Instructure Might Need A Little Schooling, But We Like The IPO

Instructure Inc. (NYSE: INST) expects to raise $75 million in its upcoming IPO. Based in Salt Lake City, Utah, Instructure offers a cloud-based learning management platform for academic institutions and corporations.

We previewed INST on our IPO Insights platform.

Instructure will offer 4.4 million shares at an expected price of $16 to $18. If the underwriters price the IPO at the midpoint of that range, Instructure will have a market capitalization of for a market capitalization of $449 million.

Instructure filed for the IPO on October 9, 2015.

Lead Underwriters: Goldman Sachs and Morgan Stanley

Underwriters: Jeffries LLC, Needham and Co., Oppenheimer, and Raymond James & Associates

Business Summary: Software Developer with Learning Management Platform

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Instructure is a software developer that offers a cloud-based learning management platform used by educational institutions and businesses. It primary products are Canvas and Bridge. Canvas was launched in 2011, and it is tailored to the education market, while Bridge was launched recently in 2015 and is tailored to corporate market.

Instructure promotes its platform through the Software-as-a-Service (NASDAQ:SAAS) business model, and the platform allows clients to customize, develop and manage dynamic face-to-face and online learning experiences. Currently, the company estimates that its education-based products are used by over 1,400 universities, school districts and learning institutions worldwide. In total, over 1,600 clients use Canvas and Bridge combined.

The Canvas line of products includes K-12, K-20, and higher education modules, and the programs integrate with mobile apps and devices. The company has just over 700 employees and is located in Salt Lake City, Utah. In its SEC filing, Instructure noted that it currently has no specific use for the proceeds of the IPO other than general corporate purposes and to create a secondary market for its stock.

Executive Management Highlights

CEO Josh Coates has been with Instructure since 2010. His previous experience includes positions at University of California, Berkeley, Microsoft, Scale Eight, and Berkeley Data Systems.

CFO Steve Kaminsky has served in his position since May 2012. Previously, he served as CFO of Radisphere National Radiology Group from 2008. His other experience comes from positions at Plan Data Managemetn, ReefEdge, McDonalds Corporation, and Ernst & Young. Mr. Kaminsky holds a B.S. in accounting from University of Illinois at Urbana-Champagne, an M.B.A. from University of California, Los Angeles and is a Certified Public Accountant.

Potential Competition: Blackboard, Desire2Learn and Moodle

Instructure faces significant competition in this highly competitive market, and other companies that offer electronic learning systems include Blackboard, Desire2Learn, Moodle, Cornerstone OnDemand, Saba Software (OTCPK:SABA), and SumTotal Systems.

Financial Highlights: Increasing Revenues, Increasing Losses

Instructure provided the following figures from its financial documents for the nine months ended September 30:

As of September 30, 2015:

Full financial info here.

Conclusion: Consider Buying In

We look forward to this unique, Goldman-led deal but also suggest investors exercise caution given large losses.

Online learning product companies are numerous and competitive, and INST has a limited operating history and has not proved profitable.

Despite the stated risks, INST is shaping up nicely as a deal. Overall, we suggest investors obtain a modest allocation.