Learning management systems provider Instructure has laid off up to 100 full-time staff as the listed company nears a key shareholder vote on a proposed sale to a private equity firm .
The restructuring primarily affected employees who worked on Instructure’s Bridge product, an LMS tailored for enterprise learning. Instructure hoped the effort would replicate the success of its market-leading Canvas learning management system for colleges. But Bridge’s performance disappointed Instructure executives. Now the company wants to accept a $2 billion acquisition offer from Thoma Bravo.
“As our business has evolved and we focus on sustainable growth and innovation to better serve our customers, we have made the decision to realign the structure of the business,” according to a statement from Instructure on the layoffs. . The company still employs around 1,200 people. Some employees who worked on Canvas were also fired.
“This has unfortunately impacted a number of roles within the company,” the statement continued. “These decisions have not been easy and we are working with those affected to make the transition smoother.”
This week, the company released its preliminary quarterly results and investor presentation that show Instructure is still making money. But he also warned that Canvas’ market saturation in higher education will slow future growth.
The company expects 17% year-over-year organic growth in 2020 for its education division. This is followed by growth of 15% projected for 2021, 12% in 2022 and 10% in 2023, according to a presentation filed with the United States Securities and Exchange Commission.
The presentation also contradicts arguments made by Instructure shareholders opposed to the Thoma Bravo deal. These shareholders say the deal undervalues the company and suffers from a lack of transparency. The deal needs a majority of shareholders to be approved. Investors representing one third of the ordinary shares are would have likely to vote against the agreement.
“We note that presentations like this during a buyout process are highly unusual, in our experience, and reflect public objections to the merger,” according to a report from investment bank DA Davidson. “The key assertion is that Instructure has gone through a thorough process and that Instructure would struggle as a stand-alone business given the deceleration in the education sector.” DA Davidson thinks the deal underestimates Instructure.
For the quarter ended December 31, Instructure recorded subscription revenue of $63.9 million, an increase of 25% over the prior quarter in 2018 and billings of $51.4 million, an increase of 34% year-over-year growth. The company ended the quarter with a net cash balance of $116.8 million.
A Raymond James report on Wednesday called the $2 billion Thoma Bravo deal a “fair offer” for Instructure. At six times unadjusted calendar year 2020 revenue, that “is in line with recent private equity inflows.”
The shareholder vote is scheduled for February 13. If passed, the deal is expected to close the next day.