Instructure Holdings: Offering A Good Structure For A Profitable Investment

Aug. 11, 2022 11:10 PM ETInstructure Holdings, Inc. (INST)4 Comments
Looking For Diogenes profile picture
Looking For Diogenes
1.81K Followers

Summary

  • I will update my original article of March 2022.
  • I will explain why I'm happy that the stock is up 26% since the original article and why I think it has more to offer in the future.
  • Readers will have the opportunity to see the stellar revenue growth the company has produced over the span of 2018 to Mid-Year 2022.

Children using computer in school

Ridofranz/iStock via Getty Images

  • Public schools will start opening for the new school year in the coming weeks. In my area, students will arrive on Wednesday, August 10th, for the new year. Our schools are still seeking a massive number of classroom teachers to teach our young students. This need goes well beyond the need for classroom teachers. School cafeteria workers, maintenance, janitors, and school bus driver are still needed.
  • In the state of Florida, they are resorting to former military members to fill their needs for staffing their classrooms -- "Qualifying veterans will have served at least four years in the military, with an honorable discharge. Candidates must also have at least 60 college credits under their belt and have attained a 2.5 GPA or higher. They must also have passed the Florida subject-area examination.”
  • In Madison County, North Carolina, the local sheriff is stocking their schools with AR-15 rifles, ammunition, and other assorted items for teachers to use in the event of an active shooter entering one of their schools.
  • A Texas state lawmaker is asking schools statewide to tell him whether they currently hold any of around 850 books on a list he has compiled, explaining that he is targeting materials that "might make students feel discomfort, guilt, anguish, or any other form of psychological distress because of their race or sex."

Across our nation, school board meetings are turning into brawling arenas and shouting matches where invectives tinged with racism are the norm. In open and carry states individuals are showing up armed with handguns and AR rifles as a show of intimidation for those attending such meetings. The end result of all this chaos is simply a case of those working in our education system, they are seeking and obtaining employment in a new profession. With this action of teachers fleeing this profession, school districts are being forced into taking a radical change in how our students will be taught now and into the foreseeable future.

It is my opinion that Instructure Holdings (NYSE:INST) will offer an excellent investment opportunity by addressing the changing needs for how our students will be taught in our classrooms.

March 30th, 2022:

On this date, I submitted an article to SA titled— Instructure Holdings: A Foundational Technology System for Educating our Nation’s Students.

As of today’s date, the article has garnered a mere 677 PVs and exactly one comment by a SA reader. The comment made by the poster totally disagreed with the premise and suggestions I made about Instructure. Considering one of the most brutal stock market corrections has occurred since my article was shared, my defense is very simple. Suggesting that my readers consider Instructure as an investment based on my premise that it would become the default solution for how our students will be taught in the future, the stock is up 26.37% since my article was published and ignored by SA readers. The comparator stock that I cited in my original article, PowerSchool Holdings (PWSC), has seen its shares decline in value.

Good investors don’t necessarily make their “killings in the market” by buying the "stock of the day" undergoing unsustainable trading without a valid supporting thesis. Finding the good stock before it becomes the front-page story and waiting for the stock to be discovered is in my opinion a good investing philosophy. Therefore, SA is currently running a special contest for contributors— Top Stock With a Catalyst and I’ve decided to update and support with more data, on why I think Instructure is gaining momentum for growing and turning into a profitable investment vehicle for investors.

Recap of Main Points from March 30th, 2022:

The Future for How We Will Educate Our Students:

The point of this new SA article is to introduce my readers to an investment opportunity found in a company known as Instructure Holdings, Inc., listed on the NYSE. Instructure is a Salt Lake City, Utah-based company, created by two graduate students in 2008. The company is a technology-based company that provides clients and their students (K-12 and higher education institutions) the following platforms for 7,000 global customers located in more than 100 countries:

  • Learning Management System
  • Assessment for Learning Actionable
  • Analytics Engaging Content
  • Online Programs - Professional Development

Basically, what Instructure provides its clients is a structure that is an all-inclusive system where the instructor/teacher/student has the delivery tools for introducing the concept, modeling the concept, practicing the concept, and eventually assessing if the student has gained proficiency with the concept.

There is also a platform option (Professional Development) that allows a school district or a company to organize and manage their staff development needs for their new hires or new elements of their job for existing employees.

Each aspect of Instructure’s platforms is readily available to be retrieved from where it is stored on a cloud storage system. Their system has near flawless results for users being able to successfully complete their tasks in a timely manner.

The point is that without an educated citizenry we are putting our nation at risk. The most recent national test scores in reading and math reflect the following dismal assessment achievements of our 13-year-old students:

The reading and mathematics scores of 13-year-old students fell between 2012 and 2020—the first time in the almost 50-year history of the National Assessment of Educational Progress (NAEP) long-term trend (LTT) assessment—according to results released today by the National Center for Education Statistics (NCES). The performance of 9-year-olds remained the same in both subjects compared to 2012.”

Update:

Since the original article, the 2021-2022 school year has ended and the normal district/state assessment has been done. The growing issue of students not meeting national standards continues to expand and much of this can be attributed to the massive dropout from the long-term ranks of the better-qualified teachers. In recent months I have been asking individuals (mostly men) in random conversations about whether they had a male teacher during their K-5 education. In my case, I never had a male teacher during these grades, the only males in the building were the principal and the janitor. I haven’t been surprised by the responses I’m now getting from asking others about this question. Just over the weekend, I posed the question to three individuals and two of the three were like me. The other initially said he had two, however, he changed it because one had been his teacher in the 7th grade and had been his science teacher. My point is, that in my day, elementary teachers who taught us the basic and fundamental skills, were all well-educated females, and they were disciplinarians. In my era, the options women had for professional careers were either nursing or teaching. As my memory serves me, all my elementary teachers had taught for decades. Today the latest drop-out rate is around 50%, on a yearly basis. With the current unemployment number reflecting that this metric is sitting at 3.5%, will there be any qualified and trained teachers left in consideration for teaching jobs?

Each year Instructure issues a report on the Status of Teaching and Learning in K-12. The latest report was issued on June 27, 2022. This report is well worth the time for parents who had K-12 students enrolled in our nation’s classrooms. One of the more striking issues this report address is the one about parents and their perception of their student’s performance.

“The study revealed that parents might not understand how academically far behind our students are performing. A small share of parents (27%) believes their children have fallen behind significantly or majorly, whereas administrators and teachers are significantly more likely to believe so (51% and 62%, respectively). Similarly, parents don’t seem to realize how much engagement has been impacted. Only half of the parents (45%) say that maintaining engagement has been difficult compared to a large majority of administrators and teachers (77% and 81%, respectively.)

Another issue covered, deals with how our education system will deliver the needed instruction to their students. In my opinion, there must be someone or something in the classroom that will impact the skills and still maintain the learning environment conducive to learning for our K-12 students.

Both hybrid and digital teaching and learning are here to stay:

With the return to in-person learning, the continued use of technology in the classroom supports innovative pedagogical strategies that prepare students for 21st-century skills. We anticipate hybrid teaching and learning to be the new normal for schools and districts moving forward.

Some 90% of parents, 91% of administrators, and 94% of teachers agree that personalized instruction has an impact on student success. And 68% of parents believe technology is beneficial in providing access to individualized programs. Self-paced learning is also top of mind for many, with 84% of parents, 71% of administrators, and 77% of teachers agreeing it’s at least moderately impactful when it comes to success.

Financials:

Second Quarter—2022, Issued on August 2:

  • Q2 GAAP EPS of -$0.09 in-line (vs. -$0.17 in prior-year quarter).
  • Revenue of $114.6M beats by $3.81M.
  • For Q3, revenue is expected to be in the range of $118.5M to $119.5M.
  • For FY22, revenue is expected to be in the range of $464.9M to $468.9M.

Historical Revenue Stream:

  • 2018-$209.544M
  • 2019-$258.473M
  • 2020-Private Company
  • 2021-$405.361M
  • 2022-$445.853M Original Projection *

Considering the original projection* for 2022, as noted above, and as of the end of Q-2 financial results, the company has now increased its projection to $468.900 M, an increase of 5.1% from the initial projection. However, based on the 2021 results if they hit their upper limit projection of $468.9M that translates into a YOY increase 0f 15.6%.

For those who wish to consider Instructure as a potential investment, they should note that currently, they are not at, or above the positive cash flow level. However, the latest GAAP EPS shows they are fast approaching turning a profit. At this point, they are continuing to invest in building out their organic growth and making the highly strategic purchase of other companies. Also, investors should note that historically, education companies see their products are adopted by school districts in the spring, and over the summer they receive the product for the needed curriculum training with staff. This simply means that the actual revenue coming into the company happens in the 3rd and 4th quarters. The 4th-Q is when end-of-year funding from federal grants, etc. must be spent and therefore this quarter is important to overall results for education companies. So, when you do your needed due diligence, just know the current cash level will be positively impacted during the current 3rd-Q and 4th-Q results.

Conclusion:

Even with the 26% increase in the stock price since my original SA article, I still see further gains in the stock for those with a horizon of at least the 2023 results. My articles are simply a starting point for potential investors starting their own due diligence, where they apply their specific criteria that meet their standards for investing your funds. Spend time reviewing my original SA article. Potential investors also need to spend time understanding the business model that Instructure operates. This is not a case of simply adopting a textbook, this involves a whole different approach to how our students will be taught in the future. With the issue of finding qualified teachers for a new methodology for how classrooms will function, there must be some structure to this methodology. It is my opinion that Instructure offers a good structure for a profitable investment.

Good luck with our future investment decisions!

Editor's Note: This article was submitted as part of Seeking Alpha’s stock catalyst competition which runs through August 31. With cash prizes and a chance to chat with the CEO, this competition – open to all contributors -- is not one you want to miss. Click here to find out more and submit your article today!

This article was written by

Looking For Diogenes profile picture
1.81K Followers
I'm retired from a near 40 year career in the publishing industry working with an international publishing company. I obtained the position of Vice President and I led the sales efforts in the two largest markets in the textbook industry -California and Texas. My investing experience is over a span of 40 years.Luckily with more winners than losers! My hobbies are traveling , reading good books(non-fiction)--and researching stocks that I have an interest. I teach a continuing education class at our local college each semester. I volunteer my time working in assisting several lawyers with their Child Protective Service cases.Drugs are destroying our society and family structure). Finally, I serve as a reviewer for a national literary prize given each year. No pay, but I get to keep the books and add to my ever growing library. Other than these activities---I'm just plain lazy!

Disclosure: I/we have a beneficial long position in the shares of INST either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Recommended For You

Comments (4)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.