
2028		57,616
Thereafter		164,940
Total	$	609,983

Credit Facility (Tables)

9 Months Ended

Sep. 30, 2024

Line of Credit Facility [Abstract]

Schedule of Maturities of Long-term Debt

The maturities of outstanding debt as of September 30, 2024, are as follows (in thousands):


	Amount
Years Ending December 31,
Remainder of 2024	$	2,993
2025		11,972
2026		11,972
2027		11,972
2028		1,128,362
Thereafter		—
Total	$	1,167,271

Revenue (Tables)

9 Months Ended

Sep. 30, 2024

Geographic Areas, Revenues from External Customers [Abstract]

Schedule of Revenue by Geographic Region

The following table presents the Company’s disaggregated revenues by geographic region, based on the physical location of the customer (in thousands):



	Three months ended September 30,						Nine months ended September 30,
	2024			2023			2024			2023

United States	$	141,717		$	107,583		$	408,067		$	314,547
Foreign		31,447			27,338			90,996			80,287
Total revenue	$	173,164		$	134,921		$	499,063		$	394,834
Percentage of revenue generated outside of the United States		18	%		20	%		18	%		20	%

Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2024

Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]

Summary of Stock-Based Compensation Expense by Award Type



	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023

Restricted stock units	$	14,113	$	11,343	$	41,351	$	32,420
Shares issuable under employee stock purchase plan		238		412		997		1,201
Total stock-based compensation	$	14,351	$	11,755	$	42,348	$	33,621

Summary of Stock-Based Compensation Expense Recorded in Consolidated Statement of Operations



	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023

Subscription and support cost of revenue	$	750	$	459	$	2,107	$	1,312
Professional services and other cost of revenue		864		603		2,451		1,639
Sales and marketing		4,170		3,145		11,612		9,142
Research and development		4,469		3,792		13,047		10,446
General and administrative		4,098		3,756		13,131		11,082
Total stock-based compensation	$	14,351	$	11,755	$	42,348	$	33,621

Summary of Restricted Stock Unit Activity

The following table summarizes the activity of RSUs for the nine months ended September 30, 2024 (in thousands, except per unit amounts):


	RSUs			Weighted Average Grant Date Fair Value Per Unit
Unvested and outstanding at December 31, 2023		4,470		$	23.68
Granted		4,335			21.99
Vested		(1,445	)		22.75
Forfeited or canceled		(645	)		22.93
Unvested and outstanding at September 30, 2024		6,715		$	22.86

Summary of Assumptions Relating to Stock Options and ESPP Purchase Rights

The following table summarizes the assumptions relating to 2021 ESPP purchase rights used in a Black-Scholes option pricing model for the three months ended September 30, 2024 and 2023:


	Three months ended September 30,
	2024	2023
Dividend yield	None	None
Volatility	18%	18 - 25%
Risk-free interest rate	5.27%	5.20 - 5.47%
Expected life (years)	0.5	0.5

2021 Plan

Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]

Summary of Restricted Stock Units Activity


	RSUs			Weighted Average Grant Date Fair Value Per Unit
Unvested and outstanding at December 31, 2023		320		$	12.30
Vested		(320	)		12.30
Unvested and outstanding at September 30, 2024		—

Leases (Tables)

9 Months Ended

Sep. 30, 2024

Leases [Abstract]

Summary of Components of Operating Lease Expense

The Company performed evaluations of its contracts and determined that each of its identified leases are operating leases. The components of total lease costs were as follows (in thousands):



	Three months ended September 30,						Nine months ended September 30,
	2024			2023			2024			2023

Operating lease cost, gross	$	1,211		$	1,641		$	3,801		$	4,938
Variable lease cost, gross(1)		656			491			1,723			1,988
Sublease income		(228	)		(256	)		(721	)		(830	)
Total lease costs(2)	$	1,639		$	1,876		$	4,803		$	6,096

(1)

(2)

Short-term lease costs for the three and nine months ended September 30, 2024 and 2023 were not significant and are not included in the table above.

Schedule of Maturities of The Company’s Operating Lease Liabilities

As of September 30, 2024, the maturities of the Company’s operating lease liabilities were as follows (in thousands):


Remainder of 2024	$	2,080
2025		5,466
2026		4,121
2027		3,160
2028		2,295
2029 and thereafter		200
Total lease payments		17,322
Less:
Imputed interest		(2,145	)
Lease liabilities		15,177
Tenant improvement reimbursements included in the measurement of lease liabilities but not yet received		(414	)
Lease liabilities, net	$	14,763

Description of Business and Basis of Presentation - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Jul. 25, 2024	Dec. 31, 2023
Common stock, shares authorized	500,000,000			500,000,000
Common stock, shares, issued	147,089,000			145,207,000
Right to Receive Per Share	$ 0.01			$ 0.01
Net proceeds after underwriting discounts and commission deduction	$ 5,983	$ 6,018
Merger Agreement [Member]
Right to Receive Per Share			$ 23.6

Net Loss Per Share - Summary of Reconciliation of the Denominator Used in the Calculation of Basic and Diluted Loss Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Numerator:
Net Income (Loss)	$ (24,696)	$ (5,481)	$ (66,770)	$ (28,311)
Denominator:
Weighted-average common shares outstanding--basic	146,670	144,222	146,079	143,665
Dilutive effect of share equivalents resulting from unvested restricted stock units and shares for issuance under employee stock purchase plan	0	0	0	0
Weighted-average common shares outstanding--diluted	146,670	144,222	146,079	143,665
Net loss per common share, basic	$ (0.17)	$ (0.04)	$ (0.46)	$ (0.2)
Net loss per common share, diluted	$ (0.17)	$ (0.04)	$ (0.46)	$ (0.2)

Net Loss Per Share - Summary of Shares Excluded from Calculation of Diluted Loss Per Share with a Potential Dilutive Impact (Details) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Shares excluded from calculation of diluted loss per share with a potential dilutive impact	6,715,000	5,255,000	6,715,000	5,255,000
Restricted Stock Units [Member]
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Shares excluded from calculation of diluted loss per share with a potential dilutive impact	6,715,000	5,222,000	6,715,000	5,222,000
Shares Issuable under Employee Stock Purchase Plan [Member]
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Shares excluded from calculation of diluted loss per share with a potential dilutive impact	0	33,000	0	33,000

Property and Equipment - Schedule of Property and Equipment, Net (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Property Plant And Equipment [Line Items]
Total property and equipment	$ 30,993	$ 26,416
Less accumulated depreciation and amortization	(14,991)	(12,937)
Total	16,002	13,479
Computer and Office Equipment [Member]
Property Plant And Equipment [Line Items]
Total property and equipment	6,484	5,437
Capitalized Software Development Costs [Member]
Property Plant And Equipment [Line Items]
Total property and equipment	18,799	13,556
Furniture and Fixtures [Member]
Property Plant And Equipment [Line Items]
Total property and equipment	1,161	1,153
Leasehold Improvement and Other [Member]
Property Plant And Equipment [Line Items]
Total property and equipment	$ 4,549	$ 6,270

Property and Equipment - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023	Dec. 31, 2023
Property, Plant and Equipment [Abstract]
Capitalized computer software, accumulated amortization	$ 7.3		$ 7.3		$ 4.7
Capitalized computer software, amortization	$ 0.9	$ 0.7	$ 2.6	$ 1.8

Acquisitions - Additional information (Details) - USD ($) $ in Thousands		3 Months Ended	9 Months Ended
	Jul. 01, 2024	Sep. 30, 2024	Sep. 30, 2024	Feb. 01, 2024
Business Acquisition [Line Items]
Business acquisition, goodwill, expected tax deductible amount		$ 235,000	$ 235,000
Increase (decrease) in deferred liabilities	$ 11,000
Developed Technology [Member]
Business Acquisition [Line Items]
Business acquisition, finite-lived intangible asset, useful life		5 years	5 years
Customer Relationship [Member] \| Minimum [Member]
Business Acquisition [Line Items]
Business acquisition, finite-lived intangible asset, useful life		7 years	7 years
Customer Relationship [Member] \| Maximum [Member]
Business Acquisition [Line Items]
Business acquisition, finite-lived intangible asset, useful life		10 years	10 years
Trade Names [Member] \| Minimum [Member]
Business Acquisition [Line Items]
Business acquisition, finite-lived intangible asset, useful life		1 year	1 year
Trade Names [Member] \| Maximum [Member]
Business Acquisition [Line Items]
Business acquisition, finite-lived intangible asset, useful life		10 years	10 years
Non-compete Agreements [Member]
Business Acquisition [Line Items]
Business acquisition, finite-lived intangible asset, useful life		3 years	3 years
PCS Holdings, LLC [Member]
Business Acquisition [Line Items]
Business acquisition, deferred tax liabilities				$ 46,574
Total purchase consideration		$ 900	$ 900	$ 834,172
Business acquisition, actual revenue		32,600	83,400
Business acquisition, net loss		$ 3,600	$ 7,000
Community Software Solutions LLC [Member]
Business Acquisition [Line Items]
Business acquisition, deferred tax liabilities	10,995
Total purchase consideration	81,782
Debt financing to acquire businesses	$ 70,000

Acquisitions - Schedule of Fair Value of Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands	Jul. 01, 2024	Feb. 01, 2024	Sep. 30, 2024	Dec. 31, 2023
Liabilities assumed:
Goodwill			$ 1,909,041	$ 1,265,316
PCS Holdings, LLC [Member]
Consideration transferred:
Cash paid		$ 832,172
Escrow		2,000
Total purchase consideration		834,172
Identifiable assets acquired:
Cash and cash equivalents		5,445
Funds held on behalf of customers		6,081
Accounts receivable		9,746
Prepaid expenses and other assets		3,331
Property and equipment		212
Right-of-use asset		375
Total assets acquired		323,490
Liabilities assumed:
Accounts payable and accrued liabilities		9,676
Customer fund deposits		6,081
Lease liabilities		430
Deferred revenue		17,478
Deferred tax liabilities		46,574
Other Liabilities		2,807
Total liabilities assumed		83,046
Goodwill		593,728
Total purchase consideration		834,172	$ 900
PCS Holdings, LLC [Member] \| Developed Technology [Member]
Identifiable assets acquired:
Intangible assets		45,800
PCS Holdings, LLC [Member] \| Trade Names [Member]
Identifiable assets acquired:
Intangible assets		12,500
PCS Holdings, LLC [Member] \| Customer Relationships [Member]
Identifiable assets acquired:
Intangible assets		$ 240,000
Community Software Solutions LLC [Member]
Consideration transferred:
Cash paid	$ 80,782
Escrow	1,000
Total purchase consideration	81,782
Identifiable assets acquired:
Cash and cash equivalents	605
Funds held on behalf of customers	2,261
Accounts receivable	332
Prepaid expenses and other assets	168
Property and equipment	22
Total assets acquired	47,488
Liabilities assumed:
Accounts payable and accrued liabilities	1,720
Customer fund deposits	2,261
Deferred revenue	727
Deferred tax liabilities	10,995
Total liabilities assumed	15,703
Goodwill	49,997
Total purchase consideration	81,782
Community Software Solutions LLC [Member] \| Developed Technology [Member]
Identifiable assets acquired:
Intangible assets	3,100
Community Software Solutions LLC [Member] \| Trade Names [Member]
Identifiable assets acquired:
Intangible assets	500
Community Software Solutions LLC [Member] \| Customer Relationships [Member]
Identifiable assets acquired:
Intangible assets	$ 40,500

Acquisitions - Schedule of Pro-forma Condensed Combined Financial Information (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Business Combinations [Abstract]
Total revenue	$ 163,546	$ 509,120	$ 475,739
Net loss	$ (22,363)	$ (66,616)	$ (78,201)

Goodwill and Intangible Assets - Schedule of Goodwill (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2024 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
Balance as of December 31, 2023	$ 1,265,316
Additions - see Note 5. Acquisitions	643,725
Balance as of June 30, 2024	$ 1,909,041

Goodwill and Intangible Assets - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Acquired Indefinite-Lived Intangible Assets [Line Items]
Amortization of intangible assets	$ 45,900	$ 35,700	$ 132,129	$ 107,237

Goodwill and Intangible Assets - Schedule of Intangible Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Acquired Indefinite Lived Intangible Assets [Line Items]
Gross	$ 1,245,271	$ 902,871
Accumulated Amortization	(635,288)	(503,159)
Total	$ 609,983	399,712
Software [Member]
Acquired Indefinite Lived Intangible Assets [Line Items]
Weighted Average Remaining Useful Life	0 months
Gross	$ 21	21
Accumulated Amortization	(21)	(21)
Total	$ 0	0
Trade Names [Member]
Acquired Indefinite Lived Intangible Assets [Line Items]
Weighted Average Remaining Useful Life	63 months
Gross	$ 139,100	126,100
Accumulated Amortization	(60,832)	(49,336)
Total	$ 78,268	76,764
Developed Technology [Member]
Acquired Indefinite Lived Intangible Assets [Line Items]
Weighted Average Remaining Useful Life	32 months
Gross	$ 374,200	325,300
Accumulated Amortization	(287,905)	(232,662)
Total	$ 86,295	92,638
Customer Relationships [Member]
Acquired Indefinite Lived Intangible Assets [Line Items]
Weighted Average Remaining Useful Life	81 months
Gross	$ 731,900	451,400
Accumulated Amortization	(286,500)	(221,123)
Total	$ 445,400	230,277
Non-compete Agreements [Member]
Acquired Indefinite Lived Intangible Assets [Line Items]
Weighted Average Remaining Useful Life	15 months
Gross	$ 50	50
Accumulated Amortization	(30)	(17)
Total	$ 20	$ 33

Goodwill and Intangible Assets - Schedule of Estimated Amortization Expense (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Goodwill and Intangible Assets Disclosure [Abstract]
Remainder of 2024	$ 45,905
2025	140,656
2026	120,302
2027	80,564
2028	57,616
Thereafter	164,940
Total	$ 609,983	$ 399,712

Revenue - Additional Information (Details) $ in Millions	3 Months Ended		9 Months Ended		12 Months Ended
Revenue - Additional Information (Details) $ in Millions	Sep. 30, 2024 USD ($) Customer	Sep. 30, 2023	Sep. 30, 2024 USD ($) Customer Segment	Sep. 30, 2023	Dec. 31, 2023 USD ($) Customer
Disaggregation of Revenue [Line Items]
Number of operating segments \| Segment			1
Revenue, remaining performance obligation expected to be recognized \| $	$ 944.6		$ 944.6
Provision for credit losses \| $			$ 1.8		$ 2.0
Minimum [Member]
Disaggregation of Revenue [Line Items]
Percentage of revenue recognized included in deferred revenue	67.00%	80.00%	55.00%	64.00%
Sales Revenue Net
Disaggregation of Revenue [Line Items]
Number of customers greater than 10 % of total revenue \| Customer	0		0
Sales Revenue Net \| International Customers \| Customer Concentration Risk
Disaggregation of Revenue [Line Items]
Concentration risk, percentage			10.00%
Trade Accounts Receivable
Disaggregation of Revenue [Line Items]
Number of other customers greater than 10 % of accounts receivable \| Customer	0		0		0
Trade Accounts Receivable \| International Customers \| Customer Concentration Risk
Disaggregation of Revenue [Line Items]
Concentration risk, percentage			10.00%		10.00%

Revenue - Schedule of Revenue by Geographic Region (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Disaggregation of Revenue [Line Items]
Total revenue	$ 173,164	$ 134,921	$ 499,063	$ 394,834
United States
Disaggregation of Revenue [Line Items]
Total revenue	141,717	107,583	408,067	314,547
Foreign
Disaggregation of Revenue [Line Items]
Total revenue	$ 31,447	$ 27,338	$ 90,996	$ 80,287
Geographic Concentration Risk \| Sales Revenue Net \| Foreign
Disaggregation of Revenue [Line Items]
Percentage of revenue generated outside of the United States	18.00%	20.00%	18.00%	20.00%

Revenue - Additional Information (Details1) - Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2024-09-30	Sep. 30, 2024
Disaggregation of Revenue [Line Items]
Revenue, remaining performance obligation, percentage	77.00%
Revenue, remaining performance obligation period	24 months

Deferred Commissions - Additional information (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023	Dec. 31, 2023
Deferred Costs [Abstract]
Deferred commissions	$ 28,700		$ 28,700		$ 27,500
Amortization of deferred sales commissions	5,700	$ 4,400	14,900	$ 14,500
Deferred commissions impairment charges	$ 0	$ 0	$ 0	$ 0

Credit Facility - Additional Information (Details) - USD ($)			3 Months Ended		9 Months Ended		12 Months Ended
	Jun. 21, 2023	Oct. 29, 2021	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023	Dec. 31, 2023	Feb. 01, 2024
Debt Instrument [Line Items]
Letters of credit outstanding			$ 1,000,000		$ 1,000,000		$ 3,200,000
Amortization of debt discount cost			1,400,000	$ 300,000	3,800,000	$ 800,000
Amortization of deferred financing costs					3,863,000	889,000
Other Assets
Debt Instrument [Line Items]
Unamortized debt issuance costs			400,000		400,000		500,000
Debt issuance costs			800,000		800,000
Minimum [Member]
Debt Instrument [Line Items]
Loan unused commitiment fee, percentage		0.40%
Maximum [Member]
Debt Instrument [Line Items]
Loan unused commitiment fee, percentage		0.50%
SOFR \| Minimum [Member]
Debt Instrument [Line Items]
Line of credit facility, interest rate	0.11448%
SOFR \| Maximum [Member]
Debt Instrument [Line Items]
Line of credit facility, interest rate	0.42826%
Letter of Credit
Debt Instrument [Line Items]
Letters of credit outstanding			10,000,000		10,000,000
Initial Term Loan \| SOFR
Debt Instrument [Line Items]
Line of credit facility, interest rate	2.75%
Incremental Term Loan
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity								$ 685,000,000
Revolving Credit Facility
Debt Instrument [Line Items]
Line of credit facility, interest rate	2.50%
Borrowings outstanding					0
Amortization of deferred financing costs			47,000	$ 47,000	100,000	$ 100,000
Term Loan
Debt Instrument [Line Items]
Unamortized debt discount costs			22,200,000		22,200,000		4,900,000
Term Loan \| Short Term Debt [Member]
Debt Instrument [Line Items]
Debt discount costs			4,400,000		4,400,000
Term Loan \| Long term Debt [Member]
Debt Instrument [Line Items]
Debt discount costs			16,300,000		16,300,000
Senior Term Loan
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity		$ 500,000,000	1,167,300,000		$ 1,167,300,000		$ 491,300,000
Percentage of principal amount redeemed		0.25%
Line of credit facility, interest rate					8.07%		8.68%
Line of credit facility, expiration period		7 years
Senior Revolver
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity		$ 125,000,000	125,000,000		$ 125,000,000
Borrowings outstanding					0
Line of credit facility, expiration period		5 years
Line of credit percentage of outstanding amount	35.00%
Senior Revolver \| Other Current Assets
Debt Instrument [Line Items]
Debt issuance costs			$ 200,000		$ 200,000
Senior Revolver \| Minimum [Member]
Debt Instrument [Line Items]
Net leverage ratio					1.00%
Senior Revolver \| Maximum [Member]
Debt Instrument [Line Items]
Net leverage ratio					7.75%

Credit Facility - Schedule of Future Minimum Principal Payments Related to the Credit Facility (Details) $ in Thousands	Sep. 30, 2024 USD ($)
Line of Credit Facility [Abstract]
Remainder of 2024	$ 2,993
2025	11,972
2026	11,972
2027	11,972
2028	1,128,362
Thereafter	0
Total	$ 1,167,271

Stockholders' Equity - Additional Information (Details) - $ / shares	Sep. 30, 2024	Dec. 31, 2023
Class Of Stock [Line Items]
Common stock, shares authorized	500,000,000	500,000,000
Common Stock, Shares, Outstanding	147,089,000	145,207,000
Common stock par value	$ 0.01	$ 0.01
Common stock, shares, issued	147,089,000	145,207,000
Common stock, shares, outstanding	147,089,000	145,207,000
Partnership
Class Of Stock [Line Items]
Common Stock, Shares, Outstanding	147,089,318	145,207,497
Common stock, shares, issued	147,089,318	145,207,497
Common stock, shares, outstanding	147,089,318	145,207,497

Stock-Based Compensation - Additional Information (Details) - USD ($) $ / shares in Units, $ in Millions	1 Months Ended	3 Months Ended	9 Months Ended	12 Months Ended
	Jul. 31, 2021	Sep. 30, 2024	Sep. 30, 2024	Dec. 31, 2023	Jan. 31, 2024
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Common stock, capital shares reserved for future issuance					5,808,300
Unrecognized stock-based compensation costs		$ 0.1	$ 0.1	$ 2.4
Common Stock, Shares Authorized		500,000,000	500,000,000	500,000,000
Common stock authorized		21,801,632	21,801,632
Common stock, shares, outstanding		147,089,000	147,089,000	145,207,000
Common stock, shares, issued		147,089,000	147,089,000	145,207,000
Minimum [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Total unrecognized compensation cost, period for recognition			2 months 12 days
Maximum [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Total unrecognized compensation cost, period for recognition				3 months 18 days
2021 Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Common stock, capital shares reserved for future issuance					1,452,075
Common stock authorized		5,162,907	5,162,907
2021 Employee Stock Purchase Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, Description			In July 2021, our board of directors adopted, and our stockholders approved the 2021 Employee Stock Purchase Plan (the “2021 ESPP”), which allows eligible employees to purchase shares of our common stock at a discount through payroll deductions of up to 15% of their eligible compensation, subject to any plan limitations. Each new offering period begins on or about March 1 and September 1 and is approximately six months in duration. On each purchase date, eligible employees can purchase our common stock at a price per share equal to 85% of the lesser of (1) the fair market value of our common stock on the offering date or (2) the fair market value of our common stock on the purchase date. A total of 1,900,000 shares of the Company’s common stock were initially reserved for issuance under the 2021 ESPP. Pursuant to the terms of the 2021 ESPP, the share reserve increased by 1,452,075 shares in January 2024. As of September 30, 2024, 5,162,907 shares of common stock were available for purchase under the 2021 ESPP. As a result of the entry into the Merger Agreement, we ceased withholding payroll deductions after our most recent purchase date on September 3, 2024, and pending the completion of the Merger, and we do not anticipate future offerings of our common stock under the 2021 ESPP.
Common stock authorized	18,000,000	1,900,000	1,900,000
Discount on share market price	15.00%
Purchase price of common stock, percent	85.00%
2020 Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Common stock authorized	0
Incentive Carry \| IPO Member
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unvested shares		6,126,802	6,126,802
Partnership [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Common stock, shares, outstanding		147,089,318	147,089,318	145,207,497
Common stock, shares, issued		147,089,318	147,089,318	145,207,497
Restricted Stock Units [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Vested in Period			1,445
RSU granted			4,335
Unrecognized stock-based compensation costs		$ 138.8	$ 138.8	$ 95.1
Aggregate fair value of RSU		$ 5.7	$ 5.7
Vesting rights			These RSUs generally vested in 11 equal quarterly installments commencing September 1, 2021.
Total unrecognized compensation cost, period for recognition			2 years 10 months 24 days	2 years 10 months 24 days
Restricted Stock Units [Member] \| Minimum [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Amount per share of RSU granted		$ 24.49
Restricted Stock Units [Member] \| Maximum [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Amount per share of RSU granted		$ 25
Restricted Stock Units [Member] \| 2021 Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Vested in Period			3,496,739
RSU granted		234,170
Restricted Stock Units [Member] \| 2021 Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Vested in Period			320

Stock-Based Compensation - Summary of Stock-Based Compensation Expense by Award Type (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Total stock-based compensation	$ 14,351	$ 11,755	$ 42,348	$ 33,621
Restricted Stock Units [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Total stock-based compensation	14,113	11,343	41,351	32,420
Shares Issuable under Employee Stock Purchase Plan [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Total stock-based compensation	$ 238	$ 412	$ 997	$ 1,201

Stock-Based Compensation - Summary of Stock-Based Compensation Expense Recorded in Consolidated Statement of Operations (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total stock-based compensation	$ 14,351	$ 11,755	$ 42,348	$ 33,621
Subscription and Support Cost of Revenue
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total stock-based compensation	750	459	2,107	1,312
Professional Services And Other Cost Of Revenue
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total stock-based compensation	864	603	2,451	1,639
Sales and Marketing
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total stock-based compensation	4,170	3,145	11,612	9,142
Research and Development
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total stock-based compensation	4,469	3,792	13,047	10,446
General and Administrative
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total stock-based compensation	$ 4,098	$ 3,756	$ 13,131	$ 11,082

Stock-Based Compensation - Summary of Restricted Stock Units Activity (Details) - Restricted Stock Units [Member]	9 Months Ended
	Sep. 30, 2024 $ / shares shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unvested and outstanding, Beginning Balance	4,470
Granted	4,335
Vested	(1,445)
Forfeited or cancelled	(645)
Unvested and outstanding, Ending Balance	6,715
Outstanding, Weighted Average Grant Date Fair Value, Beginning balance \| $ / shares	$ 23.68
Granted \| $ / shares	21.99
Vested \| $ / shares	22.75
Forfeited or cancelled \| $ / shares	22.93
Outstanding, Weighted Average Grant Date Fair Value, Ending balance \| $ / shares	$ 22.86
2021 Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unvested and outstanding, Beginning Balance	320
Vested	(320)
Unvested and outstanding, Ending Balance	0
Outstanding, Weighted Average Grant Date Fair Value, Beginning balance \| $ / shares	$ 12.3
Vested \| $ / shares	$ 12.3

Stock-Based Compensation - Summary of Assumptions Relating to Stock Options and ESPP Purchase Rights (Details) - Employee Stock Purchase Plan	3 Months Ended
	Sep. 30, 2024	Sep. 30, 2023
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Dividend yield	0.00%	0.00%
Volatility	18.00%
Risk-free interest rate	5.27%
Expected life (years)	6 months	6 months
Minimum [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Volatility		18.00%
Risk-free interest rate		5.20%
Maximum [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Volatility		25.00%
Risk-free interest rate		5.47%

Fair Value of Financial Instruments - Additional Information (Detail) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair Value Liabilities Measurement Transfers Amount	$ 0	$ 0
Fair Value Measurements Recurring
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair value of Term Loan	1,145,000
Fair Value Measurements Recurring \| Incremental Term Loan
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair value of Term Loan	1,145,000
Fair Value Measurements Recurring \| Senior Revolver [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair value of Term Loan	$ 1,145,000

Leases - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Mar. 31, 2024	Sep. 30, 2024	Dec. 31, 2023
Lessee Lease Description [Line Items]
Lease liabilities		$ 15,177
Right-of-use assets		$ 8,314	$ 9,002
Minimum [Member]
Lessee Lease Description [Line Items]
Lease term		1 year
Maximum [Member]
Lessee Lease Description [Line Items]
Lease term		6 years
Utah
Lessee Lease Description [Line Items]
Lease liabilities	$ 3,200
Right-of-use assets	3,200
Loss on exit of leased properties	1,900
Utah \| Subscription and support
Lessee Lease Description [Line Items]
Loss on exit of leased properties	400
Utah \| Sales and Marketing
Lessee Lease Description [Line Items]
Loss on exit of leased properties	600
Utah \| Research and Development
Lessee Lease Description [Line Items]
Loss on exit of leased properties	400
Utah \| General and Administrative
Lessee Lease Description [Line Items]
Loss on exit of leased properties	200
Utah \| Professional services fees
Lessee Lease Description [Line Items]
Loss on exit of leased properties	$ 300
Property Two
Lessee Lease Description [Line Items]
Sublease remaining lease term		51 months
Property Three
Lessee Lease Description [Line Items]
Sublease remaining lease term		16 months

Leases - Summary of Components of Operating Lease Expense (Details) - USD ($)
$ in Thousands

3 Months Ended

9 Months Ended

Sep. 30, 2024

Sep. 30, 2023

Sep. 30, 2024

Sep. 30, 2023

Leases [Abstract]

Operating lease cost, gross

$ 1,211

$ 1,641

$ 3,801

$ 4,938

Variable lease cost, gross

^[1]

656

491

1,723

1,988

Sublease Income

(228)

(256)

(721)

(830)

Total lease costs

^[2]

$ 1,639

$ 1,876

$ 4,803

$ 6,096

[1]	Variable rent expense was not included within the measurement of the Company’s operating right-of-use assets and lease liabilities. Variable rent expense is comprised primarily of the Company’s proportionate share of operating expenses, property taxes and insurance and is classified as lease expense due to the Company’s election to not separate lease and non-lease components.
[2]	Short-term lease costs for the three and nine months ended September 30, 2024 and 2023 were not significant and are not included in the table above.

Leases - Summary of Measurement of Operating Lease Liabilities - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Leases [Abstract]
Measurement of operating lease liabilities	$ 1.4	$ 1.9	$ 4.2	$ 6.5

Leases - Schedule of Maturities of the Company's Operating Lease Liabilities (Details) $ in Thousands	Sep. 30, 2024 USD ($)
Lessee, Operating Lease, Liability, to be Paid, Fiscal Year Maturity [Abstract]
Remainder of 2024	$ 2,080
2025	5,466
2026	4,121
2027	3,160
2028	2,295
2029 and Thereafter	200
Total lease payments	17,322
Imputed interest	(2,145)
Lease liabilities	15,177
Tenant improvement reimbursements included in the measurement of lease liabilities but not yet received	(414)
Lease liabilities, net	$ 14,763

Leases - Summary of Weighted Average Remaining Lease Term - Additional Information (Details)	Sep. 30, 2024	Dec. 31, 2023
Leases [Abstract]
Weighted average remaining lease term	3 years 3 months 18 days	3 years 1 month 6 days
Weighted average discount rate, percent	8.21%	8.22%

Commitments and Contingencies - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023	Dec. 31, 2023
Commitments and Contingencies [Line item]
2024	$ 500		$ 500
2025 through 2027	60,000		60,000
2028	65,000		65,000
Total cost of revenue	58,782	$ 47,427	171,575	$ 138,548
Research and Development Expense	31,874	20,688	90,650	65,872
Letters of credit outstanding	1,000		1,000		$ 3,200
General and administrative	26,719	15,522	68,094	44,113
Subscription And Support [Member]
Commitments and Contingencies [Line item]
Total cost of revenue	49,827	$ 40,345	145,566	$ 117,532
Purchase Commitment [Member]
Commitments and Contingencies [Line item]
Total cost of revenue	13,700		40,900
Research and Development Expense	600		1,500
Professional services	$ 100		$ 300

Related Party Transactions - Additional Information (Details) $ in Millions	3 Months Ended
	Mar. 31, 2024 USD ($)
Affiliates Of Thoma Bravo
Related Party Transaction [Line Items]
Arrangement fees	$ 1.5

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