Instructure’s August 2016 investor deck highlights a company in a high-growth phase, reporting quarterly revenue that climbed from $9.5 million in Q2 2014 to $25.8 million in Q2 2016. The deck focuses heavily on the expansion of its product suite, moving from its flagship Canvas Higher Ed product into K-12, international markets, and finally the corporate sector with Bridge. While the company remained unprofitable during this period—reporting a net loss of $12.1 million in Q2 2016—the deck emphasizes long-term value through a net revenue retention rate exceeding 100% and a massive backlog tha…
Key takeaways
- Quarterly revenue grew from $9,566,000 in Q2 2014 to $25,890,000 in Q2 2016 (Slide 25).
- The company identifies a total addressable market (TAM) growing to $7.8 billion for Learning Management and $6.4 billion for Performance Management by 2018 (Slide 7).
- Product expansion followed a clear chronological path: Higher Ed (2011), K-12 (2012), International (2014), and Bridge (2015) (Slide 10).
- Deferred revenue increased significantly from $19 million in 2013 to $52 million in 2015 (Slide 16).
- Contract backlog reached $151 million by the end of 2015, providing high visibility into future revenue (Slide 16).
- Net revenue retention is stated as being greater than 100% (Slide 22).
- Gross margins improved from 66% in Q2 2014 to 72% in Q2 2016 (Slide 25).
- The management team includes veterans from Mozy, EMC, Microsoft, and VMware (Slide 13).
Instructure Investor Deck Analysis
The August 2016 investor deck for Instructure represents a company at a critical inflection point. Having established dominance in the Higher Education Learning Management System (LMS) market with Canvas, the company was aggressively pursuing a multi-product strategy to capture the corporate and K-12 sectors. The deck is characterized by rigorous financial reporting and a clear narrative of market expansion.
Slide 1: Title Slide
The deck opens with a vibrant, abstract geometric design featuring the Instructure name in bold white typography. It is a minimalist start that focuses entirely on brand recognition without a tagline or specific mission statement on the cover.
Slide 4: Product Overview Video
Slide 4 is a placeholder for a product overview video. In a live presentation, this serves as the transition from the high-level brand introduction to the functional reality of the software. For an investor reviewing the deck asynchronously, this represents a missed opportunity to provide a static summary of the product's unique selling propositions.
Slide 7: Substantial Market Opportunity
This slide quantifies the company's growth potential. It splits the market into two primary categories: Learning Management and Adjacencies. In 2016, the Learning Management market was valued at $5.1 billion, projected to grow to $7.8 billion by 2018. The Adjacencies—which include Performance Management, Workforce Management, Recruiting, and Compensation Management—were valued at $5.5 billion in 2016, projected to reach $6.4 billion by 2018. By citing sources like IDC and MarketsandMarkets, Instructure grounds its $14.2 billion total opportunity in third-party data.
Slide 10: Growth Strategy and Revenue Streams
Slide 10 provides a chronological visualization of the company’s expansion. It shows a 'stair-step' growth model:
2011: Canvas Higher Ed · 2012: Canvas K-12 · 2014: Canvas International · 2015: Bridge (Corporate)
This slide is effective because it demonstrates that the company isn't just guessing at new markets; it has a track record of successfully launching and scaling new revenue streams every 1-2 years.
Slide 13: Innovative Management
The team slide uses a playful, unconventional approach. Each executive is pictured in a 'costume' or humorous scenario (e.g., the CEO with a blowtorch and goggles, the SVP of Product with a milk mustache). While the photos are lighthearted, the credentials listed below them are serious, featuring stints at EMC Corp, Mozy, Microsoft, GE, and Ernst & Young. This suggests a corporate culture that is high-performance but low-ego.
Slide 16: Enhanced Visibility into Future Periods
This is one of the most important slides for a SaaS investor. It tracks two key metrics from 2013 to 2015: Deferred Revenue and Backlog. Deferred revenue grew from $19 million to $52 million, while the backlog (defined as future non-cancellable amounts to be invoiced) jumped from $73 million to $151 million. This data is intended to de-risk the investment by showing that a significant portion of future revenue is already contractually guaranteed.
Slide 19: High Customer Lifetime Value
Slide 19 uses a conceptual graph to illustrate the SaaS business model. It shows the initial 'Customer Acquisition Costs' (CAC) as a negative starting point, followed by a 'Breakeven' point, and then a long-term 'Revenue' line that represents the Customer Lifetime Value. The slide highlights three stages: Acquire, Retain, and Renew. While it lacks specific dollar amounts for LTV or CAC, it reinforces the 'land and expand' philosophy mentioned elsewhere in the deck.
Slide 22: Investment Highlights
This slide serves as a summary of the bull case for Instructure. It lists six pillars: Rapid and Widespread Customer Adoption, Substantial Market Opportunity, Native Cloud-Based Platform, Focused on User-Experience and Simplicity, Solid Revenue Growth, and Enhanced Visibility Through Multi-Year Contracts. Crucially, it includes a footnote stating that Net Revenue Retention is 'Greater than 100%,' a gold-standard metric for SaaS companies indicating that existing customers are expanding their spend over time.
Slide 25: Non-GAAP Income Statement
This slide provides a detailed quarterly breakdown from Q2 2014 to Q2 2016. Key data points include:
Revenue: Grew from $9.56M to $25.89M. · Gross Margin: Improved from 66% to 72%. · Sales & Marketing (S&M): Remained high, at $17.3M (67% of revenue) in Q2 2016. · Net Loss: Increased from $8.0M to $12.1M over the same period.
The financials show a company that is prioritizing growth and market share over immediate profitability, a common strategy for venture-backed SaaS firms in this era.
Slide 28: Free Cash Flow Reconciliation
The final slide in the set addresses cash burn. It shows that Free Cash Flow (FCF) fluctuated significantly, ending Q2 2016 at a negative $10.6 million. The table reconciles net cash used in operating activities with capital expenditures (purchase of property and equipment), providing full transparency into the company's liquidity position.
What Instructure Does Well
Instructure excels at demonstrating the 'predictability' of its business. By highlighting the $151 million backlog and the 100%+ net revenue retention, they move the conversation away from current losses and toward the long-term value of the contracts they are winning. The growth strategy slide (Slide 10) is also a model for how to explain market expansion; it shows a logical progression from a core competency (Higher Ed) into adjacent markets (K-12 and Corporate) rather than a scattered approach.
What is Missing from the Deck
The deck is notably light on competitive analysis. While it mentions the size of the LMS market, it does not name competitors like Blackboard, Moodle, or D2L, nor does it explain why Canvas wins against them technically. Additionally, while the conceptual LTV/CAC slide is present, the actual ratios are omitted. Investors usually want to see the specific CAC payback period in months to validate the efficiency of the Sales & Marketing spend, which was quite high at 67% of revenue.
Founder Takeaways
Founders should study Slide 10 and Slide 16. Slide 10 is a perfect example of how to visualize a multi-year roadmap that feels both ambitious and achievable. Slide 16 demonstrates how to use 'Backlog' and 'Deferred Revenue' to tell a story of stability, even when the income statement shows a net loss. Finally, the management slide (Slide 13) shows that you can inject personality into a deck without undermining the professional pedigree of the team, provided the underlying credentials are strong.
Frequently asked questions
- What is Instructure's primary product according to the deck?
- The deck identifies 'Canvas' as the core brand, specifically broken down into Canvas Higher Ed, Canvas K-12, and Canvas International. By 2015, they added 'Bridge' to target the corporate performance and workforce management sectors, signaling a move beyond traditional education.
- How does Instructure justify its continued net losses?
- The deck emphasizes 'Enhanced Visibility' through multi-year contracts and a growing backlog, which reached $151 million in 2015. By showing a net revenue retention rate over 100% and high customer lifetime value, they argue that current spending on sales and marketing is an investment in highly predictable future cash flows.
- What markets does the company plan to enter next?
- Slide 7 outlines adjacencies including Performance Management, Workforce Management, Recruiting, and Compensation Management. These represent a $6.4 billion opportunity by 2018, nearly doubling their original TAM in Learning Management.
- What are the key financial trends shown in the 2014-2016 period?
- Revenue shows consistent double-digit year-over-year growth, while gross margins expanded from 66% to 72%. However, operating expenses also scaled significantly, particularly Sales & Marketing, which accounted for 67% of revenue in Q2 2016, keeping the company in a net loss position.
- Who are the key members of the leadership team?
- The team is led by CEO Josh Coates (formerly of Mozy and EMC) and CFO Steve Kaminsky (formerly of TriZetto and Ernst & Young). Other leaders bring experience from high-profile tech firms like Microsoft, VMware, and Ancestry.com.
