On July 30, Instructure announced its 2nd quarter financial results and there was a lot of good news. In many ways, Instructure had a very strong 2nd quarter, largely due to increased adoption of its products by customers both domestically and abroad. However, despite all the good news from the company, it seems that many investors remain uncertain about whether Instructure shares offer a solid investment in the short or long term.
As Instructure CEO Josh Coates said in a Press release published on July 30, “We delivered strong second quarter results with revenue growth of 30% year-over-year.” Coates added, “Customer adoption of Canvas and Bridge was strong in the quarter as we exceeded 4,000 customers in 70 countries.
As widely reported earlier this month, customer adoption is particularly strong for Instructure’s LMS, Canvas, which has finally overtaken competitor Blackboard Learning, at least at the post-secondary level in North America. On that front, Cornell University’s decision to switch to Canvas certainly helped. Cornell will use the Canvas LMS to reach its 22,000 students. Technology driven Arizona State University also decided to adopt Canvas for its 90,000 students and teachers. On the K-12 side of the market, Collier County Public schools in Florida will now use Canvas and Arc for its 48,000K-12 students and educators. Internationally, Canvas also made progress in the 2nd quarter. The University of Toronto has selected Canvas for its 80,000 students. Overseas, two large Norwegian school districts will also adopt Canvas.
Bridge, a platform comprised of multiple apps including Learn, Perform and Practice, and Arc, also gained new users. In the 2nd quarter, Global Radio, Europe largest radio company with 25 million registered listeners. Additionally, Bacardi MARTINI has adopted Bridge Learn to improve employee engagement and development of its workforce, which has more than 5,000 employees worldwide. Other recent Bridge users include Holiday Retirement and Cox Automotive, owner of Autotrader.com and Kelley’s Blue Book.
Going forward, Instructure anticipates strong growth in the 3rd quarter. At the end of the 3rd trimester, the September 30, 2018the company expects to report revenue of approximately $53-54 million. By the end of the year, they expect revenues to reach $209.5 millionexceeding previous predictions.
While this should confirm that Instructure stock is a safe bet for investors, not all financial analysts and investors seem to agree. In fact, in July, amid all the good news from the company regarding customer adoption and revenue growth, the company’s stock actually fell. In the end, Instructure recorded a quarterly loss of $0.24 per share. While it’s hard to say for sure why investors remain skeptical, the most obvious concern is that the company, which has grown tremendously over the past three years, is about to plateau and investors are waiting. to see how the business will evolve as it matures.
Despite falling stock prices, Instructure’s management team continues to express considerable optimism. During their July 30 press conference, Steven Kaminsky, CFO of Instructure, told reporters:We are very pleased with the results for the quarter and therefore feel very comfortable with where the business is and how it is doing. Kaminsky added that the company is particularly optimistic about continuing to grow by increasingly offering multiple products (eg, Canvas and Bridge) to single customers. As Kaminsky explained, “We’re starting to see traction in bundle deals, selling multiple products in one customer.” He expects this trend to continue between 2019 and 2021.