Executive Summary

Q3 2024 delivered strong top-line growth: revenue $173.2M, up 28.3% YoY; Adjusted EBITDA $70.1M, up 20.5% YoY, though GAAP net loss widened to $24.7M and GAAP net loss margin deteriorated to (14.3%) .
Instructure did not host an earnings call or provide guidance due to the pending acquisition by KKR; full-year guidance was previously withdrawn in Q2 2024 and remains suspended, a key narrative shift for near-term catalysts .
Cash flow from operations surged to $203.9M in Q3 (seasonal collections and Parchment impact), while net leverage improved to 3.6x and net debt fell to $964.0M, reflecting post-acquisition balance sheet dynamics .
Subscription and support remained the growth engine (Q3: $160.2M, +30.1% YoY), with GAAP gross margin 68.9% and non-GAAP recurring gross margin 82.5%, underscoring durable unit economics .
Wall Street consensus (S&P Global) was unavailable for Q3; estimate comparisons cannot be made this quarter. Values retrieved from S&P Global were unavailable for INST due to mapping limitations.

What Went Well and What Went Wrong

What Went Well

Revenue and profitability growth: Q3 revenue up 28.3% YoY to $173.2M; Adjusted EBITDA up 20.5% to $70.1M (40.5% margin), with non-GAAP operating income up 20.3% to $68.6M (39.6% margin) .
Cash generation and leverage: Operating cash flow rose to $203.9M and adjusted unlevered FCF to $244.8M; net leverage improved to 3.6x, aided by collections and Parchment contribution .
Recurring economics: Subscription & support GAAP gross margin 68.9% and non-GAAP 82.5% in Q3, reflecting scaling platform efficiencies .

Management quote (prior quarter context on strategy and scale): “We believe the investments we are making across the Instructure platform… position us as a company to deliver long-term durable growth, and I’m excited by the plan we set to become a $1 billion revenue company by 2028.” .

What Went Wrong

GAAP loss widened: Q3 GAAP net loss increased to $24.7M (vs. $5.5M in Q3 2023), with GAAP net loss margin declining ~1,020 bps YoY, driven in part by higher interest expense and acquisition-related amortization .
Margin compression (non-GAAP): Adjusted EBITDA margin fell ~270 bps YoY to 40.5%; non-GAAP operating margin down ~270 bps to 39.6%, reflecting transaction/globalization/restructuring and technology modernization costs .
Guidance visibility removed: Management withdrew FY24 guidance in Q2 and did not provide guidance or host a call in Q3 due to the KKR transaction, reducing near-term estimate anchors for investors .

Financial Results

Headline Metrics (YoY and Sequential Comparison)

Metric	Q3 2023	Q2 2024	Q3 2024
Revenue ($M)	$134.9	$170.4	$173.2
GAAP EPS ($)	$(0.04)	$(0.14)	$(0.17)
Non-GAAP Diluted EPS ($)	$0.25	$0.23	$0.23
Adjusted EBITDA ($M)	$58.2	$73.4	$70.1
Adjusted EBITDA Margin (%)	43.2%	43.1%	40.5%
Non-GAAP Operating Income ($M)	$57.0	$72.0	$68.6
Non-GAAP Operating Margin (%)	42.3%	42.2%	39.6%
GAAP Net Loss ($M)	$(5.5)	$(20.9)	$(24.7)
GAAP Net Loss Margin (%)	(4.1%)	(12.3%)	(14.3%)
Gross Margin (GAAP, %)	64.8%	65.7%	66.1%
Non-GAAP Gross Margin (%)	78.3%	79.3%	79.3%

Prior Two Quarters Trend (Sequential)

Metric	Q1 2024	Q2 2024	Q3 2024
Revenue ($M)	$155.5	$170.4	$173.2
GAAP EPS ($)	$(0.15)	$(0.14)	$(0.17)
Non-GAAP Diluted EPS ($)	$0.22	$0.23	$0.23
Adjusted EBITDA ($M)	$64.9	$73.4	$70.1
Adjusted EBITDA Margin (%)	41.8%	43.1%	40.5%
Non-GAAP Operating Income ($M)	$63.5	$72.0	$68.6
Non-GAAP Operating Margin (%)	40.8%	42.2%	39.6%

Segment Breakdown

Metric	Q3 2023	Q2 2024	Q3 2024
Subscription & Support Revenue ($M)	$123.1	$157.6	$160.2
Professional Services & Other Revenue ($M)	$11.8	$12.9	$13.0
Subscription & Support GAAP Gross Margin (%)	67.2%	68.6%	68.9%
Subscription & Support Non-GAAP Gross Margin (%)	81.4%	82.3%	82.5%

KPIs and Balance Sheet

KPI	Q3 2023	Q2 2024	Q3 2024
Remaining Performance Obligations (RPO, $M)	$862.9	$934.9	$944.6
Cash Flow from Operations ($M)	$182.6	$(8.2)	$203.9
Adjusted Unlevered Free Cash Flow ($M)	$200.1	$25.7	$244.8
Net Debt ($M)	N/A	$1,095.1	$964.0
Net Leverage Ratio (x)	N/A	4.3x	3.6x
Cash, Cash Equivalents, Restricted Cash & Funds Held ($M)	$308.6	$145.2	$203.2

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue ($M)	FY 2024	$656.5–$666.5 (May 8, 2024)	Withdrawn (Aug 2, 2024); do not rely on prior guidance	Withdrawn
Adjusted EBITDA ($M)	FY 2024	$271.0–$274.0 (May 8, 2024)	Withdrawn (Aug 2, 2024); no guidance in Q3	Withdrawn
Non-GAAP Net Income ($M)	FY 2024	$123.0–$127.0 (May 8, 2024)	Withdrawn (Aug 2, 2024); no guidance in Q3	Withdrawn
Adjusted Unlevered FCF ($M)	FY 2024	$262.0–$265.0 (May 8, 2024)	Withdrawn (Aug 2, 2024); no guidance in Q3	Withdrawn
Revenue ($M)	Q2 2024	$166.5–$167.5 (May 8, 2024)	Actual $170.4 (reported Aug 2, 2024)	Beat prior guidance

Earnings Call Themes & Trends

Topic	Previous Mentions (Q-2 and Q-1)	Current Period (Q3 2024)	Trend
AI/technology initiatives	Management highlighted AI-enabled solutions and beta feedback; planned showcase at InstructureCon	No call; AI referenced in forward-looking statements (Q2)	Continued investment, disclosure limited in Q3
Go-to-market changes	Land-and-expand motions; bundling; stronger collaboration; early pipeline build	No call due to KKR; strategy unchanged in filings	Strategy maintained; limited updates
Nontraditional learning & Parchment	Double-digit Parchment growth; end-to-end solution for traditional and nontraditional learners; cross-sell building	RPO and collections reflect Parchment impact	Integration progressing; contributing to KPIs
Macro/enrollment & budgets	Elongated sales cycles; digital transformation focus; K‑12 vendor sprawl rationalization; higher ed beta for LearnPlatform	No Q3 call; filings cite macro risks	Macro steady; visibility muted in Q3
Partner ecosystem	Competitive moat; new integrations like Lucidchart	No Q3 call update	Ecosystem intact; incremental details deferred
Leverage & cash flow	Q1 net leverage 4.7x with path to 3.4x by year end	Q3 net leverage 3.6x; CFO up sharply	Deleveraging ahead of plan; strong seasonal cash flow

Management Commentary

Strategy and scale: “Our vision is to be the ecosystem that powers learning for a lifetime… we are well positioned to connect learners across their lifelong learning journey.” .
Growth and profitability: “Adjusted EBITDA of $64.9 million grew 34.6% year-over-year… we exceeded the high end of our guidance ranges across all guided metrics.” .
Go-to-market execution: “We’ve seen a lot more collaboration between sales and customer experience… early innings, but… pleased with the progress.” .
Parchment synergy: “Bringing the delivery of learning with the evidence of learning… That message is really resonating.” .

Note: In Q3, the company did not host a call due to the pending KKR acquisition and referred investors to the 10-Q for more detail .

Q&A Highlights

Sales cycles and budgets: Higher ed decision cycles remain elongated; institutions are reallocating budgets toward digital transformation and technology consolidation .
Go-to-market progress: Early signs of success from dedicated expand teams and bundling/packaging, supporting multi-product wins and pipeline build .
Nontraditional/Professional learning: Dedicated teams are gaining traction; product-market fit strong; pipeline expected to support commitments into Q2–Q3 seasons .
Parchment integration: Early customer enthusiasm; cross-selling to registrars; Awards and Pathways traction; building combined pipeline .
Macro backdrop: No material change vs. prior quarter; education demand less sensitive to broader macro; focus on enrollments and tuition dynamics .

Estimates Context

S&P Global consensus estimates were unavailable for INST for Q3 2024 due to a mapping limitation in the CIQ company database. As a result, we cannot compare reported results to Wall Street consensus this quarter. Values retrieved from S&P Global were unavailable.
Implication: In the absence of consensus anchors, investors should focus on YoY/Sequential trends, non-GAAP margin durability, cash generation, and deleveraging progress evidenced in reported figures .

Key Takeaways for Investors

Recurring growth engine intact: Subscription & support revenue and margins remain strong; non-GAAP recurring gross margin in the low-80s signals durable unit economics even as integration costs run through P&L .
Deleveraging and cash generation: Seasonal collections and Parchment contribution drove CFO and adjusted unlevered FCF; net leverage improved to 3.6x, reducing balance sheet risk into the merger timeline .
Reported GAAP losses reflect financing and amortization: Elevated interest expense and intangible amortization continue to weigh on GAAP results; non-GAAP profitability provides a clearer view of operational performance .
Guidance visibility removed amid KKR deal: With FY guidance withdrawn and no Q3 call, near-term narrative is merger-driven; monitor regulatory approvals, timing, and any incremental disclosures via SEC filings .
Watch RPO and renewals through buying season: RPO grew to $944.6M; given elongated cycles, track Q4/early Q1 conversion to revenue for indications of momentum .
Segment health: Continued strength in subscription & support; professional services steady; margin profile suggests platform scaling benefits are intact .
Trading implications: In the absence of consensus comparisons and with an announced acquisition, fundamental beats/misses are less likely to drive near-term stock moves; deal milestones and leverage trends are the key catalysts .

INSTRUCTURE HOLDINGS, INC. (INST)·Q3 2024 Earnings Summary