UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June~~September 30, 2024

 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-40647

Instructure Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware		84-4325548
(State or other jurisdiction ofincorporation or organization)		(I.R.S. EmployerIdentification No.)

6330 South 3000 East, Suite 700

Salt Lake City, UT 84121

(Address of principal executive offices, including zip code)

(800) 203-6755

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	INST	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer		Accelerated filer	

Non-accelerated filer		Smaller reporting company	

Emerging growth company	

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No 

As of ~~July~~November 316, 2024, there were ~~146~~147,~~471~~089,~~276~~318 shares of the registrant’s common stock outstanding.

Table of Contents

Instructure Holdings, Inc.

Quarterly Report on Form 10-Q

For the Quarter Ended ~~June~~September 30, 2024

INDEX

		Page
	PART I. FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss	4
	Condensed Consolidated Statements of Stockholders’ Equity	5
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	39
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3.	Default Upon Senior Securities	41
Item 4.	Mine Safety Disclosures	41
Item 5.	Other Information	41
Item 6.	Exhibits	4241
SIGNATURES		4443

In this Quarterly Report on Form 10-Q, “we,” “our,” “us,” “Instructure,” and the “Company” refer to Instructure Holdings, Inc. and its wholly-owned subsidiaries.

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

INSTRUCTURE HOLDINGS, INC.

Condensed Consolidated Balance Sheets

(in thousands, except per share amounts)

(unaudited)

	June 30,			December 31,
	September 30,			December 31,
	2024			2023
Assets
Current assets:
Cash and cash equivalents	$	~~137~~187,~~743~~512		$	341,047
Funds held on behalf of customers		614,~~470~~783			—
Accounts receivable—net		~~223~~98,~~220~~894			67,193
Prepaid expenses		5338,~~752~~630			12,082
Deferred commissions		1514,~~085~~644			13,705
Other current assets		69,~~658~~200			4,797
Total current assets		~~442~~363,~~928~~663			438,824
Property and equipment, net		1416,~~905~~002			13,479
Right-of-use assets		98,~~161~~314			9,002
Goodwill		1,~~858~~909,~~136~~041			1,265,316
Intangible assets, net		~~611~~609,~~788~~983			399,712
Noncurrent prepaid expenses		21,~~841~~905			4,182
Deferred commissions, net of current portion		1314,~~350~~099			13,816
Deferred tax assets		65,~~564~~624			6,739
Other assets		45,~~530~~395			6,908
Total assets	$	2,~~964~~934,~~203~~026		$	2,157,978
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	2025,~~075~~576		$	23,589
Customer fund deposits		614,~~470~~783			—
Accrued liabilities		4036,~~470~~051			23,760
Lease liabilities		65,~~076~~335			7,513
Long-term debt, current		766,525			4,013
Deferred revenue		~~330~~374,~~429~~431			291,784
Total current liabilities		~~480~~462,~~045~~701			350,659
Long-term debt, net of current portion		1,~~140~~138,~~139~~510			482,387
Deferred revenue, net of current portion		9,~~574~~611			10,876
Lease liabilities, net of current portion		109,~~806~~842			9,246
Deferred tax liabilities		4645,~~191~~678			14,420
Other long-term liabilities		54,~~747~~431			4,898
Total liabilities		1,~~692~~670,~~502~~773			872,486
Stockholders’ equity:
Common stock, par value $0.01 per share; 500,000 shares authorized as of June 30, 2024 and December 31, 2023; 146,471 and 145,207 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively.		1,465			1,452
Common stock, par value $0.01 per share; 500,000 shares authorized as of September 30, 2024 and December 31, 2023; 147,089 and 145,207 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively.		1,471			1,452
Additional paid-in capital		1,~~647~~663,~~290~~532			1,619,020
Accumulated deficit		(~~377~~401,~~054~~750	)		(334,980	)
Total stockholders’ equity		1,~~271~~263,~~701~~253			1,285,492
Total liabilities and stockholders’ equity	$	2,~~964~~934,~~203~~026		$	2,157,978

See accompanying notes.

Table of Contents

INSTRUCTURE HOLDINGS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except per share amounts)

(unaudited)

Three months endedJune 30,

Six months endedJune 30,

Three months endedSeptember 30,

Nine months endedSeptember 30,

2024

2023

2024

2023

Revenue:

Subscription and support

~~157~~160,~~569~~193

~~118~~123,~~569~~110

~~302~~462,~~226~~419

~~237~~360,~~049~~159

Professional services and other

12,~~875~~971

1211,~~501~~811

2336,~~673~~644

2234,~~864~~675

Total revenue

~~170~~173,~~444~~164

~~131~~134,~~070~~921

~~325~~499,~~899~~063

~~259~~394,~~913~~834

Cost of revenue:

Subscription and support

49,~~427~~827

3840,~~377~~345

95145,~~739~~566

77117,~~187~~532

Professional services and other

98,~~013~~955

67,~~912~~082

1726,~~054~~009

1321,~~934~~016

Total cost of revenue

58,~~440~~782

4547,~~289~~427

~~112~~171,~~793~~575

91138,~~121~~548

Gross profit

~~112~~114,~~004~~382

8587,~~781~~494

~~213~~327,~~106~~488

~~168~~256,~~792~~286

Operating expenses:

Sales and marketing

6067,~~970~~673

5246,~~159~~734

~~120~~187,~~226~~899

~~103~~149,~~009~~743

Research and development

31,~~240~~874

2120,~~482~~688

5890,~~776~~650

4565,~~184~~872

General and administrative

2026,~~985~~719

1415,~~218~~522

4168,~~375~~094

2844,~~591~~113

Total operating expenses

~~113~~126,~~195~~266

8782,~~859~~944

~~220~~346,~~377~~643

~~176~~259,~~784~~728

Loss from operations

(111,~~191~~884

)

(24,~~078~~550

)

(719,~~271~~155

)

(73,~~992~~442

)

Other income (expense):

Interest income

~~509~~1,284

~~320~~1,360

34,~~017~~301

13,~~661~~021

Interest expense

(26,~~413~~627

)

(10,~~289~~868

)

(4975,~~009~~636

)

(1930,~~774~~642

)

Other income (expense)

~~(518~~2,681

)

~~402~~(2,443

)

~~(2,353~~328

)

~~478~~(1,965

)

Loss on extinguishment of debt

—

(189

)

—

Total other income (expense), net

(2622,~~422~~662

)

(911,~~567~~951

)

(4871,~~534~~196

)

(1729,~~635~~586

)

Loss before income taxes

(2734,~~613~~546

)

(117,~~645~~401

)

(5590,~~805~~351

)

(2533,~~627~~028

)

Income tax benefit

69,~~664~~850

~~672~~1,920

1323,~~731~~581

24,~~797~~717

Net loss and comprehensive loss

(2024,~~949~~696

)

(105,~~973~~481

)

(4266,~~074~~770

)

(2228,~~830~~311

)

Net loss per common share, basic and diluted

(0.1417

)

(0.0804

)

(0.2946

)

(0.1620

)

Weighted average common shares used in computing basic and diluted net loss per common share

146,~~107~~670

~~143~~144,~~647~~222

~~145~~146,~~781~~079

143,~~381~~665

See accompanying notes.

Table of Contents

INSTRUCTURE HOLDINGS, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except per share amounts)

(unaudited)

	Common
	Stock, $0.01						Additional						Total
	Par Value						Paid-In			Accumulated			Stockholders’
	Shares			Amount			Capital			Deficit			Equity
Balances at March 31, 2024		145,928		$	1,459		$	1,633,221		$	(356,105	)	$	1,278,575
Vesting of restricted stock units		620			7			(7	)		—			—
Shares withheld for tax withholding on vesting of restricted stock units		(77	)		(1	)		(1,681	)		—			(1,682	)
Stock-based compensation		—			—			15,757			—			15,757
Net loss		—			—			—			(20,949	)		(20,949	)
Balances at June 30, 2024		146,471		$	1,465		$	1,647,290		$	(377,054	)	$	1,271,701
Vesting of restricted stock units		522			5			(5	)		—			—
Purchase of ESPP shares		142			1			2,754			—			2,755
Shares withheld for tax withholding on vesting of restricted stock units		(46	)		—			(1,075	)		—			(1,075	)
Stock-based compensation		—			—			14,568			—			14,568
Net loss		—			—			—			(24,696	)		(24,696	)
Balances at September 30, 2024		147,089		$	1,471		$	1,663,532		$	(401,750	)	$	1,263,253

	Common
	Stock, $0.01						Additional						Total
	Par Value						Paid-In			Accumulated			Stockholders’
	Shares			Amount			Capital			Deficit			Equity
Balances at March 31, 2023		143,479		$	1,435		$	1,587,303		$	(312,759	)		1,275,979
Balances at June 30, 2023		143,991		$	1,440		$	1,597,409		$	(323,732	)		1,275,117
Vesting of restricted stock units		~~581~~653			67			(67	)		—			—
Shares withheld for tax withholding on vesting of restricted stock units		(69	)		(1	)		(1,706	)		—			(1,707	)
Purchase of ESPP shares		127			1			2,721			—			2,722
Stock-based compensation		—			—			11,818			—			11,818
Shares withheld for tax withholding on vesting of restricted stock units		(75	)		(1	)		(1,959	)		—			(1,960	)
Net loss		—			—			—			(10,973	)		(10,973	)
Stock-based compensation		—			—			11,862			—			11,862
Balances at June 30, 2023		143,991		$	1,440		$	1,597,409		$	(323,732	)	$	1,275,117
Net loss		—			—			—			(5,481	)		(5,481	)
Balances at September 30, 2023		144,696		$	1,447		$	1,610,026		$	(329,213	)	$	1,282,260

See accompanying notes.

Table of Contents

INSTRUCTURE HOLDINGS, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except per share amounts)

(unaudited)

	Common
	Stock, $0.01						Additional						Total
	Par Value						Paid-In			Accumulated			Stockholders’
	Shares			Amount			Capital			Deficit			Equity
Balances at December 31, 2023		145,207		$	1,452		$	1,619,020		$	(334,980	)	$	1,285,492
Vesting of restricted stock units		1,~~244~~766			1318			(1318	)		—			—
Purchase of ESPP shares		~~166~~308			23			35,~~226~~980			—			35,~~228~~983
Shares withheld for tax withholding on vesting of restricted stock units		(~~146~~192	)		(2	)		(34,~~248~~323	)		—			(34,~~250~~325	)
Stock-based compensation		—			—			2842,~~305~~873			—			2842,~~305~~873
Net loss		—			—			—			(4266,~~074~~770	)		(4266,~~074~~770	)
Balances at June 30, 2024		146,471		$	1,465		$	1,647,290		$	(377,054	)	$	1,271,701
Balances at September 30, 2024		147,089		$	1,471		$	1,663,532		$	(401,750	)	$	1,263,253

	Common
	Stock, $0.01						Additional						Total
	Par Value						Paid-In			Accumulated			Stockholders’
	Shares			Amount			Capital			Deficit			Equity
Balances at December 31, 2022		142,917		$	1,429		$	1,575,600		$	(300,902	)	$	1,276,127
Vesting of restricted stock units		1,~~021~~674			1118			(1118	)		—			—
Purchase of ESPP shares		~~173~~300			23			36,~~293~~014			—			36,~~295~~017
Shares withheld for tax withholding on vesting of restricted stock units		(~~120~~195	)		(23	)		(24,~~984~~943	)		—			(24,~~986~~946	)
Stock-based compensation		—			—			2133,~~511~~373			—			2133,~~511~~373
Net loss		—			—			—			(2228,~~830~~311	)		(2228,~~830~~311	)
Balances at June 30, 2023		143,991		$	1,440		$	1,597,409		$	(323,732	)	$	1,275,117
Balances at September 30, 2023		144,696		$	1,447		$	1,610,026		$	(329,213	)	$	1,282,260

See accompanying notes.

Table of Contents

INSTRUCTURE HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	Six months endedJune 30,
	Nine months endedSeptember 30,
	2024			2023
Operating activities:
Net loss	$	(4266,~~074~~770	)	$	(2228,~~830~~311	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation of property and equipment		24,~~742~~223			23,~~295~~481
Amortization of intangible assets		86132,~~224~~129			71107,~~493~~237
Amortization of deferred financing costs		23,~~452~~863			~~589~~889
Stock-based compensation		2742,~~997~~350			2132,~~311~~986
Deferred income taxes		(1425,~~628~~197	)		(47,~~406~~793	)
Right-of-use assets		216			2,303
Non-cash operating lease expense		1,063			3,348
Other		~~2,127~~(174	)		~~184~~2,853
Changes in assets and liabilities:
Accounts receivable—net		(~~147~~22,~~183~~684	)		(~~137~~22,~~334~~597	)
Prepaid expenses and other assets		(3826,~~782~~010	)		(2615,~~680~~250	)
Deferred commissions		(~~914~~1,222	)		12,~~822~~896
Accounts payable and accrued liabilities		32,~~562~~991			(17,~~718~~565	)
Deferred revenue		1963,~~865~~177			4157,~~358~~724
Lease liabilities		(~~307~~2,012	)		(35,~~751~~370	)
Other liabilities		(13,~~958~~274	)		~~(396~~2,520	)
Net cash used in operating activities		(100,661	)		(55,760	)
Net cash provided by operating activities		102,453			127,048
Investing activities:
Purchases of property and equipment		(36,~~746~~179	)		(24,~~900~~708	)
Proceeds from sale of property and equipment		2230			3542
Business acquisitions, net of cash received		(~~821~~901,~~739~~562	)		—
Net cash used in investing activities		(~~825~~907,~~463~~711	)		(24,~~865~~666	)
Financing activities:
Proceeds from issuance of common stock from employee equity plans		35,~~228~~983			36,~~295~~018
Shares repurchased for tax withholdings on vesting of restricted stock units		(34,~~250~~325	)		(24,~~988~~949	)
Proceeds from issuance of term debt, net of discount		663,892			—
Payments for financing costs		—			(84	)
Advances from revolving credit facility		70,000			—
Change in customer fund deposits		389			—
Repayment of advances from revolving credit facility		(70,000	)		—
Repayments on long-term debt		(5,986	)		(2,500	)
Change in customer fund deposits		6,441			—
Net cash provided by (used in) financing activities		728,273			(2,277	)
Repayments on long-term debt		(8,979	)		(3,750	)
Foreign currency impacts on cash, cash equivalents, restricted cash, and funds held on behalf of customers		(1,190	)		457
Net cash provided by (used in) financing activities		663,012			(2,765	)
Net decrease in cash, cash equivalents, restricted cash, and funds held on behalf of customers		(199,041	)		(60,445	)
Foreign currency impacts on cash, cash equivalents, restricted cash, and funds held on behalf of customers		1,287			(1,246	)
Net increase (decrease) in cash, cash equivalents, restricted cash, and funds held on behalf of customers		(140,959	)		118,371
Cash, cash equivalents, restricted cash, and funds held on behalf of customers, beginning of period		344,208			190,266
Cash, cash equivalents, restricted cash, and funds held on behalf of customers, end of period	$	~~145~~203,~~167~~249		$	~~129~~308,~~821~~637
Supplemental cash flow disclosure:
Cash paid for taxes	$	3,~~048~~987		$	12,~~819~~657
Cash paid for interest on outstanding debt	$	4065,~~124~~849		$	1731,~~674~~455
Non-cash investing and financing activities:
Capital expenditures incurred but not yet paid	$	43110		$	~~138~~75

See accompanying notes.

Table of Contents

INSTRUCTURE HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

The following provides a reconciliation of cash, cash equivalents, restricted cash, and funds held on behalf of customers to the amounts reported on the condensed consolidated balance sheets. Restricted cash has been disclosed in Other assets as it is associated with letters of credit obtained to secure office space from our various lease agreements (in thousands):

	As of June 30,
	As of September 30,
	2024		2023
Cash and cash equivalents	$	~~137~~187,~~743~~512	$	~~126~~304,~~003~~858
Restricted cash		954		3,~~818~~779
Funds held on behalf of customers		614,~~470~~783		—
Total cash, cash equivalents, restricted cash, and funds held on behalf of customers	$	~~145~~203,~~167~~249	$	~~129~~308,~~821~~637

See accompanying notes.

Table of Contents

INSTRUCTURE HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

1. Description of Business and Basis of Presentation

Company and Background

Instructure Holdings, Inc. (the “Company,” “Instructure,” “we,” “our,” or “us”) is an education technology company dedicated to elevating student access, amplifying the power of teaching, and inspiring everyone to learn together. Instructure’s platform delivers a next-generation learning management system (“LMS”), robust assessments for learning, actionable analytics, and engaging, dynamic content. Instructure offers its platform through a Software-as-a-Service, or SaaS, business model. The Company was founded in September 2008. We are headquartered in Salt Lake City, Utah, and have wholly-owned subsidiaries in the United Kingdom, Australia, the Netherlands, Hong Kong, Sweden, Brazil, Mexico, Hungary, Ireland, Canada, Singapore, and the Philippines.

~~Basis~~On July 25, 2024, Instructure entered into an Agreement and Plan of ~~Presentation~~Merger (the “Merger Agreement”) with Icon Parent Inc., a Delaware corporation (“Parent”), and Icon Acquisition Sub Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”). Parent and Merger Sub are each affiliates of investment funds managed by Kohlberg Kravis Roberts & Co. L.P. (“KKR”), a leading global investment firm. Pursuant to the Merger Agreement, Merger Sub will be merged with and into the Company, with the Company surviving as a wholly owned subsidiary of Parent (the “Merger”). Under, and subject to, the terms of the Merger Agreement, at the effective time of the Merger, Instructure stockholders will have the right to receive $23.60 per share in cash, without interest thereon and subject to applicable withholding taxes. The Company’s board of directors has unanimously approved the Merger Agreement and the transactions contemplated thereby and the necessary stockholder approval has been duly executed and delivered, adopting and approving the Merger Agreement and the transactions contemplated thereby. The obligations of the parties to complete the proposed Merger are subject to customary closing conditions, including, among others, the receipt of certain regulatory approvals. Effective as of 11:59 p.m. Eastern Time on September 9, 2024, the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, expired with respect to the Merger.

~~The~~On ~~accompanying~~September unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) applicable to interim periods5, ~~under the rules and regulations of the United States Securities and Exchange Commission (“SEC”). In the opinion of management~~2024, weInstructure ~~have~~filed ~~prepared the accompanying unaudited condensed consolidated financial statements on a basis substantially consistent~~ with the ~~audited consolidated financial statements of the Company as of and for the fiscal year ended December 31~~SEC, ~~2023, and these condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for~~ a ~~fair~~Definitive ~~presentation~~Information ofStatement ~~the~~on ~~results~~Schedule of the interim periods presented. All intercompany balances and transactions have been eliminated in consolidation. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for any subsequent quarter or for the entire year ending December 3114, ~~2024.~~containing ~~The~~more ~~year-end~~information ~~balance~~about ~~sheet data was derived from audited financial statements, but~~ the ~~interim~~Merger ~~condensed~~Agreement ~~consolidated balance sheet included in this Form 10-Q does not include all disclosures required under U.S. GAAP. Certain information~~ and ~~note disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP have been omitted under~~ the ~~rules and regulations of the SEC~~Merger.

~~These~~The ~~interim~~proposed ~~condensed~~Merger ~~consolidated~~is ~~financial~~expected ~~statements~~to ~~should~~close beduring ~~read in conjunction with~~ the ~~audited~~second ~~consolidated~~half ~~financial~~of ~~statements~~2024. ~~and~~Upon ~~related~~consummation ~~notes~~of ~~contained~~the inMerger, the Company’s ~~Annual~~will ~~Report~~be ona ~~Form~~privately ~~10-K~~held ~~for~~company ~~the~~and ~~year~~its ~~ended~~common ~~December~~stock ~~31,~~will ~~2023,~~no ~~filed~~longer ~~with~~be ~~the~~traded ~~SEC~~ on ~~February~~the ~~21,~~New ~~2024~~York ~~(the~~Stock ~~“2023 10-K”)~~Exchange.

~~Use~~Basis of ~~Estimates~~Presentation

The ~~preparation~~accompanying ofunaudited ~~the~~interim condensed consolidated financial statements have been prepared in ~~conformity~~accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) ~~requires~~applicable ~~management~~ to ~~make~~interim ~~estimates~~periods, under the rules and ~~assumptions~~regulations ~~that~~of ~~affect~~the ~~reported~~United ~~amounts~~States Securities and ~~disclosures~~Exchange Commission (“SEC”). ~~Accordingly,~~In ~~actual~~the ~~results~~opinion ~~could~~of ~~differ~~management, ~~from~~we ~~those~~have ~~estimates.~~prepared ~~Such~~the ~~estimates,~~accompanying ~~which~~unaudited wecondensed ~~evaluate~~consolidated onfinancial anstatements on~~-going~~ a basis, ~~include~~substantially ~~provisions~~consistent ~~for~~with ~~credit~~the ~~losses,~~audited ~~useful~~consolidated ~~lives~~financial ~~for~~statements ~~property~~of ~~and~~the ~~equipment~~Company as of and ~~intangible~~for ~~assets~~the fiscal year ended December 31, ~~valuation~~2023, ~~allowances~~and ~~for~~these ~~net~~condensed ~~deferred~~consolidated ~~income~~financial ~~tax~~statements ~~assets~~include all adjustments, ~~acquisition~~consisting ~~related~~only ~~estimates,~~of ~~our~~normal ~~assessment~~recurring adjustments, necessary for ~~impairment~~a fair presentation of ~~goodwill,~~the ~~intangible~~results ~~assets,~~of the interim periods presented. All intercompany balances and ~~other~~transactions ~~long-lived~~have ~~assets,~~been eliminated in consolidation. The results of operations for the ~~standalone~~interim ~~selling~~periods ~~price~~presented are not necessarily indicative of ~~performance~~the ~~obligations~~results to be expected for any subsequent quarter or for the entire year ending December 31, ~~timing~~2024. ofThe ~~professional~~year-end ~~services~~balance ~~revenue~~sheet ~~recognition~~data was derived from audited financial statements, ~~and~~but the ~~determination~~interim ofcondensed ~~the~~consolidated ~~period~~balance ofsheet ~~benefit~~included ~~for~~in ~~deferred~~this ~~commissions.~~Form We10-Q ~~base~~does ~~our~~not ~~estimates~~include onall ~~historical~~disclosures ~~experience~~required under U.S. GAAP. Certain information and onnote ~~various~~disclosures ~~other~~normally ~~assumptions~~included ~~which~~in weannual ~~believe~~consolidated tofinancial bestatements ~~reasonable~~prepared in accordance with U.S. GAAP have been omitted under the rules and regulations of the SEC.

~~Operating~~These ~~Segments~~interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 21, 2024 (the “2023 10-K”).

We operate in a single operating segment: cloud-based learning management, assessment and performance systems. Operating segments are defined as components of an enterprise for which separate financial information is regularly evaluated by the chief operating decision makers (“CODM”), which are our chief executive officer and chief financial officer, in deciding how to allocate resources and assess performance. Our CODM evaluate our financial information and resources and assess the performance of these resources on a consolidated basis. Since we operate in one operating segment, all required financial segment information can be found in the condensed consolidated financial statements.9

2.Table ~~Summary~~ of ~~Significant Accounting Policies~~Contents

AUse ~~summary~~ of the Company’s significant accounting policies is discussed in “Note 1 – Description of Business and Summary of Significant Accounting Policies” of the 2023 10-K. There have been no significant changes to these policies during the six months ended June 30, 2024, except as noted below.Estimates

9The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Such estimates, which we evaluate on an on-going basis, include provisions for credit losses, useful lives for property and equipment and intangible assets, valuation allowances for net deferred income tax assets, acquisition related estimates, our assessment for impairment of goodwill, intangible assets, and other long-lived assets, the standalone selling price of performance obligations, timing of professional services revenue recognition, and the determination of the period of benefit for deferred commissions. We base our estimates on historical experience and on various other assumptions which we believe to be reasonable.

~~Table~~Operating ~~of Contents~~Segments

~~Revenue~~We ~~Recognition~~operate in a single operating segment: cloud-based learning management, assessment and performance systems. Operating segments are defined as components of an enterprise for which separate financial information is regularly evaluated by the chief operating decision makers (“CODM”), which are our chief executive officer and chief financial officer, in deciding how to allocate resources and assess performance. Our CODM evaluate our financial information and resources and assess the performance of these resources on a consolidated basis. Since we operate in one operating segment, all required financial segment information can be found in the condensed consolidated financial statements.

We generate revenue primarily from two main sources: (1) subscription and support revenue, which is comprised of SaaS fees from customers accessing our learning platform and usage of our credential management platform, and from customers purchasing additional support beyond the standard support that is included in the basic SaaS fees; and (2~~) related professional services revenue, which is comprised of training, implementation services and other types of professional services~~. ~~Consistent~~Summary ~~with ASC 606, Revenue from Contracts with Customers, revenue is recognized when control~~ of ~~these~~Significant ~~services~~Accounting is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services. The timing of revenue recognition may differ from the timing of invoicing our customers. We record an unbilled receivable, which is included within accounts receivable—net on our consolidated balance sheets, when revenue is recognized prior to invoicing. Policies

WeA ~~determined~~summary ~~revenue~~of ~~recognition~~the ~~through~~Company’s significant accounting policies is discussed in “Note 1 – Description of Business and Summary of Significant Accounting Policies” of the ~~following~~2023 ~~steps:~~10-K. There have been no significant changes to these policies during the nine months ended September 30, 2024, except as noted below.

~~Identification~~Revenue ~~of the contract, or contracts, with a customer~~Recognition

~~Identification~~We generate revenue primarily from two main sources: (1) subscription and support revenue, which is comprised of SaaS fees from customers accessing our learning platform and usage of our credential management platform, and from customers purchasing additional support beyond the ~~performance~~standard ~~obligations~~support that is included in the ~~contract~~basic SaaS fees; and (2) related professional services revenue, which is comprised of training, implementation services and other types of professional services. Consistent with ASC 606, Revenue from Contracts with Customers, revenue is recognized when control of these services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services. The timing of revenue recognition may differ from the timing of invoicing our customers. We record an unbilled receivable, which is included within accounts receivable—net on our consolidated balance sheets, when revenue is recognized prior to invoicing.

~~Determination~~We ofdetermined revenue recognition through the ~~transaction~~following ~~price~~steps:

•

~~Allocation~~Identification of the ~~transaction~~contract, ~~price~~or tocontracts, ~~the~~with ~~performance~~a ~~obligations in the contract~~customer

•

~~Recognition~~Identification of ~~revenue~~the ~~when,~~performance orobligations ~~as,~~in wethe ~~satisfy a performance obligation~~contract

•

~~The~~Determination ~~following describes the nature~~ of ~~our primary types of revenue and~~ the ~~revenue~~transaction ~~recognition policies and significant payment terms as they pertain to the types of transactions we enter into with our customers.~~price

•

~~Subscription~~Allocation ~~and~~of ~~Support~~the transaction price to the performance obligations in the contract

•

~~Subscription~~Recognition and support revenue is derived from fees from customers to access and use our learning platform and our credential management platform, and support beyond the standard support that is included with all subscriptions. The terms of ~~our subscriptions do not provide customers the right to take possession of the software. Subscription and support~~ revenue from our learning platform is generally recognized on a ratable basis over the contract term. Payments from customers are primarily due annually in advance. Subscription and support revenue from our credential management platform is generally recognized based on the proportion of credentials transferred to the total estimated credentials to be transferred over the contract period. Customers choose to access and use the credential management platform through subscription contracts by committing to guaranteed minimum payments with excess volume billed in arrearswhen, or ~~through~~as, ~~transactional~~we ~~contracts~~satisfy ~~where payment generally occurs once an order is placed. The Company records pass through fees for transactional contracts on~~ a ~~net~~performance ~~revenue basis, as the Company does not have control over the credential and is therefore acting as the agent.~~ obligation

~~Professional~~The ~~Services~~following describes the nature of our primary types of revenue and ~~Other~~the revenue recognition policies and significant payment terms as they pertain to the types of transactions we enter into with our customers.

~~Professional~~Subscription ~~services revenue is derived from implementation, training,~~ and consulting services. Our professional services are typically considered distinct from the related subscription services as the promise to transfer the subscription can be fulfilled independently from the promise to deliver the professional services (i.e., customer receives standalone functionality from the subscription and the customer obtains the intended benefit of the subscription without the professional services). Professional services arrangements are billed in advance, and revenue from these arrangements is typically recognized over time as the services are rendered, using an efforts-expended input method. Implementation services also include nonrefundable upfront setup fees, which are allocated to the remaining performance obligations. Support

~~Contracts~~Subscription and support revenue is derived from fees from customers to access and use our learning platform and our credential management platform, and support beyond the standard support that is included with ~~Multiple~~all ~~Performance~~subscriptions. ~~Obligations~~The terms of our subscriptions do not provide customers the right to take possession of the software. Subscription and support revenue from our learning platform is generally recognized on a ratable basis over the contract term. Payments from customers are primarily due annually in advance. Subscription and support revenue from our credential management platform is generally recognized based on the proportion of credentials transferred to the total estimated credentials to be transferred over the contract period. Customers choose to access and use the credential management platform through subscription contracts by committing to guaranteed minimum payments with excess volume billed in arrears, or through transactional contracts where payment generally occurs once an order is placed. The Company records pass through fees for transactional contracts on a net revenue basis, as the Company does not have control over the credential and is therefore acting as the agent.

Many of our contracts with customers contain multiple performance obligations. We account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price (“SSP”) basis. We determine the SSP based on our overall pricing objectives by reviewing our significant pricing practices, including discounting practices, geographical locations, the size and volume of our transactions, the customer type, price lists, our pricing strategy, and historical standalone sales. SSP is analyzed on a periodic basis to identify if we have experienced significant changes in our selling prices. 10

10Table of Contents

~~Table~~Professional ofServices ~~Contents~~and Other

~~Deferred~~Professional ~~Commissions~~services and other revenue is derived from implementation, training, and consulting services. Our professional services are typically considered distinct from the related subscription services as the promise to transfer the subscription can be fulfilled independently from the promise to deliver the professional services (i.e., customer receives standalone functionality from the subscription and the customer obtains the intended benefit of the subscription without the professional services). Professional services arrangements are billed in advance, and revenue from these arrangements is typically recognized over time as the services are rendered, using an efforts-expended input method. Implementation services also include nonrefundable upfront setup fees, which are allocated to the remaining performance obligations.

~~Sales~~Contracts ~~commissions earned by our sales force, as well as related payroll taxes, are considered incremental and recoverable costs of obtaining a contract~~ with aMultiple ~~customer.~~Performance These costs are deferred and then amortized on a straight-line basis over a period of benefit that we have determined to be generally four years. We determined the period of benefit by taking into consideration our customer contracts, our technology and other factors. Amortization of deferred commissions is included in sales and marketing expenses in the accompanying consolidated statements of operations and comprehensive loss.Obligations

~~Deferred~~Many ~~Revenue~~of our contracts with customers contain multiple performance obligations. We account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price (“SSP”) basis. We determine the SSP based on our overall pricing objectives by reviewing our significant pricing practices, including discounting practices, geographical locations, the size and volume of our transactions, the customer type, price lists, our pricing strategy, and historical standalone sales. SSP is analyzed on a periodic basis to identify if we have experienced significant changes in our selling prices.

Deferred ~~revenue consists of billings and payments received in advance of revenue recognition generated by our subscription and support services and professional services and other, as described above.~~Commissions

~~Funds~~Sales ~~Held~~commissions earned by our sales force, as well as related payroll taxes, are considered incremental and recoverable costs of obtaining a contract with a customer. These costs are deferred and then amortized on ~~Behalf~~a straight-line basis over a period of ~~Customers~~benefit that we have determined to be generally four years. We determined the period of benefit by taking into consideration our customer contracts, our technology and ~~Customer~~other ~~Fund~~factors. ~~Deposits~~Amortization of deferred commissions is included in sales and marketing expenses in the accompanying condensed consolidated statements of operations and comprehensive loss.

~~Funds~~Deferred held on behalf of customers and customer fund deposits represent cash received or in-transit from credential requestors via third-party credit card processors and other payment methods. The Company generally remits payment to customers within 30 to 60 days following the purchase of a credential. Funds held on behalf of customers represent the total amount due to customers, and as such, a liability for the same amount is recorded to customer fund deposits. The funds held on behalf of customers are not available for general business use by the Company.Revenue

~~Recent~~Deferred ~~Accounting~~revenue ~~Pronouncements~~consists of billings and payments received in advance of revenue recognition generated by our subscription and support services and professional services and other, as described above.

~~Issued~~Funds ~~accounting~~Held ~~pronouncements~~on Behalf of Customers and Customer Fund Deposits

InFunds ~~November~~held ~~2023,~~on ~~the~~behalf ~~FASB~~of ~~issued~~customers ~~Accounting~~and ~~Standards~~customer ~~Update~~fund ~~(“ASU”)~~deposits ~~No.~~represent ~~2023-07,~~cash ~~Improvements~~that tois ~~Reportable~~either ~~Segment~~received ~~Disclosures~~or ~~(Topic~~in-transit ~~280),~~from ~~which~~credential ~~updates~~requestors ~~reportable~~via ~~segment~~third-party ~~disclosure~~credit ~~requirements~~card byprocessors ~~requiring~~and ~~disclosures~~other ofpayment ~~significant~~methods. ~~reportable~~The ~~segment~~Company ~~expenses~~generally ~~that~~remits ~~are~~payment ~~regularly provided~~ to ~~the~~customers ~~CODM~~within ~~and~~30 ~~included~~to ~~within~~60 ~~each~~days ~~reported~~following ~~measure~~the purchase of a ~~segment's~~credential. ~~profit~~Funds orheld ~~loss.~~on ~~The~~behalf ~~ASU~~of iscustomers ~~effective~~represent ~~for~~the ~~annual~~total ~~periods~~amount ~~beginning~~due ~~after~~to ~~December 15~~customers, ~~2023,~~ and ~~interim~~as ~~periods~~such, ~~within~~a ~~fiscal~~liability ~~years~~for ~~beginning~~the ~~after~~same ~~December~~amount ~~15,~~is ~~2024.~~recorded Weto docustomer ~~not~~fund ~~expect~~deposits. ~~the~~The ~~adoption~~funds ofheld ~~this~~on ~~guidance~~behalf toof ~~have~~customers aare ~~material~~not ~~impact~~available onfor ~~our~~general ~~condensed~~business ~~consolidated~~use ~~financial~~by ~~statements~~the ~~and related notes~~Company.

InRecent ~~December~~Accounting 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures (Topic 740), which requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. We do not expect the adoption of this guidance to have a material impact on our condensed consolidated financial statements and related notes.Pronouncements

3.Issued ~~Net~~accounting ~~Loss Per Share~~pronouncements

AIn ~~reconciliation~~November of2023, the ~~denominator~~FASB ~~used~~issued inAccounting ~~the~~Standards ~~calculation~~Update (“ASU”) No. 2023-07, Improvements to Reportable Segment Disclosures (Topic 280), which updates reportable segment disclosure requirements by requiring disclosures of ~~basic~~significant reportable segment expenses that are regularly provided to the CODM and ~~diluted~~included ~~net~~within each reported measure of a segment's profit or loss. ~~per~~The ~~share~~ASU is aseffective ~~follows~~for ~~(in~~annual ~~thousands~~periods beginning after December 15, ~~except~~2023, ~~per~~and ~~share~~interim ~~amounts):~~periods within fiscal years beginning after December 15, 2024. We do not expect the adoption of this guidance to have a material impact on our condensed consolidated financial statements and related notes.

	Three months endedJune 30,						Six months endedJune 30,
	2024			2023			2024			2023
Numerator:
Net loss	$	(20,949	)	$	(10,973	)	$	(42,074	)	$	(22,830	)
Denominator:
Weighted-average common shares outstanding—basic		146,107			143,647			145,781			143,381
Dilutive effect of share equivalents resulting from unvested restricted stock units and shares for issuance under employee stock purchase plan		—			—			—			—
Weighted-average common shares outstanding—diluted		146,107			143,647			145,781			143,381
Net loss per common share, basic and diluted	$	(0.14	)	$	(0.08	)	$	(0.29	)	$	(0.16	)

11Table of Contents

~~Table~~In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures (Topic 740), which requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. We do not expect the adoption of ~~Contents~~this guidance to have a material impact on our condensed consolidated financial statements and related notes.

For the three and six months ended June 30, 2024 and 2023, we incurred net losses and, therefore, the effect of our restricted stock units (“RSUs”) and of shares issuable under the employee stock purchase plan were not included in the calculation of diluted net loss per share as the effect would be anti-dilutive3. ~~The~~Net ~~following~~Loss ~~table~~Per ~~contains share totals with a potentially dilutive impact (in thousands):~~Share

	Three months endedJune 30,				Six months endedJune 30,
	2024		2023		2024		2023
Restricted stock units		7,142		5,788		7,142		5,788
Shares issuable under employee stock purchase plan		109		98		109		98
Total		7,251		5,886		7,251		5,886

A reconciliation of the denominator used in the calculation of basic and diluted net loss per share is as follows (in thousands, except per share amounts):

4. Property and Equipment


	Three months ended September 30,						Nine months ended September 30,
	2024			2023			2024			2023
Numerator:
Net loss	$	(24,696	)	$	(5,481	)	$	(66,770	)	$	(28,311	)
Denominator:
Weighted-average common shares outstanding—basic		146,670			144,222			146,079			143,665
Dilutive effect of share equivalents resulting from unvested restricted stock units and shares for issuance under employee stock purchase plan		—			—			—			—
Weighted-average common shares outstanding—diluted		146,670			144,222			146,079			143,665
Net loss per common share, basic and diluted	$	(0.17	)	$	(0.04	)	$	(0.46	)	$	(0.20	)

~~Property~~For the three and ~~equipment~~nine ~~consisted~~months ended September 30, 2024 and 2023, we incurred net losses and, therefore, the effect of our restricted stock units (“RSUs”) and of shares issuable under the employee stock purchase plan were not included in the calculation of diluted net loss per share as the effect would be anti-dilutive. See Note 10. “Stock-Based Compensation” for additional discussion regarding shares issuable under the employee stock purchase plan due to the Merger. The following table contains share totals with a potentially dilutive impact (in thousands):

	June 30,			December 31,
	Three months endedSeptember 30,						Nine months endedSeptember 30,
	2024			2023			2024		2023
Computer and office equipment	$	6,190		$	5,437
Restricted stock units		6,715			5,222			6,715		5,222
Capitalized software development costs		16,735			13,556
Shares issuable under employee stock purchase plan		—			33			—		33
Furniture and fixtures		1,161			1,153
Total		6,715			5,255			6,715		5,255
Leasehold improvements and other		4,512			6,270
Total property and equipment		28,598			26,416
Less accumulated depreciation and amortization		(13,693	)		(12,937	)
Total	$	14,905		$	13,479

~~Accumulated amortization for capitalized software development costs was $6.~~4 ~~million and $4~~.7 ~~million~~Property ~~at June 30, 2024~~ and ~~December~~Equipment 31, 2023, respectively. Amortization expense for capitalized software development costs for the three and six months ended June 30, 2024 was $0.9 million and $1.7 million, respectively, and for the three and six months ended June 30, 2023 was $0.6 million and $1.1 million, respectively, and is recorded within subscription and support cost of revenue on the condensed consolidated statements of operations and comprehensive loss.

12Property and equipment consisted of the following (in thousands):


	September 30,			December 31,
	2024			2023
Computer and office equipment	$	6,484		$	5,437
Capitalized software development costs		18,799			13,556
Furniture and fixtures		1,161			1,153
Leasehold improvements and other		4,549			6,270
Total property and equipment		30,993			26,416
Less accumulated depreciation and amortization		(14,991	)		(12,937	)
Total	$	16,002		$	13,479

5Accumulated amortization for capitalized software development costs was $7.3 ~~Acquisitions~~million and $4.7 million at September 30, 2024 and December 31, 2023, respectively. Amortization expense for capitalized software development costs for the three and nine months ended September 30, 2024 was $0.9 million and $2.6 million, respectively, and for the three and nine months ended September 30, 2023 was $0.7 million and $1.8 million, respectively, and is recorded within subscription and support cost of revenue on the condensed consolidated statements of operations and comprehensive loss.

~~2024 Acquisitions~~ 12

OnTable ~~February 1, 2024, we acquired all outstanding shares~~ of PCS Holdings, LLC (“Parchment”), the world's largest academic credentialing platform and network. By adding Parchment to the Instructure Learning Platform, we provide a verifiable and comprehensive digital passport of achievement records and outcomes for learners. Contents

~~At the time of the acquisition, we recorded a provisional net deferred tax liability of $46~~5.6 million in purchase accounting due to the step up in book basis of intangible assets as a result of the stock acquisition. We expect the net deferred tax liability to decrease as book amortization expense is recognized on the acquisition-related intangible assets. The conclusions below will remain provisional until the Parchment tax returns are filed.Acquisitions

~~The~~2024 ~~following~~Acquisitions ~~table summarizes the preliminary estimated fair values of the consideration transferred, assets acquired and liabilities assumed as of the date of the Parchment acquisition (in thousands):~~

Consideration transferred
Cash paid	$	831,264
Escrow		2,000
Total purchase consideration	$	833,264
Identifiable assets acquired
Cash and cash equivalents	$	5,445
Funds held on behalf of customers		6,081
Accounts receivable		9,746
Prepaid expenses and other assets		3,331
Property and equipment		212
Right-of-use assets		375
Intangible assets: developed technology		45,800
Intangible assets: trade name		12,500
Intangible assets: customer relationships		240,000
Total assets acquired	$	323,490
Liabilities assumed
Accounts payable and accrued liabilities	$	9,676
Customer fund deposits		6,081
Lease liabilities		430
Deferred revenue		17,478
Deferred tax liabilities		46,574
Other liabilities		2,807
Total liabilities assumed	$	83,046
Goodwill		592,820
Total purchase consideration	$	833,264

On February 1, 2024, we acquired all outstanding shares of PCS Holdings, LLC (“Parchment”), the world's largest academic credentialing platform and network. By adding Parchment to the Instructure Learning Platform, we provide a verifiable and comprehensive digital passport of achievement records and outcomes for learners.

~~The~~At ~~following unaudited pro forma condensed combined financial information (in thousands) presents~~ the ~~results~~time of ~~operations of Instructure as if~~ the ~~Parchment~~ acquisition ~~occurred as of January 1~~, ~~2023.~~we ~~The~~recorded ~~unaudited~~a ~~pro~~provisional ~~forma~~net ~~results~~deferred ~~may~~tax ~~not~~liability ~~necessarily reflect actual results~~ of ~~operations that would have been achieved, nor are they necessarily indicative of future results of operations~~$46.6 ~~The~~million ~~unaudited~~in ~~pro~~purchase ~~forma~~accounting ~~results~~due ~~reflect~~to the ~~elimination of historical intangible amortization expense incurred by Parchment and the~~ step- up ~~amortization~~in ~~adjustments~~book ~~for~~basis ~~the fair value~~ of intangible assets ~~acquired,~~as ~~the~~a ~~elimination~~result of ~~historical~~the ~~interest~~stock ~~expense~~acquisition. ~~incurred~~We byexpect ~~Parchment on its debt and~~ the ~~incurrence~~net ofdeferred ~~interest~~tax ~~expense~~liability ~~related~~ to ~~the~~decrease ~~issuance~~as ofbook ~~debt~~amortization inexpense ~~connection~~is ~~with~~recognized on the ~~Parchment~~ acquisition,-related ~~and~~intangible ~~transaction~~assets. ~~expenses,~~The ~~nonrecurring~~conclusions ~~post-combination~~below ~~compensation~~will ~~expense~~remain ~~and~~provisional ~~the~~until ~~related adjustment to~~ the ~~income~~Parchment tax ~~provision~~returns are filed.

	Three months endedJune 30,			Six months endedJune 30,
	2023			2024			2023
Total revenue	$	158,936		$	335,957		$	312,193
Net loss	$	(22,014	)	$	(41,921	)	$	(55,838	)

During the third quarter of 2024, a measurement period adjustment of $0.9 million was made to the total purchase consideration, with a corresponding increase to goodwill, in connection with the completion of the Parchment post-closing statement. The following table summarizes the preliminary estimated fair values of the consideration transferred, assets acquired and liabilities assumed as of the date of the Parchment acquisition (in thousands):


Consideration transferred
Cash paid	$	832,172
Escrow		2,000
Total purchase consideration	$	834,172

Identifiable assets acquired
Cash and cash equivalents	$	5,445
Funds held on behalf of customers		6,081
Accounts receivable		9,746
Prepaid expenses and other assets		3,331
Property and equipment		212
Right-of-use assets		375
Intangible assets: developed technology		45,800
Intangible assets: trade name		12,500
Intangible assets: customer relationships		240,000
Total assets acquired	$	323,490

Liabilities assumed
Accounts payable and accrued liabilities	$	9,676
Customer fund deposits		6,081
Lease liabilities		430
Deferred revenue		17,478
Deferred tax liabilities		46,574
Other liabilities		2,807
Total liabilities assumed	$	83,046
Goodwill		593,728
Total purchase consideration	$	834,172

~~Table~~The following unaudited pro forma condensed combined financial information (in thousands) presents the results of ~~Contents~~operations of Instructure as if the Parchment acquisition occurred as of January 1, 2023. The unaudited pro forma results may not necessarily reflect actual results of operations that would have been achieved, nor are they necessarily indicative of future results of operations. The unaudited pro forma results reflect the elimination of historical intangible amortization expense incurred by Parchment and the step-up amortization adjustments for the fair value of intangible assets acquired, the elimination of historical interest expense incurred by Parchment on its debt and the incurrence of interest expense related to the issuance of debt in connection with the Parchment acquisition, and transaction expenses, nonrecurring post-combination compensation expense and the related adjustment to the income tax provision.

Actual revenue and net income recorded on Instructure's condensed combined statement of operations and comprehensive loss for Parchment during the three months ended June 30, 2024 was $32.8 million and $5.9 million, respectively, and $50.8 million and $3.4 million during the six months ended June 30, 2024, respectively.


	Three months ended September 30,			Nine months ended September 30,
	2023			2024			2023
Total revenue	$	163,546		$	509,120		$	475,739
Net loss	$	(22,363	)	$	(66,616	)	$	(78,201	)

On July 1, 2024, Instructure closed the acquisition of 100% of the equity interests of Community Software Solutions, LLC (“Scribbles”), a leading provider of credentialing and records management to K-12 school districts across the United States, in an all cash transaction. The purchase was financed through a combination of cash on hand and $70.0 million of debt financing under the Company's Senior Revolver (see Note 7. “Credit Facility”). The purpose of the transaction is to bolster the scale and reach of the Instructure Learning Platform as learners are engaged throughout their lifelong learning journey, facilitating evidence of learning and streamlining the educational process for educators and learners during key transitions. The Company intends to integrate Scribbles into its single operating segment. The preliminary purchase price is $81.8 million, which was paid to the sellers net of unpaid indebtedness and transaction expenses, and is subject to certain post-closing adjustments as set forth in the Purchase Agreement. The Company is currently evaluating the purchase price allocation following the close of the acquisition of Scribbles and expects the primary assets acquired to be intangible assets and goodwill, and assumed liabilities. It is not practicable to disclose the preliminary purchase price allocation for this acquisition given the short period of time between the acquisition date and the issuance of these consolidated financial statements.13

~~For~~Table ~~all periods presented, the excess~~ of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired is recorded as goodwill, of which $235.0 million is expected to be deductible for tax purposes from the Parchment acquisition. The goodwill generated from acquisition transactions is attributable to the expected synergies to be achieved following the consummation of the business combination and the assembled workforce values. The fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions. Developed technology represents the estimated fair value of the acquired existing technology and is being amortized over its estimated useful life of five years. Amortization of developed technology is included in subscription and support cost of revenue expenses in the accompanying consolidated statements of operations and comprehensive loss. The trade names acquired are amortized over the estimated useful life of three to ten years. Customer relationships represent the estimated fair value of the acquired customer bases and are amortized over the estimated useful life of seven to ten years. Amortization of trade names and customer relationships is included in sales and marketing expenses in the accompanying consolidated statements of operations and comprehensive loss. Non-compete agreements are amortized over an estimated useful life of three years and amortization of non-compete agreements is included in research and development expenses in the accompanying condensed consolidated statements of operations and comprehensive loss.Contents

14Actual revenue and net income recorded on Instructure's condensed combined statement of operations and comprehensive loss for Parchment during the three months ended September 30, 2024 was $32.6 million and $3.6 million, respectively, and $83.4 million and $7.0 million during the nine months ended September 30, 2024, respectively.

~~Table~~On July 1, 2024, Instructure acquired all outstanding equity interests of Community ~~Contents~~Software Solutions, LLC (“Scribbles”), a leading provider of credentialing and records management to K-12 school districts across the United States, in an all cash transaction. The purchase was financed through a combination of cash on hand and $70.0 million of debt financing under the Company's Senior Revolver, which was repaid in full on July 25, 2024. The purpose of the transaction is to bolster the scale and reach of the Instructure Learning Platform as learners are engaged throughout their lifelong learning journey, facilitating evidence of learning and streamlining the educational process for educators and learners during key transitions.

6At the time of the acquisition, we recorded a provisional net deferred tax liability of $11.0 ~~Goodwill~~million ~~and~~in ~~Intangible~~purchase ~~Assets~~accounting due to the step up in book basis of intangible assets as a result of the stock acquisition. We expect the net deferred tax liability to decrease as book amortization expense is recognized on the acquisition-related intangible assets. The allocations below will remain provisional until tax returns are filed for Scribbles.

~~Goodwill~~The ~~activity~~following ~~was~~table summarizes the preliminary estimated fair values of the consideration transferred, assets acquired and liabilities assumed as ~~follows~~of the date of the Scribbles acquisition (in thousands):

	Total
Consideration transferred
Balance as of December 31, 2023	$	1,265,316
Cash paid	$	80,782
Additions - see Note 5. “Acquisitions”		592,820
Escrow		1,000
Balance as of June 30, 2024	$	1,858,136
Total purchase consideration	$	81,782
Identifiable assets acquired
Cash and cash equivalents	$	605
Funds held on behalf of customers		2,261
Accounts receivable		332
Prepaid expenses and other assets		168
Property and equipment		22
Intangible assets: developed technology		3,100
Intangible assets: trade name		500
Intangible assets: customer relationships		40,500
Total assets acquired	$	47,488
Liabilities assumed
Accounts payable and accrued liabilities	$	1,720
Customer fund deposits		2,261
Deferred revenue		727
Deferred tax liabilities		10,995
Total liabilities assumed	$	15,703
Goodwill		49,997
Total purchase consideration	$	81,782

~~Intangible~~Actual ~~assets~~revenue ~~consisted~~and net income recorded on Instructure's condensed combined statement of operations and comprehensive loss for Scribbles during the ~~following~~three ~~(in~~and ~~thousands):~~nine months ended September 30, 2024 are not material.

	Weighted-Average Remaining Useful Life	June 30, 2024							December 31, 2023
		Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
Software	0 Months	$	21	$	(21	)	$	—	$	21	$	(21	)	$	—
Trade names	67 Months		138,600		(56,845	)		81,755		126,100		(49,336	)		76,764
Developed technology	31 Months		371,100		(269,125	)		101,975		325,300		(232,662	)		92,638
Customer relationships	80 Months		691,400		(263,366	)		428,034		451,400		(221,123	)		230,277
Non-compete agreements	18 Months		50		(26	)		24		50		(17	)		33
Total		$	1,201,171	$	(589,383	)	$	611,788	$	902,871	$	(503,159	)	$	399,712

For all periods presented, the excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired is recorded as goodwill, of which $235.0 million is expected to be deductible for tax purposes from the Parchment acquisition. The goodwill generated from acquisitions is attributable to the expected synergies to be achieved following the consummation of the business combination and the assembled workforce values. The fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions. Developed technology represents the estimated fair value of the acquired existing technology and is being amortized over its estimated useful life of five years. Amortization of developed technology is included in subscription and support cost of revenue expenses in the accompanying condensed consolidated statements of operations and comprehensive loss. The trade names acquired are amortized over the estimated useful life of one to ten years. Customer relationships represent the estimated fair value of the acquired customer bases and are amortized over the estimated useful life of seven to ten years. Amortization of trade names and customer relationships is included in sales and marketing expenses in the accompanying condensed consolidated statements of operations and comprehensive loss. Non-compete agreements are amortized over an estimated useful life of three years and amortization of non-compete agreements is included in research and development expenses in the accompanying condensed consolidated statements of operations and comprehensive loss.

Amortization expense for intangible assets was $42.9 million and 86.2 million, respectively, for the three and six months ended June 30, 2024, and $35.7 million and 71.5 million, respectively, for the three and six months ended June 30, 2023. 14

~~Based~~Table onof ~~the recorded intangible assets at June 30, 2024, estimated amortization expense is expected to be as follows (in thousands):~~ Contents

	Amortization
	Expense
Years Ending December 31,
Remainder of 2024	$	89,225
2025		135,736
2026		115,632
2027		75,894
2028		52,946
Thereafter		142,355
Total	$	611,788

6. Goodwill and Intangible Assets

7.Goodwill ~~Credit~~activity ~~Facility~~was as follows (in thousands):

On October 29, 2021, we entered into a credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, (the “2021 Credit Agreement”) governing our senior secured credit facilities (the “Senior Secured Credit Facilities”), consisting of a $500.0 million initial senior secured term loan facility (the “Senior Term Loan”) and a $125.0 million senior secured revolving credit facility (the “Senior Revolver”). The proceeds from the Senior Secured Credit Facilities were used, in addition to cash on hand, to (1) refinance, in full, all existing indebtedness under our initial credit agreement entered into in March of 2020 with a syndicate of lenders and Golub Capital Markets LLC (the “2021 Refinancing”), (2) pay certain fees and expenses incurred in connection with the entry into the 2021 Credit Agreement and the Refinancing, and (3) finance working capital needs of the Company and its subsidiaries for general corporate purposes.


	Total
Balance as of December 31, 2023	$	1,265,316
Additions - see Note 5. “Acquisitions”		643,725
Balance as of September 30, 2024	$	1,909,041

~~All~~Intangible ofassets ~~the~~consisted ~~Company’s obligations under the Senior Secured Credit Facilities are guaranteed by the subsidiary guarantors named therein. The Senior Revolver includes a $10.0 million sublimit for the issuance~~ of ~~letters of credit. Any issuance of letters of credit will reduce~~ the ~~amount~~following ~~available~~(in ~~under~~thousands): ~~the Senior Revolver. As of June 30, 2024, we had $70.0 million of borrowings outstanding under our Senior Revolver.~~


	Weighted-Average Remaining Useful Life	September 30, 2024							December 31, 2023
		Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net

Software	0 Months	$	21	$	(21	)	$	—	$	21	$	(21	)	$	—
Trade names	63 Months		139,100		(60,832	)		78,268		126,100		(49,336	)		76,764
Developed technology	32 Months		374,200		(287,905	)		86,295		325,300		(232,662	)		92,638
Customer relationships	81 Months		731,900		(286,500	)		445,400		451,400		(221,123	)		230,277
Non-compete agreements	15 Months		50		(30	)		20		50		(17	)		33
Total		$	1,245,271	$	(635,288	)	$	609,983	$	902,871	$	(503,159	)	$	399,712

~~Table~~Amortization ofexpense ~~Contents~~for intangible assets was $45.9 million and 132.1 million, respectively, for the three and nine months ended September 30, 2024, and $35.7 million and 107.2 million, respectively, for the three and nine months ended September 30, 2023.

~~The~~Based ~~Senior~~on ~~Term Loan has a seven-year maturity and~~ the ~~Senior~~recorded ~~Revolver~~intangible ~~has~~assets aat ~~five-year~~September ~~maturity. Commencing June~~ 30, ~~2022~~2024, weestimated ~~were~~amortization ~~required~~expense tois ~~repay~~expected ~~the~~to ~~Senior~~be ~~Term~~as ~~Loan~~follows ~~portion of the Senior Secured Credit Facilities~~ (in ~~quarterly~~thousands): principal installments of 0.25% of the aggregate original principal amount of the Senior Term Loan at closing, with the balance payable at maturity. We are also required to pay an unused commitment fee to the lenders under the Senior Revolver at the Applicable Commitment Fee of the average daily unutilized commitments. The Applicable Commitment Fee ranges from 0.40% to 0.50% subject to the Company’s Consolidated First Lien Net Leverage Ratio.

On June 21, 2023, we entered into the first amendment to the 2021 Credit Agreement (the “Amended 2021 Credit Agreement”) whereby all borrowings denominated in U.S. dollars and that incur interest or fees using the Eurocurrency Rate, which are determined by reference to the London Interbank Offered Rate (“LIBOR”), have been replaced with the Secured Overnight Financing Rate (“SOFR”). For SOFR loans, the loans denominated in dollars now bear interest at the Adjusted Term SOFR Rate, which is equal to the Term SOFR Reference Rate, as published by the CME Term SOFR Administrator, plus the Term SOFR Adjustment as dictated by the interest rate period elected by the Company. The Term SOFR Adjustment ranges from 0.11448% to 0.42826% per annum. The Applicable Rate (x) for the Initial Term Loans remains at 2.75% per annum for SOFR loans and (y) for the Revolving Credit Facility remains at 2.50% per annum with applicable step downs. The transition from LIBOR to SOFR became effective on July 5, 2023. All other terms and conditions in place under the 2021 Credit Agreement on the effective date of the Amended 2021 Credit Agreement remained unchanged and in full effect.


	Amortization
	Expense
Years Ending December 31,
Remainder of 2024	$	45,905
2025		140,656
2026		120,302
2027		80,564
2028		57,616
Thereafter		164,940
Total	$	609,983

The Amended 2021 Credit Agreement contains a financial covenant solely with respect to the Senior Revolver. If the outstanding amounts under the Senior Revolver exceed 35% of the aggregate amount of the Senior Revolver commitments, we are required to maintain at the end of each fiscal quarter a Consolidated Net Leverage Ratio of not more than 7.75 toCredit ~~1.00.~~Facility As of June 30, 2024, there was $70.0 million of borrowings outstanding under the Senior Revolver. The Company had $55.0 million of availability under the Senior Revolver as of June 30, 2024. The Company repaid the outstanding borrowings under the Senior Revolver in full on July 25, 2024.

On ~~February~~October 129, ~~2024~~2021, we entered into ~~the~~a ~~second~~credit ~~amendment~~agreement towith ~~the~~JPMorgan ~~2021~~Chase ~~Credit~~Bank, ~~Agreement~~N.A., as ~~previously~~administrative ~~amended~~agent, ~~by the Amended 2021 Credit Agreement~~ (the “~~Amended~~2021 ~~2023~~ Credit Agreement”), bygoverning ~~and~~our ~~among~~senior ~~the~~secured ~~Company~~credit ~~and~~facilities ~~certain~~(the of“Senior ~~its~~Secured ~~subsidiaries,~~Credit ~~JPMorgan Chase Bank~~Facilities”), ~~N.A.,~~consisting asof ~~administrative~~a ~~agent, and the lenders named therein~~$500.0 ~~Pursuant~~million toinitial ~~the~~senior ~~Amended~~secured ~~2023~~term ~~Credit~~loan ~~Agreement,~~facility ~~among certain other amendments,~~ (the ~~lenders~~“Senior ~~agreed,~~Term ~~severally~~Loan”) and ~~not~~a ~~jointly,~~$125.0 tomillion ~~extend~~senior ~~additional~~secured ~~2023~~revolving ~~Incremental~~credit ~~Term~~facility ~~Loans~~ (the “~~2023~~Senior ~~Incremental Term Loans~~Revolver”). toThe ~~Instructure~~proceeds ~~under~~from the ~~2021~~Senior Secured Credit ~~Agreement~~Facilities were used, in anaddition ~~aggregate~~to ~~principal~~cash ~~amount~~on ~~equal~~hand, to ~~$685.0~~(1) ~~million.~~refinance, ~~The~~in ~~Company~~full, ~~used~~all ~~the~~existing ~~proceeds~~indebtedness ofunder ~~the~~our ~~2023~~initial ~~Incremental~~credit ~~Term~~agreement ~~Loans,~~entered ~~borrowed~~into ~~under~~in ~~the~~March ~~2021~~of ~~Credit~~2020 ~~Agreement,~~with toa ~~finance~~syndicate ~~(i)~~of ~~the~~lenders ~~cash~~and ~~consideration~~Golub ~~for~~Capital ~~the~~Markets ~~acquisition~~LLC of(the ~~Parchment~~“2021 Refinancing”), ~~and~~ (ii2) pay certain fees and ~~costs~~expenses incurred in connection with the ~~acquisition~~entry ~~and~~into ~~related~~the ~~transactions.~~2021 ~~The Senior Secured~~ Credit ~~Facilities,~~Agreement ~~together~~and ~~with~~ the ~~Amended~~Refinancing, ~~2023~~and ~~Credit~~(3) ~~Agreement,~~finance ~~comprise~~working ~~our~~capital ~~amended~~needs ~~senior~~of ~~secured~~the ~~credit~~Company ~~facilities~~and ~~(the~~its ~~“Amended~~subsidiaries ~~Senior~~for ~~Secured~~general ~~Credit~~corporate ~~Facilities”)~~purposes.

AsAll ~~a result~~ of the ~~2023 Incremental Term Loans, the~~ Company’s ~~capitalized~~obligations ~~$4.4~~under ~~million and $16.3 million of debt discount costs incurred in connection with~~ the ~~Amended~~Senior ~~2023~~Secured Credit ~~Agreement~~Facilities inare ~~long-term~~guaranteed ~~debt,~~by ~~current and long-term debt, net of current portion, respectively, on~~ the ~~condensed~~subsidiary ~~consolidated~~guarantors ~~balance~~named ~~sheets~~therein. The ~~Company~~Senior ~~recognized~~Revolver ~~$1.4~~includes ~~million~~a ~~and~~ $210.~~4 million of amortization of debt discount costs for the three and six months ended June 30, 2024, respectively, and $~~0.3 million ~~and~~sublimit ~~$0.5 million~~ for the ~~three~~issuance ~~and~~of ~~six~~letters ~~months ended June 30, 2023, respectively, which is recorded as interest expense in the accompanying condensed consolidated statements~~ of ~~operations and comprehensive loss~~credit. AtAny ~~June~~issuance ~~30,~~of ~~2024~~letters ~~and~~of ~~December~~credit ~~31,~~will ~~2023,~~reduce the ~~Company had an aggregate principal~~ amount ~~outstanding~~available ~~of $1,170.3 million and $491.3 million, respectively,~~ under the ~~Amended~~ Senior ~~Secured Credit Facilities, bearing interest at 8~~Revolver.~~35%~~ ~~and~~As ~~8.68%, respectively. The Company had $23.6 million and $4.9 million~~ of ~~unamortized~~September ~~debt discount costs at June~~ 30, 2024 ~~and December 31~~, ~~2023,~~we ~~respectively,~~had ~~which~~no isoutstanding ~~recorded~~borrowings asunder aour ~~reduction~~Senior ~~of the debt balance on the Company’s condensed consolidated balance sheets~~Revolver.

As a result of the 2021 Refinancing, the Company capitalized $0.2 million and $0.8 million of deferred issuance costs incurred in connection with the Senior Revolver in other current assets and other assets, respectively, on the condensed consolidated balance sheets. The Company recognized $47.0 thousand and $0.1 million of amortization of debt issuance costs for the three and six months ended June 30, 2024, respectively, and $47.0 thousand, and $0.1 million for the three and six months ended June 30, 2023, respectively, which is recorded as interest expense in the accompanying condensed consolidated statements of operations and comprehensive loss. The Company had $0.4 million and $0.5 million of unamortized debt issuance costs at June 30, 2024 and December 31, 2023, respectively, which are included in other current assets and other assets on the Company’s condensed consolidated balance sheets. 15

~~The~~Table ~~Amended~~of Senior Secured Credit Facilities contain customary negative covenants. At June 30, 2024, the Company was in compliance with all applicable covenants pertaining to the Amended Senior Secured Credit Facilities. Contents

16The Senior Term Loan has a seven-year maturity and the Senior Revolver has a five-year maturity. Commencing June 30, 2022, we were required to repay the Senior Term Loan portion of the Senior Secured Credit Facilities in quarterly principal installments of 0.25% of the aggregate original principal amount of the Senior Term Loan at closing, with the balance payable at maturity. We are also required to pay an unused commitment fee to the lenders under the Senior Revolver at the Applicable Commitment Fee of the average daily unutilized commitments. The Applicable Commitment Fee ranges from 0.40% to 0.50% subject to the Company’s Consolidated First Lien Net Leverage Ratio.

~~Table~~On June 21, 2023, we entered into the first amendment to the 2021 Credit Agreement (the “Amended 2021 Credit Agreement”) whereby all borrowings denominated in U.S. dollars and that incur interest or fees using the Eurocurrency Rate, which are determined by reference to the London Interbank Offered Rate (“LIBOR”), have been replaced with the Secured Overnight Financing Rate (“SOFR”). For SOFR loans, the loans denominated in dollars now bear interest at the Adjusted Term SOFR Rate, which is equal to the Term SOFR Reference Rate, as published by the CME Term SOFR Administrator, plus the Term SOFR Adjustment as dictated by the interest rate period elected by the Company. The Term SOFR Adjustment ranges from 0.11448% to 0.42826% per annum. The Applicable Rate (x) for the Initial Term Loans remains at 2.75% per annum for SOFR loans and (y) for the Revolving Credit Facility remains at 2.50% per annum with applicable step downs. The transition from LIBOR to SOFR became effective on July 5, 2023. All other terms and conditions in place under the 2021 Credit Agreement on the effective date of ~~Contents~~the Amended 2021 Credit Agreement remained unchanged and in full effect.

The ~~maturities~~Amended of2021 Credit Agreement contains a financial covenant solely with respect to the Senior Revolver. If the outstanding ~~debt~~amounts asunder the Senior Revolver exceed 35% of ~~June~~the aggregate amount of the Senior Revolver commitments, we are required to maintain at the end of each fiscal quarter a Consolidated Net Leverage Ratio of not more than 7.75 to 1.00. As of September 30, 2024, ~~inclusive~~there ofwere no borrowings outstanding under the Senior Revolver,. ~~are~~The Company had $125.0 million of availability under the Senior Revolver as ~~follows~~of ~~(in~~September ~~thousands):~~30, 2024.

	Amount
Years Ending December 31,
Remainder of 2024	$	75,986
2025		11,972
2026		11,972
2027		11,972
2028		1,128,362
Thereafter		—
Total	$	1,240,264

On February 1, 2024, we entered into the second amendment to the 2021 Credit Agreement as previously amended by the Amended 2021 Credit Agreement (the “Amended 2023 Credit Agreement”), by and among the Company and certain of its subsidiaries, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders named therein. Pursuant to the Amended 2023 Credit Agreement, among certain other amendments, the lenders agreed, severally and not jointly, to extend additional 2023 Incremental Term Loans (the “2023 Incremental Term Loans”) to Instructure under the 2021 Credit Agreement in an aggregate principal amount equal to $685.0 million. The Company used the proceeds of the 2023 Incremental Term Loans, borrowed under the 2021 Credit Agreement, to finance (i) the cash consideration for the acquisition of Parchment, and (ii) fees and costs incurred in connection with the acquisition and related transactions. The Senior Secured Credit Facilities, together with the Amended 2023 Credit Agreement, comprise our amended senior secured credit facilities (the “Amended Senior Secured Credit Facilities”).

As a result of the 2023 Incremental Term Loans, the Company capitalized $4.4 million and $16.3 million of debt discount costs incurred in connection with the Amended 2023 Credit Agreement in long-term debt, current and long-term debt, net of current portion, respectively, on the condensed consolidated balance sheets. The Company recognized $1.4 million and $3.8 million of amortization of debt discount costs for the three and nine months ended September 30, 2024, respectively, and $0.3 ~~Revenue~~million and $0.8 million for the three and nine months ended September 30, 2023, respectively, which is recorded as interest expense in the accompanying condensed consolidated statements of operations and comprehensive loss. At September 30, 2024 and December 31, 2023, the Company had an aggregate principal amount outstanding of $1,167.3 million and $491.3 million, respectively, under the Amended Senior Secured Credit Facilities, bearing interest at 8.07% and 8.68%, respectively. The Company had $22.2 million and $4.9 million of unamortized debt discount costs at September 30, 2024 and December 31, 2023, respectively, which is recorded as a reduction of the debt balance on the Company’s condensed consolidated balance sheets.

WeAs ~~have~~a ~~one~~result ~~operating~~of ~~segment~~the 2021 Refinancing, ~~which~~the isCompany ~~our~~capitalized ~~cloud-based~~$0.2 ~~learning~~million and $0.8 million of deferred issuance costs incurred in connection with the Senior Revolver in other current assets and other assets, ~~assessment~~respectively, ~~development~~on ~~and~~the ~~engagement~~condensed ~~systems~~consolidated balance sheets. ~~Our~~The ~~customers~~Company ~~consist~~recognized of$47.0 ~~K-12~~thousand and ~~Higher~~$0.1 ~~Education~~million ~~institutions~~of ~~that~~amortization ~~purchase~~of ~~our~~debt ~~Canvas~~issuance ~~LMS,~~costs ~~which~~for ~~includes~~the ~~assessments~~three and nine months ended September 30, ~~analytics~~2024, ~~learning content~~respectively, and ~~credentials~~$47.0 ~~The~~thousand, ~~following~~and ~~table~~$0.1 ~~presents~~million for the ~~Company’s~~three ~~disaggregated~~and ~~revenues~~nine bymonths ~~geographic~~ended ~~region~~September 30, ~~based~~2023, onrespectively, which is recorded as interest expense in the ~~physical~~accompanying ~~location~~condensed consolidated statements of ~~the~~operations ~~customer~~and (comprehensive loss. The Company had $0.4 million and $0.5 million of unamortized debt issuance costs at September 30, 2024 and December 31, 2023, respectively, which are included in ~~thousands):~~other current assets and other assets on the Company’s condensed consolidated balance sheets.

	Three months endedJune 30,						Six months endedJune 30,
	2024			2023			2024			2023
United States	$	139,840		$	104,350		$	266,350		$	206,944
Foreign		30,604			26,720			59,549			52,969
Total revenue	$	170,444		$	131,070		$	325,899		$	259,913
Percentage of revenue generated outside of the United States		18	%		20	%		18	%		20	%

The Amended Senior Secured Credit Facilities contain customary negative covenants. At September 30, 2024, the Company was in compliance with all applicable covenants pertaining to the Amended Senior Secured Credit Facilities.

~~Deferred Revenue and Performance Obligations~~ 16

~~During~~Table ~~the three and six months ended June 30, 2024, 79% and 72%~~ of revenue recognized was included in our deferred revenue balance at March 31, 2024 and December 31, 2023, respectively. During the three and six months ended June 30, 2023, 88% and 85% of revenue recognized was included in our deferred revenue balance at March 31, 2023 and December 31, 2022, respectively.Contents

~~Transaction~~The ~~Price~~maturities ~~Allocated~~of tooutstanding ~~the~~debt ~~Remaining~~as ~~Performance~~of ~~Obligations~~September 30, 2024, are as follows (in thousands):

As of June 30, 2024, approximately $934.9 million of revenue is expected to be recognized from remaining performance obligations. We expect to recognize revenue on approximately 76% of our remaining performance obligations over the next 24 months, with the balance recognized thereafter.


	Amount
Years Ending December 31,
Remainder of 2024	$	2,993
2025		11,972
2026		11,972
2027		11,972
2028		1,128,362
Thereafter		—
Total	$	1,167,271

~~Concentration~~8. ~~of Credit Risk, Significant Customers and Provision for Credit Losses~~Revenue

~~There~~We ~~were~~have noone ~~customers~~operating ~~with~~segment, ~~revenue~~which asis aour ~~percentage~~cloud-based learning, assessment, development and engagement systems. Our customers consist of ~~total~~K-12 ~~revenue~~and ~~exceeding~~Higher ~~10%~~Education ~~for~~institutions ~~the~~that ~~periods~~purchase ~~presented~~our Canvas LMS, which includes assessments, analytics, learning content, and credentials. The following table presents the Company’s disaggregated revenues by geographic region, based on the physical location of the customer (in thousands):

As of June 30, 2024 and December 31, 2023 there were no customers with outstanding net accounts receivable balances as a percentage of total outstanding net accounts receivable greater than 10%.



	Three months ended September 30,						Nine months ended September 30,
	2024			2023			2024			2023

United States	$	141,717		$	107,583		$	408,067		$	314,547
Foreign		31,447			27,338			90,996			80,287
Total revenue	$	173,164		$	134,921		$	499,063		$	394,834
Percentage of revenue generated outside of the United States		18	%		20	%		18	%		20	%

~~Our~~Deferred ~~provisions~~Revenue ~~for credit loss balances at June 30, 2024~~ and ~~December~~Performance ~~31,~~Obligations ~~2023 were $2.8 million and $2.0 million, respectively.~~

9During the three and nine months ended September 30, 2024, 67% and 55% of revenue recognized was included in our deferred revenue balance at June 30, 2024 and December 31, 2023, respectively. ~~Deferred~~During ~~Commissions~~the three and nine months ended September 30, 2023, 80% and 64% of revenue recognized was included in our deferred revenue balance at June 30, 2023 and December 31, 2022, respectively.

~~Deferred~~Transaction ~~commissions~~Price ~~primarily~~Allocated ~~consist~~to of sales commissions that are capitalized as incremental contract origination costs and were $28.4 million and $27.5 million as of June 30, 2024 and December 31, 2023, respectively. Amortization expense for deferred commissions was $4.6 million and $9.3 million for the ~~three~~Remaining ~~and~~Performance ~~six~~Obligations months ended June 30, 2024, respectively, and $5.3 million and $10.1 million for the three and six months ended June 30, 2023, respectively. There was no impairment of deferred commissions during these periods.

17As of September 30, 2024, approximately $944.6 million of revenue is expected to be recognized from remaining performance obligations. We expect to recognize revenue on approximately 77% of our remaining performance obligations over the next 24 months, with the balance recognized thereafter.

~~Table~~Concentration of ~~Contents~~Credit Risk, Significant Customers and Provision for Credit Losses

There were no customers with revenue as a percentage of total revenue exceeding 10.% ~~Stock-Based~~for ~~Compensation~~the periods presented.

As of ~~June~~September 30, 2024 and December 31, 2023, there were ~~500,000,000~~no ~~shares~~customers ofwith ~~common~~outstanding ~~stock~~net ~~authorized.~~accounts Asreceivable ofbalances ~~June~~as ~~30,~~a ~~2024~~percentage ~~and~~of ~~December~~total ~~31,~~outstanding ~~2023,~~net ~~there~~accounts ~~were~~receivable ~~146,471,276~~greater ~~and~~than ~~145,207,497 shares of common stock issued and outstanding, respectively~~10%.

~~Employee~~Our ~~Equity~~provisions ~~Plans~~for credit loss balances at September 30, 2024 and December 31, 2023 were $1.8 million and $2.0 million, respectively.

~~The Instructure Parent, LP Incentive Equity Plan (the “2020 Plan”) was terminated in July 2021 in connection with the Company’s initial public offering (the “IPO”)~~9. AsDeferred ofCommissions the IPO date 6,126,802 unvested incentive units were exchanged for 3,496,739 RSUs under the 2021 Omnibus Incentive Plan (the “2021 Plan”). These RSUs will generally vest in 11 equal quarterly installments commencing September 1, 2021.

InDeferred ~~July~~commissions ~~2021,~~primarily ~~our~~consist ~~board~~ of ~~directors~~sales ~~adopted~~commissions ~~the~~that ~~2021~~are ~~Plan~~capitalized ~~and~~as noincremental ~~shares~~contract ~~remain~~origination ~~available~~costs ~~for~~and ~~issuance~~were ~~under~~$28.7 ~~the~~million ~~2020~~and ~~Plan~~$27.5 Amillion ~~total~~as of 18September 30,~~000,000~~ ~~shares~~2024 ofand ~~the~~December ~~Company's~~31, ~~common~~2023, ~~stock~~respectively. ~~were~~Amortization ~~initially~~expense ~~reserved~~ for ~~issuance~~deferred ~~under~~commissions ~~the~~was ~~2021 Plan~~$5.7 ~~Pursuant~~million toand ~~the~~$14.9 ~~terms~~million offor the ~~2021~~three ~~Plan,~~and ~~the~~nine ~~share~~months ~~reserve~~ended ~~increased~~September by30, 52024,~~808~~ respectively,~~300~~ ~~shares~~and in$4.4 ~~January~~million ~~2024~~and $14.5 Asmillion offor ~~June~~the ~~30,~~three ~~2024,~~and wenine ~~had~~months 21ended September 30,~~897~~ 2023,~~418~~ ~~shares~~respectively. ofThere ~~common~~was ~~stock~~no ~~available~~impairment ~~for~~of ~~future~~deferred ~~grants~~commissions ~~under~~during ~~the~~these ~~2021 Plan~~periods.

In July 2021, our board of directors adopted, and our stockholders approved the 2021 Employee Stock Purchase Plan (the “2021 ESPP”), which allows eligible employees to purchase shares of our common stock at a discount through payroll deductions of up to 15% of their eligible compensation, subject to any plan limitations. Each new offering period begins on or about March 1 and September 1 and is approximately six months in duration. On each purchase date, eligible employees can purchase our common stock at a price per share equal to 85% of the lesser of (1) the fair market value of our common stock on the offering date or (2) the fair market value of our common stock on the purchase date. A total of 1,900,000 shares of the Company’s common stock were initially reserved for issuance under the 2021 ESPP. Pursuant to the terms of the 2021 ESPP, the share reserve increased by 1,452,075 shares in January 2024. As of June 30, 2024, 5,304,954 shares of common stock were available for purchase under the 2021 ESPP.17

~~During~~Table ~~the three months ended June 30, 2024, we granted 2,362,142 RSUs to employees under the 2021 Plan. Each RSU entitles the recipient to receive one share~~ of the Company’s common stock upon vesting. The RSUs are subject to time-based service requirements and generally vest over a four-year service period. The grant date fair value of the RSUs granted during the three months ended June 30, 2024 ranged from $19.20 to $21.60, which represents the closing stock price for the underlying common stock on the respective grant dates, with an aggregate fair value of $46.8 million.Contents

~~The~~10. ~~following two tables present stock~~Stock-~~based~~Based ~~compensation~~Compensation ~~by award type and where the stock-based compensation expense was recorded in our condensed consolidated statements of operations and comprehensive loss (in thousands):~~

	Three months endedJune 30,				Six months endedJune 30,
	2024		2023		2024		2023
Restricted stock units	$	15,190	$	11,478	$	27,238	$	21,077
Shares issuable under employee stock purchase plan		362		378		759		789
Total stock-based compensation	$	15,552	$	11,856	$	27,997	$	21,866

As of September 30, 2024 and December 31, 2023, there were 500,000,000 shares of common stock authorized. As of September 30, 2024 and December 31, 2023, there were 147,089,318 and 145,207,497 shares of common stock issued and outstanding, respectively.

	Three months endedJune 30,				Six months endedJune 30,
	2024		2023		2024		2023
Subscription and support cost of revenue	$	792	$	474	$	1,357	$	853
Professional services and other cost of revenue		943		622		1,587		1,036
Sales and marketing		4,328		3,469		7,442		5,997
Research and development		4,738		3,480		8,578		6,654
General and administrative		4,751		3,811		9,033		7,326
Total stock-based compensation	$	15,552	$	11,856	$	27,997	$	21,866

Employee Equity Plans

18The Instructure Parent, LP Incentive Equity Plan (the “2020 Plan”) was terminated in July 2021 in connection with the Company’s initial public offering (the “IPO”). As of the IPO date, 6,126,802 unvested incentive units were exchanged for 3,496,739 RSUs under the 2021 Omnibus Incentive Plan (the “2021 Plan”). These RSUs generally vested in 11 equal quarterly installments commencing September 1, 2021.

~~Table~~In July 2021, our board of ~~Contents~~directors adopted the 2021 Plan and no shares remain available for issuance under the 2020 Plan. A total of 18,000,000 shares of the Company's common stock were initially reserved for issuance under the 2021 Plan. Pursuant to the terms of the 2021 Plan, the share reserve increased by 5,808,300 shares in January 2024. As of September 30, 2024, we had 21,801,632 shares of common stock available for future grants under the 2021 Plan.

~~Restricted~~In July 2021, our board of directors adopted, and our stockholders approved the 2021 Employee Stock ~~Units~~Purchase Plan (the “2021 ESPP”), which allows eligible employees to purchase shares of our common stock at a discount through payroll deductions of up to 15% of their eligible compensation, subject to any plan limitations. Each new offering period begins on or about March 1 and September 1 and is approximately six months in duration. On each purchase date, eligible employees can purchase our common stock at a price per share equal to 85% of the lesser of (1) the fair market value of our common stock on the offering date or (2) the fair market value of our common stock on the purchase date. A total of 1,900,000 shares of the Company’s common stock were initially reserved for issuance under the 2021 ESPP. Pursuant to the terms of the 2021 ESPP, the share reserve increased by 1,452,075 shares in January 2024. As of September 30, 2024, 5,162,907 shares of common stock were available for purchase under the 2021 ESPP. As a result of the entry into the Merger Agreement, we ceased withholding payroll deductions after our most recent purchase date on September 3, 2024, and pending the completion of the Merger, and we do not anticipate future offerings of our common stock under the 2021 ESPP.

~~The~~During ~~following~~the ~~table~~three ~~summarizes~~months ended September 30, 2024, we granted 234,170 RSUs to employees under the ~~activity~~2021 Plan. Each RSU entitles the recipient to receive one share of the Company’s common stock upon vesting. The RSUs ~~for~~are subject to time-based service requirements and generally vest over a four-year service period. The grant date fair value of the ~~six~~RSUs granted during the three months ended ~~June~~September 30, 2024 ~~(in~~ranged ~~thousands~~from $24.49 to $25.0, ~~except~~which ~~per~~represents ~~unit~~the ~~amounts):~~closing stock price for the underlying common stock on the respective grant dates, with an aggregate fair value of $5.7 million.

	RSUs			Weighted Average Grant Date Fair Value Per Unit
Unvested and outstanding at December 31, 2023		4,470		$	23.68
Granted		4,101			21.84
Vested		(923	)		22.95
Forfeited or canceled		(507	)		23.10
Unvested and outstanding at June 30, 2024		7,141		$	22.76

The following two tables present stock-based compensation by award type and classification of stock-based compensation expense recorded within our condensed consolidated statements of operations and comprehensive loss (in thousands):

As of June 30, 2024 and December 31, 2023, total unrecognized compensation cost related to unvested RSUs amounted to $150.5 million and $95.1 million, respectively, which is expected to be recognized over a weighted average period of 3.1 years and 2.9 years, respectively.



	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023

Restricted stock units	$	14,113	$	11,343	$	41,351	$	32,420
Shares issuable under employee stock purchase plan		238		412		997		1,201
Total stock-based compensation	$	14,351	$	11,755	$	42,348	$	33,621

The following table summarizes the activity of the incentive units granted under the 2020 Plan, subsequent to their conversion into RSUs under the 2021 Plan, for the six months ended June 30, 2024 (in thousands, except per unit amounts):



	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023

Subscription and support cost of revenue	$	750	$	459	$	2,107	$	1,312
Professional services and other cost of revenue		864		603		2,451		1,639
Sales and marketing		4,170		3,145		11,612		9,142
Research and development		4,469		3,792		13,047		10,446
General and administrative		4,098		3,756		13,131		11,082
Total stock-based compensation	$	14,351	$	11,755	$	42,348	$	33,621

	RSUs			Weighted Average Grant Date Fair Value Per Unit
Unvested and outstanding at December 31, 2023		320		$	12.30
Vested		(319	)		12.30
Unvested and outstanding at June 30, 2024		1		$	13.48

~~There~~Table ~~were no incentive units granted subsequent to December 31, 2021 under the 2020 Plan. As~~ of June 30, 2024 and December 31, 2023, we had less than $0.1 million and $2.4 million, respectively, of unrecognized stock-based compensation expense related to unvested incentive units exchanged for RSUs that are expected to be recognized over a weighted-average period of 0.3 and 0.3 years, respectively.Contents

~~2021~~Restricted ~~ESPP~~Stock Units

The following table summarizes the ~~assumptions~~activity ~~relating~~of toRSUs ~~2021 ESPP purchase rights used in a Black-Scholes option pricing model~~ for the ~~three~~nine months ended ~~June~~September 30, 2024 ~~and~~(in ~~2023~~thousands, except per unit amounts):

	Three months endedJune 30,
	RSUs			Weighted Average Grant Date Fair Value Per Unit
	2024		2023
Unvested and outstanding at December 31, 2023		4,470		$	23.68
Dividend yield	None		None
Granted		4,335			21.99
Volatility	18%		25%
Vested		(1,445	)		22.75
Risk-free interest rate	5.27%		5.20%
Forfeited or canceled		(645	)		22.93
Expected life (years)	0.5		0.5
Unvested and outstanding at September 30, 2024		6,715		$	22.86

11As of September 30, 2024 and December 31, 2023, total unrecognized compensation cost related to unvested RSUs amounted to $138.8 ~~Income~~million ~~Taxes~~and $95.1 million, respectively, which is expected to be recognized over a weighted average period of 2.9 years and 2.9 years, respectively.

~~Utilization~~The offollowing ~~the~~table ~~net~~summarizes ~~operating~~the ~~loss~~activity ~~carryforwards~~of ~~and~~the ~~credits~~incentive ~~may~~units begranted ~~subject~~under tothe ~~substantial~~2020 ~~annual~~Plan, ~~limitation~~subsequent ~~due~~ to ~~the~~their ~~ownership~~conversion ~~change~~into ~~limitations~~RSUs ~~provided~~under bythe ~~Section~~2021 ~~382~~Plan, offor the ~~Internal~~nine ~~Revenue~~months ~~Code~~ended ofSeptember ~~1986~~30, as2024 ~~amended, and similar state provisions. The annual limitation may result~~ (in ~~the~~thousands, ~~expiration~~except ofper ~~net~~unit ~~operating~~amounts): ~~losses and credits before utilization.~~

We file tax returns in the United States, the United Kingdom, Australia, the Netherlands, Hong Kong, Sweden, Brazil, Mexico, Hungary, China, Singapore, Ireland, Canada and various state jurisdictions. All of our tax years remain open to examination by major taxing jurisdictions to which we are subject, as carryforward attributes generated in past years may still be adjusted upon examination by the Internal Revenue Service or state and foreign tax authorities if they have or will be used in future periods.


	RSUs			Weighted Average Grant Date Fair Value Per Unit
Unvested and outstanding at December 31, 2023		320		$	12.30
Vested		(320	)		12.30
Unvested and outstanding at September 30, 2024		—

WeThere ~~believe~~were ~~that~~no weincentive ~~have~~units ~~provided~~granted ~~adequate~~subsequent ~~reserves~~to ~~for~~December ~~our~~31, ~~income~~2021 ~~tax~~under ~~uncertainties~~the in2020 ~~all~~Plan. ~~open~~As ~~tax~~of ~~years~~September 30, 2024 and December 31, 2023, we had less than $0.1 Wemillion doand ~~not~~$2.4 ~~expect~~million, ~~our~~respectively, ~~gross~~of unrecognized ~~tax~~stock-based ~~benefits~~compensation expense related to ~~change~~unvested ~~significantly~~incentive inunits ~~the~~exchanged ~~next~~for 12RSUs ~~months~~that are expected to be recognized over a weighted-average period of 0.2 and 0.3 years, respectively.

192021 ESPP

~~Table~~The offollowing ~~Contents~~table summarizes the assumptions relating to 2021 ESPP purchase rights used in a Black-Scholes option pricing model for the three months ended September 30, 2024 and 2023:

12. Fair Value of Financial Instruments


	Three months ended September 30,
	2024	2023
Dividend yield	None	None
Volatility	18%	18 - 25%
Risk-free interest rate	5.27%	5.20 - 5.47%
Expected life (years)	0.5	0.5

The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date11. ~~Financial~~Income assets are marked to bid prices and financial liabilities are marked to offer prices. Fair value measurements do not include transaction costs. The fair value hierarchy prioritizes the quality and reliability of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined into the following three categories: Taxes

~~Level~~Utilization 1:of ~~Quoted~~the ~~market~~net ~~prices~~operating inloss ~~active~~carryforwards ~~markets~~and ~~for~~credits ~~identical~~may ~~assets~~be orsubject ~~liabilities~~to substantial annual limitation due to the ownership change limitations provided by Section 382 of the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization.

~~Level~~We 2:file ~~Observable~~tax ~~market-based~~returns ~~inputs~~in orthe ~~unobservable~~United ~~inputs~~States, ~~that~~the United Kingdom, Australia, the Netherlands, Hong Kong, Sweden, Brazil, Mexico, Hungary, China, Singapore, Ireland, Canada and various state jurisdictions. All of our tax years remain open to examination by major taxing jurisdictions to which we are ~~corroborated~~subject, as carryforward attributes generated in past years may still be adjusted upon examination by ~~market~~the ~~data.~~Internal Revenue Service or state and foreign tax authorities if they have or will be used in future periods.

~~Level~~We 3:believe ~~Unobservable~~that ~~inputs~~we ~~that~~have ~~are~~provided ~~not~~adequate ~~corroborated~~reserves byfor ~~market~~our ~~data~~income tax uncertainties in all open tax years. We do not expect our gross unrecognized tax benefits to change significantly in the next 12 months.

~~There were no transfers between Level 1 and Level 2 of the fair value measurement hierarchy during the period ended June 30, 2024 and December 31, 2023.~~ 19

Table ~~Instruments~~of ~~Not Recorded at Fair Value on a Recurring Basis~~ Contents

~~We estimate the fair value of our Senior Term Loan and 2023 Incremental Term Loans carried at face value, less unamortized discount costs, quarterly for disclosure purposes~~12. ~~The~~Fair ~~estimated~~Value ~~fair value~~ of ~~our~~Financial ~~Senior~~Instruments Term Loan, 2023 Incremental Term Loans, and Senior Revolver is determined by Level 2 inputs, observable market-based inputs or unobservable inputs that are corroborated by market data. As of June 30, 2024, the fair value of our Senior Term Loan, 2023 Incremental Term Loans, and Senior Revolver was $1,216.7 million. The carrying amounts of our cash, prepaid expenses, other current assets, and accrued liabilities approximate their current fair value because of their nature and relatively short maturity dates or durations.

13The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ~~Leases~~Financial assets are marked to bid prices and financial liabilities are marked to offer prices. Fair value measurements do not include transaction costs. The fair value hierarchy prioritizes the quality and reliability of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined into the following three categories:

~~The~~Level ~~Company~~1: ~~leases~~Quoted ~~office~~market ~~space~~prices under non-cancelable operating leases with lease terms ranging from one to six years. These leases require monthly lease payments that may be subject to annual increases throughout the lease term. The Company subleases four of its locations. The first sublease expired in ~~the~~active ~~second~~markets ~~quarter~~for ofidentical ~~2023,~~assets ~~the~~or ~~second sublease expired in the second quarter of 2024, and the third and fourth sublease terms had 54 months and 19 months remaining as of June 30, 2024, respectively~~liabilities. ~~The subleases do not have an option for renewal.~~

~~During~~Level the first quarter of 2024, the Company vacated multiple floors of its leased office space at its headquarters in Salt Lake City, Utah, with the intention of subleasing the vacated office space. As a result, the Company recognized a loss on exit of leased properties of $1.9 million in the first quarter of 2024, of which $0.4 million was recognized in subscription and support cost of revenue, $0.3 million in professional services and other cost of revenue, $0.6 million in sales and marketing, $0.4 million in research and development, and $0.2: ~~million~~Observable inmarket-based ~~general~~inputs ~~and~~or ~~administrative~~unobservable ininputs ~~our condensed consolidated statements of operations and comprehensive loss. Additionally, during the first quarter of 2024, the Company amended its lease for the remaining office space~~ that itare ~~currently~~corroborated ~~occupies at its headquarter location~~ by ~~extending~~market ~~the lease term from March 1, 2024 through February 28, 2029~~data. ~~As a result, the Company recorded a right-of-use asset and lease liability of $3.2 million during the first quarter of 2024.~~

~~Operating~~Level ~~lease~~3: ~~right-of-use~~Unobservable ~~assets~~inputs ~~and~~that ~~operating lease liabilities~~ are recognized at the lease commencement date based on the present value of the lease payments over the lease term. Right-of-use assets also include adjustments related to prepaid or deferred lease payments and lease incentives. As most of our leases do not ~~provide~~corroborated anby ~~implicit~~market ~~interest rate, we use our incremental borrowing rate based on information available at the lease commencement date to determine the present value of lease payments~~data.

~~The~~There ~~Company~~were ~~performed~~no ~~evaluations~~transfers ofbetween ~~its~~Level ~~contracts~~1 and ~~determined~~Level ~~that~~2 ~~each~~ of ~~its~~the ~~identified~~fair ~~leases~~value ~~are~~measurement ~~operating~~hierarchy ~~leases.~~during ~~The~~the ~~components~~period ofended ~~total~~September ~~lease~~30, ~~costs~~2024 ~~were~~and asDecember ~~follows~~31, ~~(in~~2023. ~~thousands):~~

	Three months endedJune 30,						Six months endedJune 30,
	2024			2023			2024			2023
Operating lease cost, gross	$	1,350		$	1,511		$	2,590		$	3,297
Variable lease cost, gross(1)		561			656			1,067			1,366
Sublease income		(237	)		(287	)		(493	)		(574	)
Total lease costs(2)	$	1,674		$	1,880		$	3,164		$	4,089

Instruments Not Recorded at Fair Value on a Recurring Basis

20We estimate the fair value of our Senior Term Loan and 2023 Incremental Term Loans carried at face value, less unamortized discount costs, quarterly for disclosure purposes. The estimated fair value of our Senior Term Loan, 2023 Incremental Term Loans, and Senior Revolver is determined by Level 2 inputs, observable market-based inputs or unobservable inputs that are corroborated by market data. As of September 30, 2024, the fair value of our Senior Term Loan and 2023 Incremental Term Loans was $1,145.0 million. The carrying amounts of our cash, prepaid expenses, other current assets, and accrued liabilities approximate their current fair value because of their nature and relatively short maturity dates or durations.

~~Table~~13. ofLeases ~~Contents~~

~~Variable~~The ~~rent~~Company ~~expense~~leases ~~was~~office ~~not~~space ~~included~~under ~~within~~non-cancelable ~~the~~operating ~~measurement~~leases ofwith lease terms ranging from one to six years. These leases require monthly lease payments that may be subject to annual increases throughout the lease term. The Company’s ~~operating~~subleases ~~right-~~four of~~-use~~ ~~assets~~its ~~and~~locations. ~~lease~~The ~~liabilities.~~first ~~Variable~~sublease ~~rent~~expired ~~expense~~in isthe ~~comprised~~second ~~primarily~~quarter of 2023, the ~~Company’s~~second ~~proportionate~~sublease ~~share~~expired ofin ~~operating~~the ~~expenses~~second quarter of 2024, ~~property~~and ~~taxes~~the third and ~~insurance~~fourth sublease terms had 51 months and is16 ~~classified~~months remaining as ~~lease~~of ~~expense~~September ~~due~~30, to2024, ~~the~~respectively. ~~Company’s~~The ~~election~~subleases todo not ~~separate~~have ~~lease~~an ~~and~~option ~~non-lease~~for ~~components~~renewal.

~~Short-term~~During ~~lease~~the ~~costs~~first ~~for~~quarter of 2024, the ~~three~~Company ~~and~~vacated ~~six~~multiple ~~months~~floors ~~ended~~of ~~June~~its 30leased office space at its headquarters in Salt Lake City, Utah, with the intention of subleasing the vacated office space. As a result, the Company recognized a loss on exit of leased properties of $1.9 million in the first quarter of 2024, of which $0.4 million was recognized in subscription and ~~2023~~support ~~were~~cost ~~not~~of ~~significant~~revenue, $0.3 million in professional services and ~~are~~other ~~not~~cost ~~included~~of revenue, $0.6 million in sales and marketing, $0.4 million in research and development, and $0.2 million in general and administrative in our condensed consolidated statements of operations and comprehensive loss. Additionally, during the ~~table~~first ~~above~~quarter of 2024, the Company amended its lease for the remaining office space that it currently occupies at its headquarter location by extending the lease term from March 1, 2024 through February 28, 2029. As a result, the Company recorded a right-of-use asset and lease liability of $3.2 million during the first quarter of 2024.

~~Cash~~Operating ~~paid~~lease ~~for~~right-of-use ~~amounts~~assets ~~included~~and inoperating ~~the~~lease ~~measurement~~liabilities ofare ~~operating~~recognized at the lease ~~liabilities~~commencement ~~for~~date based on the ~~three~~present ~~and~~value ~~six~~of ~~months~~the ~~ended~~lease ~~June~~payments ~~30,~~over ~~2024~~the ~~were~~lease $1term.4 ~~million~~Right-of-use ~~and~~assets ~~$2.8~~also ~~million,~~include ~~respectively,~~adjustments ~~and~~related ~~for~~to ~~the~~prepaid ~~three~~or deferred lease payments and ~~six~~lease ~~months~~incentives. ~~ended~~As ~~June~~most ~~30,~~of ~~2023~~our ~~were~~leases ~~$2.2~~do ~~million~~not ~~and~~provide ~~$4.4~~an ~~million,~~implicit ~~respectively.~~interest ~~Cash~~rate, ~~paid~~we ~~for~~use ~~amounts~~our ~~included~~incremental inborrowing ~~the~~rate ~~measurement~~based ofon ~~operating~~information ~~lease~~available ~~liabilities~~at ~~was~~the ~~included~~lease incommencement ~~operating~~date ~~activities~~to indetermine the ~~condensed~~present ~~consolidated~~value ~~statements~~ of ~~cash~~lease ~~flows~~payments.

AsThe Company performed evaluations of ~~June~~its ~~30,~~contracts ~~2024,~~and ~~the~~determined ~~maturities~~that each of ~~the~~its ~~Company’s~~identified leases are operating leases. The components of total lease ~~liabilities~~costs were as follows (in thousands):

Remainder of 2024	$	4,167
		Three months endedSeptember 30,						Nine months endedSeptember 30,
2025		5,435
		2024			2023			2024			2023
2026		4,090
Operating lease cost, gross		$	1,211		$	1,641		$	3,801		$	4,938
2027		3,157
Variable lease cost, gross(1)			656			491			1,723			1,988
2028		2,295
Sublease income			(228	)		(256	)		(721	)		(830	)
2029 and thereafter		200
Total lease costs(2)		$	1,639		$	1,876		$	4,803		$	6,096
Total lease payments		19,344
Less:
Imputed interest		(2,462	)
Lease liabilities		16,882
Tenant improvement reimbursements included in the measurement of lease liabilities but not yet received		(414	)
Lease liabilities, net	$	16,468

As of June 30, 2024 and December 31, 2023, the weighted average remaining lease term was 3.4 and 3.0 years, respectively, and the weighted average discount rate used to determine operating lease liabilities was 8.21% and 8.22% as of June 30, 2024 and December 31, 2023, respectively. 20

~~14.~~Table ~~Commitments~~of ~~and Contingencies~~ Contents

(1)

~~Non~~Variable rent expense was not included within the measurement of the Company’s operating right-~~cancelable~~of-use ~~purchase~~assets ~~obligations~~and lease liabilities. Variable rent expense is comprised primarily of the Company’s proportionate share of operating expenses, property taxes and insurance and is classified as lease expense due to the Company’s election to not separate lease and non-lease components.

(2)

~~As of June 30, 2024, our outstanding non~~Short-~~cancelable purchase obligations with a~~ term oflease 12costs ~~months or longer related to cloud infrastructure and business analytic services in the ordinary course of business totaled $1.2 million~~ for ~~fiscal year 2024, $60.0 million per year for fiscal years 2025 through 2027, and $65.0 million for fiscal year 2028. During~~ the three ~~months ended June 30, 2024, we recognized $13.2 million in subscription~~ and ~~support~~nine cost of revenue, $0.4 million in research and development, and $0.1 million in professional services and other cost of revenue in our condensed consolidated statements of operations and comprehensive loss related to our non-cancelable purchase obligations, and during the six months ended ~~June~~September 30, 2024 ~~we recognized $27.2 million in subscription~~ and ~~support~~2023 ~~cost~~were ofnot ~~revenue,~~significant ~~$0.9 million in research~~ and ~~development,~~are ~~and~~not ~~$0.2~~included ~~million~~ in ~~professional~~the ~~services~~table ~~and other cost of revenue in our condensed consolidated statements of operations and comprehensive loss related to our non-cancelable purchase obligations~~above.

~~Letters~~Cash paid for amounts included in the measurement of ~~Credit~~operating lease liabilities for the three and ~~Collateral~~nine ~~Arrangements~~months ended September 30, 2024 were $1.4 million and $4.2 million, respectively, and for the three and nine months ended September 30, 2023 were $1.9 million and $6.5 million, respectively. Cash paid for amounts included in the measurement of operating lease liabilities was included in operating activities in the condensed consolidated statements of cash flows.

As of ~~June~~September 30, 2024 ~~and December 31~~, ~~2023,~~the wematurities ~~had a total~~ of ~~$1.0 million and $3.2 million, respectively, of letters of credit outstanding that were issued for purposes of securing certain of~~ the Company’s ~~obligations~~operating ~~under~~lease ~~facility~~liabilities ~~leases.~~were as follows (in thousands):

Litigation


Remainder of 2024	$	2,080
2025		5,466
2026		4,121
2027		3,160
2028		2,295
2029 and thereafter		200
Total lease payments		17,322
Less:
Imputed interest		(2,145	)
Lease liabilities		15,177
Tenant improvement reimbursements included in the measurement of lease liabilities but not yet received		(414	)
Lease liabilities, net	$	14,763

WeAs ~~are~~of ~~involved~~September in30, ~~various~~2024 ~~legal~~and ~~proceedings~~December ~~and~~31, ~~claims~~2023, ~~including~~the ~~challenges~~weighted toaverage ~~trademarks,~~remaining ~~from~~lease ~~time~~term towas ~~time~~3.3 ~~If we determine that it is probable that a loss has been incurred~~ and ~~the amount is reasonably estimable, we will record a liability in our condensed consolidated financial statements~~3.1 ~~If only a range of estimated losses can be determined~~years, ~~we accrue an amount within the range that~~respectively, inand ~~our judgment, reflects~~ the ~~most~~weighted ~~likely~~average ~~outcome;~~discount ifrate ~~none~~used ofto ~~the~~determine ~~estimates~~operating ~~within~~lease ~~that~~liabilities ~~range~~was ~~is a better estimate than any other amount, we accrue the low end of the range~~8.21% ~~Although the results of litigation~~ and ~~claims~~8.22% ~~are~~as ~~inherently unpredictable and uncertain, management does not believe that the outcome~~ of ~~our~~September ~~various legal proceedings~~30, if2024 ~~determined~~and ~~adversely~~December ~~to us~~31, ~~individually or in the aggregate~~2023, ~~would have a material impact on our financial statements~~respectively.

2114. Commitments and Contingencies

~~Table~~Non-cancelable ofpurchase ~~Contents~~obligations

15As of September 30, 2024, our outstanding non-cancelable purchase obligations with a term of 12 months or longer related to cloud infrastructure and business analytic services in the ordinary course of business totaled $0.5 ~~Related~~million for fiscal year 2024, $60.0 million per year for fiscal years 2025 through 2027, and $65.0 million for fiscal year 2028. During the three months ended September 30, 2024, we recognized $13.7 million in subscription and support cost of revenue, $0.6 million in research and development, and $0.1 million in professional services and other cost of revenue in our condensed consolidated statements of operations and comprehensive loss related to our non-~~Party~~cancelable ~~Transactions~~purchase obligations, and during the nine months ended September 30, 2024 we recognized $40.9 million in subscription and support cost of revenue, $1.5 million in research and development, and $0.3 million in professional services and other cost of revenue in our condensed consolidated statements of operations and comprehensive loss related to our non-cancelable purchase obligations.

InLetters ~~conjunction with the Amended 2023 Credit Agreement and the 2023 Incremental Term Loans, during the first quarter~~ of ~~2024, the Company paid affiliates of Thoma Bravo, LLC $1.5 million in arrangement fees. Refer to Note 7. “~~Credit ~~Facility” for additional information regarding the Amended 2023 Credit Agreement~~ and ~~the~~Collateral ~~2023 Incremental Term Loans.~~ Arrangements

16As of September 30, 2024 and December 31, 2023, we had a total of $1.0 ~~Subsequent~~million ~~Events~~and $3.2 million, respectively, of letters of credit outstanding that were issued for purposes of securing certain of the Company’s obligations under facility leases.

OnLitigation July 25, 2024, Instructure entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Icon Parent Inc., a Delaware corporation (“Parent”), and Icon Acquisition Sub Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”). Parent and Merger Sub are each affiliates of investment funds managed by Kohlberg Kravis Roberts & Co. L.P. (“KKR”), a leading global investment firm. Pursuant to the Merger Agreement, Merger Sub will be merged with and into the Company, with the Company surviving as a wholly owned subsidiary of Parent (the “Merger”). Under, and subject to, the terms of the Merger Agreement, at the effective time of the Merger, Instructure stockholders will have the right to receive $23.60 per share in cash, without interest thereon and subject to applicable withholding taxes. The Company’s board of directors has unanimously approved the Merger Agreement and the transactions contemplated thereby and the necessary stockholder approval has been duly executed and delivered, adopting and approving the Merger Agreement and the transactions contemplated thereby. The obligations of the parties to complete the proposed Merger are subject to customary closing conditions, including, among others, the receipt of certain regulatory approvals. The proposed Merger is expected to close during the second half of 2024. Upon consummation of the Merger, the Company will be a privately held company and its common stock will no longer be traded on the New York Stock Exchange.

~~Item~~We 2are involved in various legal proceedings and claims, including challenges to trademarks, from time to time. ~~Management’s~~ ~~Discussion~~If we determine that it is probable that a loss has been incurred and ~~Analysis~~the amount is reasonably estimable, we will record a liability in our condensed consolidated financial statements. If only a range of ~~Financial~~estimated ~~Condition~~losses ~~and~~can ~~Results~~be determined, we accrue an amount within the range that, in our judgment, reflects the most likely outcome; if none of ~~Operations~~the estimates within that range is a better estimate than any other amount, we accrue the low end of the range.

~~You~~The ~~should~~Company ~~read~~has ~~the~~received ~~following~~two ~~discussion~~complaints ~~and~~by ~~analysis~~purported ~~together~~stockholders ~~with~~of the ~~financial~~Company ~~statements~~filed ~~and~~in the ~~related~~Delaware ~~notes~~Court toof ~~those~~Chancery ~~statements~~seeking ~~included~~to incompel ~~Part~~inspection ~~I, Item 1~~ of ~~this~~books ~~Quarterly~~and ~~Report~~records onrelated ~~Form~~to ~~10-Q,~~the ~~and~~Merger. ~~our~~We ~~audited~~are ~~Consolidated~~currently ~~Financial~~unable ~~Data~~to ~~for~~predict the ~~year~~outcome ~~ended~~of ~~December~~this 31matter, ~~2023~~ and ~~the~~as ~~related~~a ~~notes thereto~~result, ~~which~~potential ~~are included in the Company’s Annual Report on Form 10-K for the year ended December 31~~losses, ~~2023,~~if ~~filed with the SEC on February 21~~any, ~~2024~~cannot ~~(the~~be ~~“2023 10-K”)~~estimated. ~~The following discussion contains forward-looking statements. See the “Forward-Looking Statements” section of this Quarterly Report on Form 10-Q.~~

~~Overview~~21

~~From~~Table ~~the inception~~ of a teacher’s lesson through a student’s mastery of a concept, Instructure personalizes, simplifies, organizes, and automates the entire learning lifecycle through the power of technology. Our platform delivers the elements that leaders, teachers, and learners need – a next-generation LMS, robust assessments for learning, actionable analytics, and engaging, dynamic course content. Schools standardize on Instructure’s solutions as the core of their learning platform because we bring together all of the tools that students, teachers, parents, and administrators need to create an accessible, engaging and modern learning environment. Our platform is cloud-native, built on open technologies, and scalable across thousands of institutions and tens of millions of users worldwide. Instructure is the LMS market share leader in both Higher Education and paid K-12, with over 8,000 global customers, representing Higher Education institutions and K-12 districts and schools in more than 100 countries. We are maniacally focused on our customers and enhancing the teaching and learning experience. As such, we continuously innovate to grow the functionality and capabilities of our platform, including through acquisitions. Our platform becomes the invaluable digital infrastructure behind our customers’ instructional workflows. We acquired Parchment in February 2024, the world's largest academic credentialing platform and network. By adding Parchment to the Instructure Learning Platform, we provide a verifiable and comprehensive digital passport of achievement records and outcomes for learners. Identification of Parchment's global customer count within Instructure's ecosystem is ongoing as part of our go-to-market alignment and integration efforts. On July 1, 2024, we acquired Scribbles, a leading provider of credentialing and records management to K-12 school districts across the United States. The purpose of the transaction is to bolster the scale and reach of the Instructure Learning Platform, facilitating evidence of learning and streamlining the educational process for educators and learners during key transitions. Integration efforts for Scribbles have commenced.Contents

~~Since~~Although ~~our~~the ~~founding~~results inof ~~2008,~~litigation weand ~~have~~claims ~~expanded~~are ~~our~~inherently ~~platform~~unpredictable ~~from~~and ~~the~~uncertain, ~~core~~management ~~LMS~~does tonot ~~include~~believe athat ~~broad~~the ~~set~~outcome of ~~offerings targeting all aspects of teaching, learning, and credentialing. As~~ our ~~platform~~various ~~has~~legal ~~grown~~proceedings, weif ~~have~~determined ~~become~~adversely ~~more strategic~~ to ~~schools~~us, asindividually ~~they~~or ~~seek~~in ~~vendor~~the ~~consolidation~~aggregate, ~~best~~would ofhave ~~breed~~a ~~solutions,~~material ~~and~~impact ~~integrated~~on ~~offerings~~our tofinancial ~~serve teachers and students~~statements.

~~This discussion and analysis reflects our financial condition and results of operations for the three and six months ended June 30, 2024 and 2023~~15. Related-Party Transactions

~~For~~In conjunction with the ~~three~~Amended ~~months~~2023 ~~ended~~Credit ~~June~~Agreement 30and the 2023 Incremental Term Loans, during the first quarter of 2024, the Company paid affiliates of Thoma Bravo, LLC $1.5 million in arrangement fees. Refer to Note 7. “Credit Facility” for additional information regarding the Amended 2023 Credit Agreement and the 2023: Incremental Term Loans.

~~Our~~Item ~~revenue~~2. Management’s ~~was~~Discussion ~~$170.4~~and ~~million~~Analysis of Financial Condition and ~~$131.1~~Results ~~million,~~of ~~respectively~~Operations.

~~Our~~You ~~net~~should ~~loss~~read ~~was~~the ~~$20.9~~following ~~million~~discussion and ~~$11.0~~analysis ~~million~~together with the financial statements and the related notes to those statements included in Part I, ~~respectively~~Item 1 of this Quarterly Report on Form 10-Q, and our audited Consolidated Financial Data for the year ended December 31, 2023 and the related notes thereto, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 21, 2024 (the “2023 10-K”). The following discussion contains forward-looking statements. See the “Forward-Looking Statements” section of this Quarterly Report on Form 10-Q.

22Overview

~~Table~~From the inception of ~~Contents~~a teacher’s lesson through a student’s mastery of a concept, Instructure personalizes, simplifies, organizes, and automates the entire learning lifecycle through the power of technology. Our platform delivers the elements that leaders, teachers, and learners need – a next-generation LMS, robust assessments for learning, actionable analytics, and engaging, dynamic course content. Schools standardize on Instructure’s solutions as the core of their learning platform because we bring together all of the tools that students, teachers, parents, and administrators need to create an accessible, engaging and modern learning environment. Our platform is cloud-native, built on open technologies, and scalable across thousands of institutions and tens of millions of users worldwide. Instructure is the LMS market share leader in both Higher Education and paid K-12, with over 8,000 global customers, representing Higher Education institutions and K-12 districts and schools in more than 100 countries. We are maniacally focused on our customers and enhancing the teaching and learning experience. As such, we continuously innovate to grow the functionality and capabilities of our platform, including through acquisitions. Our platform becomes the invaluable digital infrastructure behind our customers’ instructional workflows. We acquired Parchment in February 2024, the world's largest academic credentialing platform and network. By adding Parchment to the Instructure Learning Platform, we provide a verifiable and comprehensive digital passport of achievement records and outcomes for learners. On July 1, 2024, we acquired Scribbles, a leading provider of credentialing and records management to K-12 school districts across the United States. The purpose of the transaction is to bolster the scale and reach of the Instructure Learning Platform, facilitating evidence of learning and streamlining the educational process for educators and learners during key transitions. Integration efforts for Scribbles have commenced. Identification of Parchment’s and Scribbles’ global customer count within Instructure's ecosystem is ongoing as part of our go-to-market alignment and integration efforts.

~~Our~~Since ~~adjusted~~our ~~EBITDA~~founding ~~was~~in ~~$73.4~~2008, ~~million~~we have expanded our platform from the core LMS to include a broad set of offerings targeting all aspects of teaching, learning, and ~~$51~~credentialing.3 ~~million~~As our platform has grown, ~~respectively~~we have become more strategic to schools as they seek vendor consolidation, best of breed solutions, and integrated offerings to serve teachers and students.

~~Our~~This ~~operating~~discussion ~~cash~~and ~~flow~~analysis ~~was~~reflects ~~$(8.2)~~our ~~million~~financial condition and ~~$25.1~~results ~~million~~of operations for the three and nine months ended September 30, ~~respectively~~2024 and 2023.

~~Our~~For ~~free~~the ~~cash~~three ~~flow~~months ~~was~~ended ~~$(10.0)~~September ~~million~~30, 2024 and ~~$23.5~~2023: ~~million, respectively.~~

•

~~For~~Our ~~the~~revenue ~~six~~was ~~months~~$173.2 ~~ended~~million ~~June~~and 30$134.9 million, ~~2024~~respectively. ~~and 2023:~~

•

Our ~~revenue~~net loss was $~~325~~24.97 million and $~~259~~5.95 million, respectively.

•

Our ~~net~~adjusted ~~loss~~EBITDA was $4270.1 million and $2258.82 million, respectively.

•

Our ~~adjusted~~operating ~~EBITDA~~cash flow was $~~138~~203.49 million and $99182.56 million, respectively.

•

Our ~~operating~~free cash flow was $~~(100~~201.7)5 million and $~~(55~~180.8) million, respectively.

~~Our~~For ~~free~~the ~~cash~~nine ~~flow~~months ~~was~~ended ~~$(104.4)~~September ~~million~~30, 2024 and ~~$(58.6) million, respectively.~~2023:

•

~~Adjusted~~Our ~~EBITDA~~revenue ~~and~~was ~~free cash flow are non-GAAP measures~~$499.1 ~~See~~million ~~“Non-GAAP Financial Measures” for definitions~~ and ~~reconciliations~~$394.8 tomillion, ~~the most closely comparable GAAP measures~~respectively.

•

~~Take-Private~~Our ~~Merger~~net ~~Agreement~~loss was $66.8 million and $28.3 million, respectively.

•

OnOur ~~July~~adjusted ~~25,~~EBITDA ~~2024,~~was ~~Instructure entered into the Merger Agreement with Parent and Merger Sub~~$208.4 ~~Parent~~million and Merger Sub are each affiliates of investment funds managed by KKR, a leading global investment firm. Pursuant to the Merger Agreement, Merger Sub will be merged with and into the Company, with the Company surviving as a wholly owned subsidiary of Parent. Under, and subject to, the terms of the Merger Agreement, at the effective time of the Merger, Instructure stockholders will have the right to receive $23157.607 ~~per share in cash~~million, ~~without interest thereon and subject to applicable withholding taxes~~respectively. The Company’s board of directors has unanimously approved the Merger Agreement and the transactions contemplated thereby and the necessary stockholder approval has been duly executed and delivered, adopting and approving the Merger Agreement and the transactions contemplated thereby. The obligations of the parties to complete the proposed Merger are subject to customary closing conditions, including, among others, the receipt of certain regulatory approvals. The proposed Merger is expected to close during the second half of 2024. Upon consummation of the Merger, the Company will be a privately held company and its common stock will no longer be traded on the New York Stock Exchange.

~~Macroeconomic Conditions and Trends~~22

~~Adverse~~Table macroeconomic conditions, including but not limited to high inflation, slower economic growth, changes to fiscal and monetary policy, and high interest rates could impact our business and customer spending. Certain of ~~our customers may be negatively impacted by these events.~~ Contents

•

23Our operating cash flow was $102.5 million and $127.0 million, respectively.

•

~~Table~~Our offree ~~Contents~~cash flow was $96.3 million and $122.4 million, respectively.

WeAdjusted ~~have~~EBITDA ~~continued~~and tofree ~~experience~~cash ~~high~~flow ~~usage~~are onnon-GAAP ~~our~~measures. ~~platform~~See as“Non-GAAP ~~our~~Financial ~~customers~~Measures” ~~continue~~for todefinitions ~~embrace remote learning platforms~~ and ~~demand~~reconciliations ~~for~~to ~~our~~the ~~products~~most ~~remains~~closely ~~high. These~~comparable ~~factors~~GAAP ~~have generated a positive impact to our gross margin~~measures.

~~Instructure has witnessed a noteworthy surge in the volume of Non~~Take-~~Traditional~~Private ~~use~~Merger case projects entering the market. The expanding Non-Traditional student segment presents a substantial growth opportunity, and we believe Instructure is strategically positioned to seize this market share. Leveraging the awareness gained from Kindergarten through Higher Ed utilization and Instructure's product competencies in credentialing, further enhances our advantage in capturing this evolving market. Agreement

~~The~~On UJuly 25, 2024, Instructure entered into the Merger Agreement with Parent and Merger Sub.S ~~dollar~~Parent ~~may~~and ~~fluctuate~~Merger ~~relative~~Sub toare ~~foreign~~each ~~currencies~~affiliates ~~depending~~of oninvestment ~~whether~~funds ~~the~~managed Uby KKR, a leading global investment firm.S. ~~Federal~~Pursuant ~~Reserve~~to ~~maintains~~the Merger Agreement, Merger Sub will be merged with and into the ~~federal~~Company, ~~funds~~with ~~interest~~the ~~rate~~Company orsurviving ifas ~~they~~a ~~choose~~wholly owned subsidiary of Parent. Under, and subject to, ~~lower~~the terms of the ~~federal~~Merger ~~funds~~Agreement, ~~interest~~at ~~rate~~the effective time of the Merger, ~~which~~Instructure ~~could~~stockholders ~~further~~will ~~impact~~have ~~our~~the ~~reported~~right ~~expenses~~to receive $23.60 ~~The~~per share in cash, without interest ~~rate~~thereon ~~applicable~~and subject to ~~our~~applicable ~~Senior~~withholding ~~Term~~taxes. ~~Loan~~The ~~decreased~~Company’s ~~slightly~~board ~~from~~of 8directors has unanimously approved the Merger Agreement and the transactions contemplated thereby and the necessary stockholder approval has been duly executed and delivered, adopting and approving the Merger Agreement and the transactions contemplated thereby.~~68%~~ asThe obligations of ~~December~~the ~~31,~~parties ~~2023~~to complete the proposed Merger are subject to 8customary closing conditions, including, among others, the receipt of certain regulatory approvals.~~35%~~ Effective as of ~~June~~11:59 30p.m. Eastern Time on September 9, 2024., ~~These~~the ~~items~~waiting ~~have~~period ~~not~~under ~~had~~the aHart-Scott-Rodino ~~material~~Antitrust ~~impact~~Improvements onAct ~~our~~of ~~results~~1976, ofas ~~operations~~amended, expired with respect to ~~date~~the Merger.

~~Key~~On ~~Factors~~September ~~Affecting~~5, ~~Our~~2024, ~~Performance~~Instructure filed with the SEC, a Definitive Information Statement on Schedule 14, containing more information about the Merger Agreement and the Merger.

~~Our~~The ~~historical~~proposed ~~financial~~Merger ~~performance~~is ~~has~~expected ~~been,~~to ~~and~~close weduring ~~expect~~the ~~our~~second ~~financial~~half ~~performance~~of in2024, ~~the~~although ~~future~~Instructure tocannot ~~be,~~assure ~~driven~~completion by any particular date, if at all. Upon consummation of the ~~following~~Merger, ~~trends~~the Company will be a privately held company and ~~our~~its ~~ability~~common ~~to:~~stock will no longer be traded on the New York Stock Exchange.

~~Increase~~Macroeconomic ~~Adoption~~Conditions ~~of Cloud-Based Software by Higher Education~~ and ~~K-12 Institutions~~ Trends

~~Our~~Adverse ~~ability~~macroeconomic toconditions, ~~increase~~including ~~market~~but ~~adoption~~not oflimited ~~our~~to ~~platform~~high isinflation, ~~driven~~slower byeconomic ~~the~~growth, ~~overall~~changes ~~adoption~~to offiscal ~~cloud applications~~ and ~~infrastructure~~monetary bypolicy, ~~academic institutions. We believe that Higher Education~~ and ~~K-12~~high ~~institutions~~interest ~~continue~~rates tocould beimpact ~~poised~~our tobusiness ~~accelerate the pace of cloud adoption to support near-term online educational needs as a result of continued adoption of remote education~~ and ~~continued~~customer ~~digital transformation in education, to withstand future challenges~~spending. ~~Academic~~Certain ~~institutions that relied upon on-premises solutions to support remote operations faced significant delays at the height~~ of ~~the~~our ~~pandemic.~~customers Tomay be ~~prepared~~negatively ~~for~~impacted ~~any~~by similar future health crisis, institutions must make a fundamental shift to adopt cloud-based collaboration solutions. In order to continue providing a high-quality education and support in-person, remote, and hybrid learning. As the leader in the market for cloud-based learning technology, we believe the imperative for these ~~institutions to adopt cloud infrastructure will increase demand for our platform and broaden our customer base~~events.

~~Grow~~We ~~Our~~have ~~Customer~~continued ~~Base~~to experience high usage on our platform as our customers continue to embrace remote learning platforms and demand for our products remains high. These factors have generated a positive impact to our gross margin.

WeInstructure ~~believe~~has ~~there~~witnessed isa ~~significant~~noteworthy ~~opportunity~~surge ~~to grow our customer base~~ in ~~Higher~~the ~~Education~~volume ~~and~~of KNon-~~12.~~Traditional ~~The~~use ~~growth~~case ofprojects ~~our~~entering ~~Higher Education customer base is primarily dependent on~~ the ~~replacement~~market. ofThe ~~legacy~~expanding ~~systems with our cloud~~Non-~~native~~Traditional ~~platform~~student insegment ~~North~~presents ~~America~~a ~~and~~substantial ~~our continued expansion efforts internationally. The~~ growth ofopportunity, ~~our~~and ~~K-12~~we ~~customer~~believe ~~base~~Instructure is ~~primarily~~strategically ~~dependent~~positioned ~~on our ability~~ to ~~surround~~seize ~~currently~~this ~~implemented~~market ~~free~~share. ~~solutions~~Leveraging ~~with~~the ~~our~~awareness ~~learning~~gained ~~platform~~from ~~and,~~Kindergarten inthrough ~~connection~~Higher ~~therewith,~~Ed ~~monetize~~utilization ~~demand~~and ~~for~~Instructure's ~~our~~product ~~broad~~competencies ~~capabilities.~~in Wecredentialing, ~~intend~~further toenhances ~~expand~~ our ~~customer~~advantage ~~base by continuing to make targeted and prudent investments~~ in ~~sales~~capturing ~~and~~this ~~marketing~~evolving ~~and customer support~~market.

~~Cross-sell~~The ~~into~~U.S dollar has fluctuated relative to foreign currencies upon the U.S. Federal Reserve's lowering the federal funds interest rate. Our reported expenses have immaterially decreased as a result. The interest rate applicable to our ~~Existing~~Senior ~~Customer~~Term ~~Base~~Loan decreased slightly from 8.68% as of December 31, 2023 to 8.07% as of September 30, 2024. These items have not had a material impact on our results of operations to date.

~~Most~~Key ofFactors ~~our~~Affecting customers initially engage with us using our Canvas LMS solution, and then we are generally able to cross-sell our other solutions as these customers become aware of the benefits of our broad capabilities, including learning, assessments, analytics, student success, program management, digital courseware, and global online learning. Our future revenue growth is dependent upon our ability to expand our customers’ use of our learning platform. Our ability to increase sales to existing customers depends on a number of factors, including customer satisfaction, competition, pricing, economic conditions, and spending by customers. Performance

~~Key~~Our ~~Components~~historical offinancial ~~Results~~performance ofhas ~~Operations~~been, and we expect our financial performance in the future to be, driven by the following trends and our ability to:

~~Revenue~~Increase Adoption of Cloud-Based Software by Higher Education and K-12 Institutions

WeOur ~~generate~~ability ~~revenue~~to ~~primarily~~increase ~~from~~market ~~two~~adoption ~~main~~of ~~sources:~~our ~~(1)~~platform ~~subscription~~is driven by the overall adoption of cloud applications and ~~support~~infrastructure ~~revenue,~~by ~~which~~academic isinstitutions. ~~comprised~~We believe that Higher Education and K-12 institutions continue to be poised to accelerate the pace of ~~SaaS~~cloud ~~fees~~adoption ~~from~~to ~~customers~~support ~~accessing~~near-term ~~our~~online ~~learning~~educational ~~platform~~needs ~~and~~as ~~usage~~a result of ~~our~~continued ~~credential~~adoption ~~management~~of ~~platform,~~remote education and ~~from~~continued ~~customers~~digital ~~purchasing~~transformation ~~additional~~in education, to withstand future challenges. Academic institutions that relied upon on-premise solutions to support ~~beyond~~remote operations faced significant delays at the ~~standard~~height of the pandemic. To be prepared for any similar future health crisis, institutions must make a fundamental shift to adopt cloud-based collaboration solutions. In order to continue providing a high-quality education and support ~~that~~in-person, isremote, ~~included~~and hybrid learning. As the leader in the ~~basic~~market ~~SaaS~~for ~~fees;~~cloud-based ~~and~~learning ~~(2)~~technology, ~~related~~we ~~professional~~believe ~~services~~the ~~revenue,~~imperative ~~which~~for isthese ~~comprised~~institutions ofto ~~training,~~adopt ~~implementation~~cloud ~~services~~infrastructure ~~and~~will ~~other~~increase ~~types~~demand offor ~~professional~~our ~~services~~platform and broaden our customer base.

2423

Table of Contents

~~Subscription~~Grow revenue is derived from customers using our learning platform and is driven primarily by the number of customers, the number of users at each customer, the price of our applications, and renewals. Support revenue is derived from customers purchasing additional support beyond the standard support that is included in the basic SaaS fee. Our ~~contracts~~Customer ~~typically~~Base vary in length between one and five years. Subscriptions and support are non-cancelable and are billed in advance on an annual basis. All subscription and support fees billed are initially recorded in deferred revenue and recognized ratably over the subscription term. Revenue derived from the use of our credential management platform is also subscription and support revenue, and is generally recognized based on the proportion of credentials transferred to the total estimated credentials to be transferred over the contract period. Customers choose to access and use the credential management platform through subscription contracts by committing to guaranteed minimum payments with excess volume billed in arrears, or through transactional contracts where payment generally occurs once an order is placed. The Company records pass through fees for transactional contracts on a net revenue basis, as the Company does not have control over the credential and is therefore acting as the agent.

~~Professional~~We ~~services~~believe ~~and~~there ~~other~~is ~~revenue~~significant ~~are~~opportunity ~~derived~~to ~~primarily~~grow ~~from~~our ~~training,~~customer ~~implementation,~~base ~~and~~in ~~other~~Higher ~~professional~~Education ~~fees,~~and ~~which~~K-12. ~~generally~~The ~~take~~growth ~~anywhere~~of ~~from~~our 30Higher toEducation 90customer ~~days~~base tois ~~complete~~primarily ~~depending~~dependent on ~~customer-side~~the ~~complexity~~replacement ~~and~~of ~~timelines.~~legacy ~~These~~systems ~~services~~with ~~include~~our ~~regularly scheduled and highly~~cloud-~~structured~~native ~~activities~~platform toin ~~ensure~~North ~~customers~~America ~~progress~~and ~~toward~~our ~~better~~continued ~~utilizing~~expansion ~~our~~efforts ~~applications~~internationally. ~~Most~~The growth of ~~these~~our ~~interactions~~K-12 ~~take~~customer ~~place~~base ~~over~~is ~~the~~primarily ~~phone~~dependent ~~and~~on ~~through~~our ~~the~~ability ~~use~~to ofsurround ~~web~~currently ~~meeting~~implemented ~~technology.~~free ~~Because~~solutions wewith ~~have~~our ~~determined~~learning ~~the~~platform ~~implementation~~and, ~~services~~in ~~are~~connection ~~distinct~~therewith, ~~they~~monetize ~~are~~demand ~~recognized~~for ~~over~~our ~~time~~broad ascapabilities. ~~the~~We ~~services~~intend ~~are~~to ~~rendered,~~expand ~~using~~our ancustomer ~~efforts-expended~~base ~~input~~by ~~method.~~continuing ~~Implementation~~to ~~services~~make ~~also~~targeted ~~include~~and ~~nonrefundable~~prudent ~~upfront~~investments ~~setup~~in ~~fees,~~sales ~~which~~and ~~are~~marketing ~~allocated~~and tocustomer ~~the remaining performance obligations~~support.

~~Instructure~~Cross-sell ~~offers~~into ~~customers training services for an incremental fee which focus on creating confidence among users so they can be successful with~~ our ~~applications.~~Existing ~~Most~~Customer ~~training~~Base is performed remotely using web meeting technology, while the remainder is delivered in person. Because we have determined that training offerings are distinct from other performance obligations, we record training revenue upon the delivery of the service which can vary based on the nature of the training purchased. For trainings that are delivered live, revenue is recognized upon delivery. The Company offers customers unlimited access to online training services for a defined period of time, whereby revenue is recognized ratably over the defined contract term.

InMost ~~addition~~of to our ~~implementation~~customers ~~and~~initially ~~training~~engage ~~offerings,~~with weus ~~provide~~using ~~consulting~~our ~~services~~Canvas ~~for~~LMS ~~custom~~solution, ~~application~~and ~~development,~~then ~~integrations,~~we ~~content~~are ~~services~~generally ~~and~~able ~~change~~to ~~management~~cross-sell ~~consulting.~~our ~~These~~other ~~services~~solutions ~~are~~as ~~architected~~these tocustomers ~~boost~~become ~~customer~~aware ~~adoption~~of the benefits of our ~~applications~~broad ~~and~~capabilities, toincluding ~~drive~~learning, ~~usage~~assessments, ofanalytics, ~~features~~student success, program management, digital courseware, and ~~capabilities~~global ~~that~~online ~~are~~learning. ~~unique~~Our tofuture revenue growth is dependent upon our ~~company.~~ability Weto ~~have~~expand ~~determined~~our ~~that~~customers’ ~~these~~use ~~services~~of ~~are~~our ~~distinct~~learning platform. ~~Professional~~Our ~~services~~ability ~~revenue~~to isincrease ~~typically~~sales ~~recognized~~to ~~over~~existing ~~time~~customers asdepends ~~the~~on ~~services~~a ~~are~~number ~~rendered~~of factors, ~~using~~including ancustomer ~~efforts-expended~~satisfaction, ~~input~~competition, ~~method~~pricing, economic conditions, and spending by customers.

~~Cost~~Key Components of ~~Revenue~~Results of Operations

Cost of subscription and support revenue consists primarily of the costs of our cloud hosting provider and other third-party service providers, employee-related costs including payroll, benefits and stock-based compensation expense for our operations and customer support teams, amortization of capitalized software development costs and acquired technology, costs associated with our print operations, and allocated overhead costs, which we define as rent, facilities and costs related to information technology. Our technology acquired through mergers and acquisitions is measured at its estimated fair value and is amortized over its estimated useful life, which is five years. Revenue

~~Cost~~We ofgenerate ~~professional~~revenue ~~services~~primarily from two main sources: (1) subscription and ~~other~~support revenue, ~~consists~~which ~~primarily~~is comprised of ~~personnel~~SaaS ~~costs~~fees from customers accessing our learning platform and usage of our ~~professional~~credential ~~services~~management ~~organization~~platform, ~~including~~and ~~salaries,~~from ~~benefits,~~customers ~~travel,~~purchasing ~~bonuses~~additional support beyond the standard support that is included in the basic SaaS fees; and ~~stock-based~~(2) ~~compensation~~related professional services revenue, aswhich ~~well~~is ascomprised ~~allocated~~of ~~overhead~~training, ~~costs.~~implementation services and other types of professional services.

~~Operating~~Subscription ~~Expenses~~revenue is derived from customers using our learning platform and is driven primarily by the number of customers, the number of users at each customer, the price of our applications, and renewals. Support revenue is derived from customers purchasing additional support beyond the standard support that is included in the basic SaaS fee. Our contracts typically vary in length between one and five years. Subscriptions and support are non-cancelable and are billed in advance on an annual basis. All subscription and support fees billed are initially recorded in deferred revenue and recognized ratably over the subscription term. Revenue derived from the use of our credential management platform is also subscription and support revenue, and is generally recognized based on the proportion of credentials transferred to the total estimated credentials to be transferred over the contract period. Customers choose to access and use the credential management platform through subscription contracts by committing to guaranteed minimum payments with excess volume billed in arrears, or through transactional contracts where payment generally occurs once an order is placed. The Company records pass through fees for transactional contracts on a net revenue basis, as the Company does not have control over the credential and is therefore acting as the agent.

~~Sales~~Professional ~~and~~services ~~Marketing. Sales~~ and ~~marketing~~other ~~expenses~~revenue ~~consist~~are derived primarily offrom ~~personnel costs of our sales and marketing employees~~training, ~~including sales commissions and incentives~~implementation, ~~benefits~~ and ~~stock-based~~other ~~compensation~~professional ~~expense~~fees, ~~marketing~~which ~~programs,~~generally ~~including~~take ~~lead~~anywhere ~~generation,~~from ~~costs~~30 ofto ~~our~~90 ~~annual~~days ~~InstructureCon~~to ~~user~~complete ~~conference,~~depending ~~acquisition~~on customer-~~related~~side ~~amortization~~complexity ~~expenses~~ and ~~allocated overhead costs~~timelines. WeThese ~~defer~~services ~~and~~include ~~amortize~~regularly onscheduled aand ~~straight~~highly-~~line~~structured ~~basis~~activities ~~sales~~to ~~commission~~ensure ~~costs~~customers ~~related~~progress totoward ~~acquiring~~better ~~new~~utilizing ~~contracts~~our ~~over~~applications. aMost ~~period~~ of ~~benefit~~these ~~that~~interactions wetake ~~have~~place ~~determined~~over tothe bephone ~~generally~~and ~~four~~through ~~years.~~the ~~Customer~~use ~~relationships~~of ~~represent~~web ~~the~~meeting ~~estimated~~technology. ~~fair~~Because ~~value~~we ofhave determined the ~~acquired~~implementation ~~customer~~services ~~bases~~are ~~and~~distinct, they are ~~amortized~~recognized over time as the ~~estimated~~services ~~useful~~are ~~life~~rendered, ofusing ~~seven~~an toefforts-expended ~~ten~~input ~~years~~method. ~~The~~Implementation ~~trade~~services ~~names~~also ~~acquired~~include ~~are~~nonrefundable ~~amortized~~upfront ~~over~~setup ~~the~~fees, ~~estimated~~which ~~useful~~are ~~lives~~allocated ~~ranging~~to ~~from~~the ~~three~~remaining toperformance ~~ten years~~obligations.

~~Research~~Instructure ~~and~~offers ~~Development.~~customers ~~Research~~training ~~and~~services ~~development~~for ~~expenses~~an ~~consist~~incremental ~~primarily~~fee ofwhich ~~personnel~~focus ~~costs~~on ofcreating confidence among users so they can be successful with our ~~development~~applications. ~~team,~~Most ~~including~~training ~~payroll,~~is ~~benefits~~performed ~~and~~remotely ~~stock-based~~using ~~compensation~~web ~~expense~~meeting ~~and~~technology, ~~allocated~~while ~~overhead~~the ~~costs.~~remainder Weis ~~capitalize~~delivered ~~certain~~in ~~software~~person. ~~development~~Because ~~costs~~we have determined that training offerings are ~~attributable~~distinct tofrom ~~developing~~other ~~new~~performance ~~applications~~obligations, ~~features~~we ~~and~~record ~~adding~~training ~~incremental~~revenue ~~functionality~~upon tothe ~~our~~delivery ~~platform.~~of Wethe ~~amortize~~service ~~these~~which ~~costs~~can tovary ~~subscription~~based ~~and~~on ~~support~~the ~~cost~~nature of ~~revenue~~the intraining ~~the~~purchased. ~~condensed~~For ~~consolidated~~trainings ~~statements~~that ofare ~~operations~~delivered ~~and~~live, ~~comprehensive~~revenue ~~loss~~is ~~over~~recognized ~~the~~upon ~~estimated~~delivery. ~~life~~The ofCompany ~~the~~offers ~~new~~customers ~~application~~unlimited oraccess ~~incremental~~to ~~functionality~~online training services for a defined period of time, ~~which~~whereby revenue is ~~generally~~recognized ~~three~~ratably ~~years~~over the defined contract term.

25In addition to our implementation and training offerings, we provide consulting services for custom application development, integrations, content services and change management consulting. These services are architected to boost customer adoption of our applications and to drive usage of features and capabilities that are unique to our company. We have determined that these services are distinct. Professional services revenue is typically recognized over time as the services are rendered, using an efforts-expended input method.

~~Table of Contents~~24

~~General~~Table ~~and Administrative. General and administrative expenses consist~~ of personnel costs and related expenses for executive, finance, legal, human resources, recruiting, employee-related information technology, administrative personnel, including payroll, benefits and stock-based compensation expense; professional fees for external legal, accounting and other consulting services; and allocated overhead costs. Contents

~~Other~~Cost ~~Income~~of ~~(Expense), net~~Revenue

~~Other~~Cost ~~income~~of ~~(expense),~~subscription ~~net~~and support revenue consists primarily of ~~interest~~the ~~income,~~costs ~~interest~~of ~~expense,~~our cloud hosting provider and ~~the~~other ~~impact~~third-party ofservice ~~foreign~~providers, ~~currency~~employee-related ~~transaction~~costs ~~gains~~including payroll, benefits and ~~losses.~~stock-based ~~Interest~~compensation expense isfor ~~related~~our tooperations ~~fees~~and ~~incurred~~customer tosupport ~~have~~teams, ~~access~~amortization toof ~~our~~capitalized ~~credit~~software ~~facilities.~~development Ascosts weand ~~have~~acquired ~~expanded~~technology, costs associated with our ~~international~~print operations, ~~our~~and ~~exposure~~allocated overhead costs, which we define as rent, facilities and costs related to ~~fluctuations~~information intechnology. ~~foreign~~Our ~~currencies~~technology ~~has~~acquired ~~increased~~through mergers and acquisitions is measured at its estimated fair value and is amortized over its estimated useful life, which is five years.

~~Income~~Cost ~~Tax~~of ~~Benefit~~professional services and other revenue consists primarily of personnel costs of our professional services organization, including salaries, benefits, travel, bonuses and stock-based compensation, as well as allocated overhead costs.

WeOperating are subject to income taxes in the United States and foreign jurisdictions in which we do business. These foreign jurisdictions have statutory tax rates different from those in the United States. Accordingly, our effective tax rates will vary depending on the relative proportion of foreign to U.S. income and changes in tax laws. The income tax benefit at June 30, 2024 consists of decreases in U.S. Federal and state deferred tax liabilities due to current year pretax book loss, net of valuation allowance released.Expenses

~~Results~~Sales and Marketing. Sales and marketing expenses consist primarily of ~~Operations~~personnel costs of our sales and marketing employees, including sales commissions and incentives, benefits and stock-based compensation expense, marketing programs, including lead generation, costs of our annual InstructureCon user conference, acquisition-related amortization expenses and allocated overhead costs. We defer and amortize on a straight-line basis sales commission costs related to acquiring new contracts over a period of benefit that we have determined to be generally four years. Customer relationships represent the estimated fair value of the acquired customer bases and are amortized over the estimated useful life of seven to ten years. The trade names acquired are amortized over the estimated useful lives ranging from one to ten years.

~~The~~Research ~~following~~and ~~tables~~Development. ~~set~~Research ~~forth~~and ~~our~~development ~~results~~expenses ofconsist ~~operations~~primarily ~~for~~of ~~the~~personnel ~~periods~~costs ~~presented and as a percentage~~ of our ~~total~~development ~~revenue~~team, ~~for~~including ~~those~~payroll, ~~periods.~~benefits ~~The~~and ~~data~~stock-based ~~has~~compensation ~~been~~expense ~~derived~~and ~~from~~allocated ~~the~~overhead ~~unaudited~~costs. ~~condensed~~We ~~consolidated~~capitalize ~~financial~~certain ~~statements~~software ~~contained~~development incosts ~~this~~that ~~Quarterly~~are ~~Report~~attributable onto ~~Form~~developing ~~10-Q~~new ~~which include~~applications, infeatures ~~our~~and ~~opinion,~~adding ~~all~~incremental ~~adjustments,~~functionality ~~consisting~~to ~~only~~our ofplatform. ~~normal~~We ~~recurring~~amortize ~~adjustments,~~these ~~that~~costs weto ~~consider~~subscription ~~necessary~~and ~~for~~support acost ~~fair~~of ~~presentation~~revenue ofin the ~~financial~~condensed ~~position~~consolidated ~~and~~statements ~~results~~ of operations ~~for~~and ~~the~~comprehensive ~~interim~~loss ~~periods~~over ~~presented.~~the ~~The~~estimated ~~period-to-period~~life ~~comparison~~ of ~~financial~~the ~~results~~new isapplication ~~not~~or ~~necessarily~~incremental ~~indicative~~functionality, ofwhich ~~financial~~is ~~results~~generally tothree ~~be achieved in future periods~~years.

	Three months endedJune 30,						Six months endedJune 30,
	2024			2023			2024			2023
	(in thousands)
Revenue:
Subscription and support	$	157,569		$	118,569		$	302,226		$	237,049
Professional services and other		12,875			12,501			23,673			22,864
Total revenue		170,444			131,070			325,899			259,913
Cost of revenue:
Subscription and support(1) (2) (3)		49,427			38,377			95,739			77,187
Professional services and other(1) (3)		9,013			6,912			17,054			13,934
Total cost of revenue		58,440			45,289			112,793			91,121
Gross profit		112,004			85,781			213,106			168,792
Operating expenses:
Sales and marketing(1) (2) (3)		60,970			52,159			120,226			103,009
Research and development(1) (2) (3)		31,240			21,482			58,776			45,184
General and administrative(1) (3)		20,985			14,218			41,375			28,591
Total operating expenses		113,195			87,859			220,377			176,784
Loss from operations		(1,191	)		(2,078	)		(7,271	)		(7,992	)
Other income (expense):
Interest income		509			320			3,017			1,661
Interest expense		(26,413	)		(10,289	)		(49,009	)		(19,774	)
Other income (expense)(3)		(518	)		402			(2,353	)		478
Loss on extinguishment of debt(3)		—			—			(189	)		—
Total other income (expense), net		(26,422	)		(9,567	)		(48,534	)		(17,635	)
Loss before income taxes		(27,613	)		(11,645	)		(55,805	)		(25,627	)
Income tax benefit		6,664			672			13,731			2,797
Net loss	$	(20,949	)	$	(10,973	)	$	(42,074	)	$	(22,830	)

General and Administrative. General and administrative expenses consist of personnel costs and related expenses for executive, finance, legal, human resources, recruiting, employee-related information technology, administrative personnel, including payroll, benefits and stock-based compensation expense; professional fees for external legal, accounting and other consulting services; and allocated overhead costs.

26Other Income (Expense), net

~~Table~~Other income (expense), net consists primarily of ~~Contents~~interest income, interest expense, and the impact of foreign currency transaction gains and losses. Interest expense is related to fees incurred to have access to our credit facilities. As we have expanded our international operations, our exposure to fluctuations in foreign currencies has increased.

~~Includes stock-based compensation as follows:~~25

	Three months endedJune 30,				Six months endedJune 30,
	2024		2023		2024		2023
	(in thousands)
Cost of revenue:
Subscription and support	$	792	$	474	$	1,357	$	853
Professional services and other		943		622		1,587		1,036
Sales and marketing		4,328		3,469		7,442		5,997
Research and development		4,738		3,480		8,578		6,654
General and administrative		4,751		3,811		9,033		7,326
Total stock-based compensation	$	15,552	$	11,856	$	27,997	$	21,866

Table of Contents

~~Includes~~Income ~~amortization~~Tax ~~of acquisition-related intangibles as follows:~~Benefit

	Three months endedJune 30,				Six months endedJune 30,
	2024		2023		2024		2023
	(in thousands)
Cost of revenue:
Subscription and support	$	18,625	$	16,265	$	36,463	$	32,338
Sales and marketing		24,269		19,475		49,753		39,145
Research and development		4		4		8		9
Total amortization of acquisition-related intangibles	$	42,898	$	35,744	$	86,224	$	71,492

We are subject to income taxes in the United States and foreign jurisdictions in which we do business. These foreign jurisdictions have statutory tax rates different from those in the United States. Accordingly, our effective tax rates will vary depending on the relative proportion of foreign to U.S. income and changes in tax laws. The income tax benefit at September 30, 2024 consists of decreases in U.S. Federal and state deferred tax liabilities due to current year pretax book loss, net of valuation allowance released.

~~Includes~~Results ~~transaction, globalization, restructuring, technology modernization, other non-recurring costs, foreign currency gains and losses, and loss on extinguishment~~ of ~~debt as follows:~~Operations

	Three months endedJune 30,					Six months endedJune 30,
	2024			2023		2024			2023
	(in thousands)
Cost of revenue:
Subscription and support	$	2,194		$	989	$	4,034		$	1,283
Professional services and other		565			14		1,309			239
Sales and marketing		2,574			1,610		4,838			3,369
Research and development		3,581			1,414		6,627			4,982
General and administrative		5,823			606		11,732			2,103
Other income (expense)		(515	)		391		(2,347	)		641
Loss on extinguishment of debt		—			—		189			—
Total costs for transaction, globalization, restructuring, technology modernization, other non-recurring costs, and foreign currency gains and losses	$	15,252		$	4,242	$	31,076		$	11,335

The following tables set forth our results of operations for the periods presented and as a percentage of our total revenue for those periods. The data has been derived from the unaudited condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q which include, in our opinion, all adjustments, consisting only of normal recurring adjustments, that we consider necessary for a fair presentation of the financial position and results of operations for the interim periods presented. The period-to-period comparison of financial results is not necessarily indicative of financial results to be achieved in future periods.



	Three months ended September 30,						Nine months ended September 30,
	2024			2023			2024			2023
	(in thousands)
Revenue:
Subscription and support	$	160,193		$	123,110		$	462,419		$	360,159
Professional services and other		12,971			11,811			36,644			34,675
Total revenue		173,164			134,921			499,063			394,834
Cost of revenue:
Subscription and support(1) (2) (3)		49,827			40,345			145,566			117,532
Professional services and other(1) (3)		8,955			7,082			26,009			21,016
Total cost of revenue		58,782			47,427			171,575			138,548
Gross profit		114,382			87,494			327,488			256,286
Operating expenses:
Sales and marketing(1) (2) (3)		67,673			46,734			187,899			149,743
Research and development(1) (2) (3)		31,874			20,688			90,650			65,872
General and administrative(1) (3)		26,719			15,522			68,094			44,113
Total operating expenses		126,266			82,944			346,643			259,728
Loss from operations		(11,884	)		4,550			(19,155	)		(3,442	)
Other income (expense):
Interest income		1,284			1,360			4,301			3,021
Interest expense		(26,627	)		(10,868	)		(75,636	)		(30,642	)
Other income (expense)(3)		2,681			(2,443	)		328			(1,965	)
Loss on extinguishment of debt(3)		—			—			(189	)		—
Total other income (expense), net		(22,662	)		(11,951	)		(71,196	)		(29,586	)
Loss before income taxes		(34,546	)		(7,401	)		(90,351	)		(33,028	)
Income tax benefit		9,850			1,920			23,581			4,717
Net loss	$	(24,696	)	$	(5,481	)	$	(66,770	)	$	(28,311	)

(1)

~~Table~~Includes ofstock-based ~~Contents~~compensation as follows:

	Three months endedJune 30,			Six months endedJune 30,
	Three months endedSeptember 30,						Nine months endedSeptember 30,
	2024		~~2023~~	~~2024~~2023		~~2023~~	2024		2023
	(as a percentage of total revenue)
	(in thousands)
Revenue:
Cost of revenue:
Subscription and support	~~92%~~$	750	~~90%~~	~~93%~~$	459	~~91%~~	$	2,107	$	1,312
Professional services and other	8	864	10	7	603	9		2,451		1,639
Total revenue	100		100	100		100
Sales and marketing		4,170			3,145			11,612		9,142
Cost of revenue:
Research and development		4,469			3,792			13,047		10,446
Subscription and support	29		29	29		30
General and administrative		4,098			3,756			13,131		11,082
Professional services and other	5		5	5		5
Total stock-based compensation	$	14,351		$	11,755		$	42,348	$	33,621
Total cost of revenue	34		34	34		35
Gross profit	66		66	66		65
Operating expenses:
Sales and marketing	36		40	37		40
Research and development	18		16	18		17
General and administrative	12		11	13		11
Total operating expenses	66		67	68		68
Loss from operations	—		(1)	(2)		(3)
Other income (expense):
Interest income	—		—	1		1
Interest expense	(15)		(8)	(15)		(8)
Other income (expense)	—		—	—		—
Loss on extinguishment of debt	—		—	—		—
Total other income (expense), net	(15)		(8)	(14)		(7)
Loss before income taxes	(15)		(9)	(16)		(10)
Income tax benefit	4		1	4		1
Net loss	(11)%		(8)%	(12)%		(9)%

~~Comparison of the three and six months ended June 30, 2024 and three and six months ended June 30, 2023.~~26

~~Revenue~~Table of Contents

(2)

	Three months endedJune 30,				Change					Six months endedJune 30,				Change
	2024		2023		Amount		%			2024		2023		Amount		%
	(dollars in thousands)
Subscription and support	$	157,569	$	118,569	$	39,000		33	%	$	302,226	$	237,049	$	65,177		27	%
Professional services and other		12,875		12,501		374		3			23,673		22,864		809		4
Total revenue	$	170,444	$	131,070	$	39,374		30	%	$	325,899	$	259,913	$	65,986		25	%

Includes amortization of acquisition-related intangibles as follows:


	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023
	(in thousands)
Cost of revenue:
Subscription and support	$	18,780	$	16,265	$	55,243	$	48,603
Sales and marketing		27,120		19,475		76,873		58,620
Research and development		5		4		13		13
Total amortization of acquisition-related intangibles	$	45,905	$	35,744	$	132,129	$	107,236

(3)

~~Table~~Includes transaction, globalization, restructuring, technology modernization, other non-recurring costs, foreign currency gains and losses, and loss on extinguishment of ~~Contents~~debt as follows:

Three month change


	Three months ended September 30,					Nine months ended September 30,
	2024		2023			2024		2023
	(in thousands)
Cost of revenue:
Subscription and support	$	2,199	$	767		$	6,233	$	2,050
Professional services and other		423		(4	)		1,732		235
Sales and marketing		1,728		391			6,566		3,760
Research and development		4,189		1,745			10,816		6,727
General and administrative		11,735		2,099			23,467		4,202
Other income (expense)		2,690		(2,420	)		343		(1,779	)
Loss on extinguishment of debt		—		—			189		—
Total costs for transaction, globalization, restructuring, technology modernization, other non-recurring costs, and foreign currency gains and losses	$	17,584	$	7,418		$	48,660	$	18,753

Subscription and support revenue increased $39.0 million for the three months ended June 30, 2024. The increase is due to expanded use of our solutions, including among new and existing customers. For the three months ended June 30, 2024, revenue from new customers increased by $4.6 million, revenue from existing customers increased by $2.4 million, and revenue from Parchment accounted for $31.9 million of the increase. Included in those figures, international markets contributed 18% of the total revenue for the three months ended June 30, 2024, an increase of $3.9 million. Use of our solutions expanded as a result of the need for continued digital transformation in education and targeted sales and marketing efforts in new and existing markets.27

~~Professional~~Table ~~services and other revenue increased $0.4 million for the three months ended June 30, 2024. The increase is due to the expanded use~~ of ~~our solutions as discussed above, as well as contributions from the acquisition of Parchment.~~ Contents

Six month change



	Three months ended September 30,		Nine months ended September 30,
	2024	2023	2024	2023
	(as a percentage of total revenue)
Revenue:
Subscription and support	93%	91%	93%	91%
Professional services and other	7	9	7	9
Total revenue	100	100	100	100
Cost of revenue:
Subscription and support	29	30	29	30
Professional services and other	5	5	5	5
Total cost of revenue	34	35	34	35
Gross profit	66	65	66	65
Operating expenses:
Sales and marketing	39	35	38	38
Research and development	18	15	18	17
General and administrative	15	11	14	11
Total operating expenses	72	61	70	66
Loss from operations	(6)	4	(4)	(1)
Other income (expense):
Interest income	1	1	1	1
Interest expense	(15)	(8)	(15)	(8)
Other income (expense)	2	(2)	—	—
Loss on extinguishment of debt	—	—	—	—
Total other income (expense), net	(12)	(9)	(14)	(7)
Loss before income taxes	(18)	(5)	(18)	(8)
Income tax benefit	6	1	5	1
Net loss	(12)%	(4)%	(13)%	(7)%

~~Subscription~~Comparison ~~and~~of ~~support revenue increased $65.2 million for~~ the ~~six~~three ~~months ended June 30, 2024. The increase is due to expanded use of our solutions, including among new~~ and ~~existing~~nine ~~customers. For the six~~ months ended ~~June~~September 30, 2024, ~~revenue~~and ~~from~~three ~~new customers increased by $8.3 million, revenue from existing customers increased by $7.7 million,~~ and ~~revenue~~nine ~~from Parchment accounted for $49.2 million of the increase. Included in those figures, international markets contributed 18% of the total revenue for the six~~ months ended ~~June~~September 30, ~~2024, an increase of $6~~2023.~~6 million. Use of our solutions expanded as a result of the need for continued digital transformation in education and targeted sales and marketing efforts in new and existing markets.~~

Professional services and other revenue increased $0.8 million for the six months ended June 30, 2024. The increase is due to the expanded use of our solutions as discussed above, as well as contributions from the acquisition of Parchment. Revenue

Cost of Revenue and Gross Margin



	Three months ended September 30,				Change					Nine months ended September 30,				Change
	2024		2023		Amount		%			2024		2023		Amount		%
	(dollars in thousands)
Subscription and support	$	160,193	$	123,110	$	37,083		30	%	$	462,419	$	360,159	$	102,260		28	%
Professional services and other		12,971		11,811		1,160		10			36,644		34,675		1,969		6
Total revenue	$	173,164	$	134,921	$	38,243		28	%	$	499,063	$	394,834	$	104,229		26	%

	Three months endedJune 30,						Change					Six months endedJune 30,						Change
	2024			2023			Amount		%			2024			2023			Amount		%
	(dollars in thousands)
Cost of revenue:
Subscription and support	$	49,427		$	38,377		$	11,050		29	%	$	95,739		$	77,187		$	18,552		24	%
Professional services and other		9,013			6,912			2,101		30			17,054			13,934			3,120		22
Total cost of revenue	$	58,440		$	45,289		$	13,151		29	%	$	112,793		$	91,121		$	21,672		24	%
Gross margin percentage
Subscription and support revenue		69	%		68	%							68	%		67	%
Professional services and other		30			45								28			39
Total gross margin		66			65								65			65

~~Three~~Table ~~month~~of ~~change~~Contents

~~Subscription~~Three ~~and~~month support cost of revenue increased $11.1 million for the three months ended June 30, 2024 due to an increase in amortization of acquisition-related intangibles of $2.4 million, an increase in web hosting costs of $1.6 million, an increase in salaries, wages, and payroll-related benefits of $2.1 million, an increase in stock-based compensation of $0.3 million, an increase in bonus expense of $0.3 million, an increase in systems and hardware costs of $0.3 million, an increase in amortization of capitalized software costs of $0.3 million, an increase of $0.2 million in software expense, and other insignificant increases totaling $0.3 million. Additionally, subscription and support cost of revenue increased $3.3 million due to the addition of Parchment's printing operations and merchant fees. change

~~Professional~~Subscription ~~services~~ and ~~other~~support ~~cost of~~ revenue increased $237.1 million for the three months ended ~~June~~September 30, 2024. The increase is due to anexpanded ~~increase~~use inof ~~salaries,~~our ~~wages~~solutions, ~~and~~including ~~payroll-related~~among ~~benefits~~new ofand $1existing customers.4 ~~million~~For the three months ended September 30, an2024, ~~increase~~revenue infrom ~~stock-based~~new ~~compensation~~customers ofincreased by $0.3.7 million, anrevenue ~~increase~~from inexisting ~~bonuses~~customers ofremained flat, and revenue from Parchment accounted for $030.25 million, anof the increase. Included in ~~third-party~~those ~~contractor~~figures, ~~and~~international ~~consulting~~markets ~~costs~~contributed 18% of ~~$0.1~~the ~~million,~~total ~~and~~revenue anfor ~~increase~~the inthree ~~travel~~months ~~expenses~~ended September 30, 2024, an increase of $04.1 million. Use of our solutions expanded as a result of the need for continued digital transformation in education and targeted sales and marketing efforts in new and existing markets.

29Professional services and other revenue increased $1.2 million for the three months ended September 30, 2024. The increase is due to contributions from the acquisition of Parchment.

~~Table~~Nine ofmonth ~~Contents~~change

~~Six~~Subscription ~~month~~and ~~change~~support revenue increased $102.3 million for the nine months ended September 30, 2024. The increase is due to expanded use of our solutions, including among new and existing customers. For the nine months ended September 30, 2024, revenue from new customers increased by $7.8 million, revenue from existing customers increased by $12.0 million, and revenue from Parchment accounted for $79.7 million of the increase. Included in those figures, international markets contributed 18% of the total revenue for the nine months ended September 30, 2024, an increase of $10.7 million. Use of our solutions expanded as a result of the need for continued digital transformation in education and targeted sales and marketing efforts in new and existing markets.

~~Subscription~~Professional services and ~~support~~other ~~cost of~~ revenue increased $182.60 million for the ~~six~~nine months ended ~~June~~September 30, 2024 ~~due to an increase in web hosting costs of $3~~.0 ~~million,~~The an increase inis amortization of acquisition-related intangibles of $4.1 million, an increase in salaries, wages, and payroll-related benefits of $3.4 million, an increase in stock-based compensation of $0.5 million, an increase in bonuses of $0.3 million, an increase of $0.4 million due to ~~exit~~contributions offrom leased properties, an increase in amortization of capitalized software costs of $0.6 million, an increase in systems and hardware of $0.5 million, an increase of $0.2 million in software expense, an increase in third-party contractor and consulting costs of $0.1, and other insignificant increases totaling $0.4 million. Additionally, subscription and support cost of revenue increased $5.1 million due to the ~~addition~~acquisition of Parchment~~'s printing operations and merchant fees~~.

~~Professional~~Cost ~~services and other cost~~ of ~~revenue~~Revenue ~~increased $3.1 million for the six months ended June 30, 2024 due to an increase in salaries, wages,~~ and ~~payroll-related~~Gross ~~benefits of $2.1 million, an increase in stock-based compensation of $0.5 million, an increase in bonuses of $0.2 million, and an increase of $0.3 million due to exit of leased properties.~~Margin

Operating Expenses



	Three months ended September 30,						Change					Nine months ended September 30,						Change
	2024			2023			Amount		%			2024			2023			Amount		%
	(dollars in thousands)
Cost of revenue:
Subscription and support	$	49,827		$	40,345		$	9,482		24	%	$	145,566		$	117,532		$	28,034		24	%
Professional services and other		8,955			7,082			1,873		26			26,009			21,016			4,993		24
Total cost of revenue	$	58,782		$	47,427		$	11,355		24	%	$	171,575		$	138,548		$	33,027		24	%
Gross margin percentage
Subscription and support revenue		69	%		67	%							69	%		67	%
Professional services and other		31			40								29			39
Total gross margin		66			65								66			65

~~Sales~~Three ~~and~~month ~~Marketing~~change

	Three months endedJune 30,				Change					Six months endedJune 30,				Change
	2024		2023		Amount		%			2024		2023		Amount		%
	(dollars in thousands)
Sales and marketing	$	60,970	$	52,159	$	8,811		17	%	$	120,226	$	103,009	$	17,217		17	%

Subscription and support cost of revenue increased $9.5 million for the three months ended September 30, 2024 due to an increase in amortization of acquisition-related intangibles of $2.5 million, an increase in web hosting costs of $0.6 million, an increase in salaries, wages, and payroll-related benefits of $1.6 million, an increase in stock-based compensation of $0.3 million, an increase in bonus expense of $0.2 million, an increase in systems and hardware costs of $0.3 million, an increase in amortization of capitalized software costs of $0.3 million, and other insignificant increases totaling $0.3 million. Additionally, subscription and support cost of revenue increased $3.4 million due to the addition of Parchment's printing operations and merchant fees.

~~Three~~Professional ~~month~~services ~~change~~and other cost of revenue increased $1.9 for the three months ended September 30, 2024 due to an increase in salaries, wages, and payroll-related benefits of $1.4 million, an increase in stock-based compensation of $0.3 million, and an increase in third-party contractor and consulting costs of $0.3 million. These increases were offset by a decrease of $0.1 million in systems and hardware costs.

Sales and marketing expenses increased $8.8 million for the three months ended June 30, 2024 due to an increase in salaries, wages, and payroll-related benefits of $3.5 million, an increase in amortization of acquisition-related intangibles of $4.8 million, an increase in stock-based compensation of $0.9 million, an increase in bonuses of $0.5 million, an increase in systems and hardware expense of $0.4 million, an increase in employee-related expense of $0.3 million, and an increase in travel expenses of $0.3 million. These increases were offset by a decrease in marketing expenses, including tradeshows, conferences, and public relations, of $1.2 million, a decrease in commissions expense of $0.4 million, and a decrease in third-party contractor and consulting costs of $0.3 million. 29

~~Six~~Table ~~month~~of ~~change~~Contents

~~Sales~~Nine ~~and~~month marketing expenses increased $17.2 million for the six months ended June 30, 2024 due to an increase in salaries, wages, and payroll-related benefits of $4.5 million, an increase in amortization of acquisition-related intangibles of $10.6 million, an increase in stock-based compensation of $1.4 million, an increase in bonuses of $0.5 million, an increase in systems and hardware expenses of $0.7 million, an increase in employee-related expense of $0.9 million, and an increase in exit of leased properties of $0.4 million. These increases were offset by a decrease in marketing expenses, including tradeshows, conferences, and public relations, of $1.3 million, a decrease in commissions expense of $0.2 million, and a decrease in third-party contractor and consulting costs of $0.3 million. change

~~Research~~Subscription and ~~Development~~support cost of revenue increased $28.0 million for the nine months ended September 30, 2024 due to an increase in web hosting costs of $3.6 million, an increase in amortization of acquisition-related intangibles of $6.7 million, an increase in salaries, wages, and payroll-related benefits of $5.1 million, an increase in stock-based compensation of $0.8 million, an increase in bonuses of $0.4 million, an increase of $0.3 million due to exit of leased properties, an increase in amortization of capitalized software costs of $0.8 million, an increase in systems and hardware costs of $0.8 million, an increase of $0.4 million in software expense, an increase of $0.4 million in deferred costs of revenue, and an increase in third-party contractor and consulting costs of $0.1 million. Additionally, subscription and support cost of revenue increased $8.6 million due to the addition of Parchment's printing operations and merchant fees.

	Three months endedJune 30,				Change					Six months endedJune 30,				Change
	2024		2023		Amount		%			2024		2023		Amount		%
	(dollars in thousands)
Research and development	$	31,240	$	21,482	$	9,758		45	%	$	58,776	$	45,184	$	13,592		30	%

Professional services and other cost of revenue increased $5.0 million for the nine months ended September 30, 2024 due to an increase in salaries, wages, and payroll-related benefits of $2.1 million, an increase in stock-based compensation of $0.5 million, an increase in bonuses of $0.2 million, an increase of $0.4 million in third-party contractor and consulting costs, and an increase of $0.3 million due to exit of leased properties. These increases were offset by a decrease of $0.2 million in systems and hardware costs.

30Operating Expenses

~~Table~~Sales ofand ~~Contents~~Marketing

Three month change



	Three months ended September 30,				Change					Nine months ended September 30,				Change
	2024		2023		Amount		%			2024		2023		Amount		%
	(dollars in thousands)
Sales and marketing	$	67,673	$	46,734	$	20,939		45	%	$	187,899	$	149,743	$	38,156		25	%

~~Research~~Three ~~and~~month development expenses increased $9.8 million for the three months ended June 30, 2024 due to an increase in salaries, wages, and payroll-related benefits of $5.1 million, an increase in stock-based compensation of $1.3 million, an increase in bonuses of $0.8 million, and increase in third-party contractor and consulting costs of $1.0 million, an increase in systems and hardware of $0.8 million, an increase in employee related expenses of $0.6 million, and an increase in travel expenses of $0.2 million.change

~~Six~~Sales ~~month~~and ~~change~~marketing expenses increased $20.9 million for the three months ended September 30, 2024 due to an increase in salaries, wages, and payroll-related benefits of $3.8 million, an increase in amortization of acquisition-related intangibles of $7.6 million, an increase in stock-based compensation of $1.0 million, an increase in bonuses of $0.8 million, an increase in commission expense of $1.6 million, an increase in systems and hardware expense of $0.4 million, an increase in employee-related expense of $0.2 million, an increase in marketing expenses, including tradeshows and conferences, of $3.5 million, an increase in third-party contractor and consulting costs of $1.3 million, an increase in travel expenses of $0.5 million, and other insignificant increases of $0.2 million.

~~Research~~Nine ~~and~~month development expenses increased $13.6 million for the six months ended June 30, 2024 due to an increase in salaries, wages, and payroll-related benefits of $8.1 million, an increase in stock-based compensation of $1.9 million, an increase in bonus expenses of $0.7 million, an increase in systems and hardware expenses of $1.0 million, and increase in employee related expenses of $0.6 million, an increase in third-party contractor and consulting costs of $0.6 million, an increase of $0.4 million due to exit of leased properties, an increase in travel expenses of $0.2 million, and an increase in marketing expenses of $0.1 million.change

~~General~~Sales and ~~Administrative~~marketing expenses increased $38.2 million for the nine months ended September 30, 2024 due to an increase in salaries, wages, and payroll-related benefits of $8.3 million, an increase in amortization of acquisition-related intangibles of $18.3 million, an increase in stock-based compensation of $2.5 million, an increase in bonuses of $1.3 million, an increase in commission expense of $1.4 million, an increase in systems and hardware expenses of $1.1 million, an increase in employee-related expense of $1.2 million, an increase in third-party contractor and consulting costs of $1.0 million, an increase in marketing expenses, including tradeshows and conferences, of $2.2 million, an increase in travel expenses of $0.4 million, and an increase in exit of leased properties of $0.5 million.

	Three months endedJune 30,				Change					Six months endedJune 30,				Change
	2024		2023		Amount		%			2024		2023		Amount		%
	(dollars in thousands)
General and administrative	$	20,985	$	14,218	$	6,767		48	%	$	41,375	$	28,591	$	12,784		45	%

Research and Development

Three month change



	Three months ended September 30,				Change					Nine months ended September 30,				Change
	2024		2023		Amount		%			2024		2023		Amount		%
	(dollars in thousands)
Research and development	$	31,874	$	20,688	$	11,186		54	%	$	90,650	$	65,872	$	24,778		38	%

~~General and administrative expenses increased by $6.8 million for the three months ended June~~ 30, 2024 due to increases in third-party contractor and consulting costs of $4.7 million, an increase in salaries, wages, and payroll-related benefits of $0.9 million, an increase in stock-based compensation of $0.9 million, an increase in bonuses of $0.3 million, an increase in systems and hardware expenses of $0.1 million, and an increase in travel expenses of $0.1 million. These increases were offset by a decrease in business insurance of $0.2 million.

~~Six~~Table ~~month~~of ~~change~~Contents

~~General~~Three ~~and~~month administrative expenses increased by $12.8 million for the six months ended June 30, 2024 due to increases in third-party contractor and consulting costs of $8.2 million, an increase in salaries, wages, and payroll-related benefits of $2.2 million, an increase in stock-based compensation of $1.7 million, an increase in bonus expenses of $0.6 million, an increase in sales tax expenses of $0.2 million, an increase in systems and hardware expenses of $0.1 million, and an increase in travel expenses of $0.1 million. These increases were offset by a decrease in business insurance expenses of $0.3 million. change

~~Other~~Research ~~Income~~and ~~(Expense)~~development expenses increased $11.2 million for the three months ended September 30, ~~Net~~2024 due to an increase in salaries, wages, and payroll-related benefits of $5.9 million, an increase in stock-based compensation of $0.7 million, an increase in bonuses of $1.1 million, an increase in third-party contractor and consulting costs of $1.8 million, an increase in systems and hardware of $0.9 million, an increase in software expenses of $0.2 million, an increase in travel expenses of $0.3 million, and other insignificant increases of $0.3 million.

	Three months endedJune 30,						Change						Six months endedJune 30,						Change
	2024			2023			Amount			%			2024			2023			Amount			%
	(dollars in thousands)
Other income (expense), net	$	(26,422	)	$	(9,567	)	$	(16,855	)		176	%	$	(48,534	)	$	(17,635	)	$	(30,899	)		175	%

Nine month change

~~Three~~Research ~~month~~and ~~change~~development expenses increased $24.8 million for the nine months ended September 30, 2024 due to an increase in salaries, wages, and payroll-related benefits of $14.0 million, an increase in stock-based compensation of $2.6 million, an increase in bonus expenses of $1.8 million, an increase in systems and hardware expenses of $1.9 million, and increase in employee related expenses of $0.7 million, an increase in third-party contractor and consulting costs of $2.5 million, an increase of $0.5 million due to exit of leased properties, an increase in travel expenses of $0.5 million, and other insignificant increases of $0.3 million.

~~Other~~General ~~income (expense), net includes interest income~~ and expense and the impact of foreign currency transaction gains and losses. Other income (expense), net increased $16.9 million for the three months ended June 30, 2024 as a result of increased interest expense of $16.1 million due to additional borrowings on our Senior Term Loan (as defined below) and an increase in expense of $1.0 million related to realized and unrealized foreign currency losses. These increases were offset by an increase in interest income of $0.2 million.Administrative



	Three months ended September 30,				Change					Nine months ended September 30,				Change
	2024		2023		Amount		%			2024		2023		Amount		%
	(dollars in thousands)
General and administrative	$	26,719	$	15,522	$	11,197		72	%	$	68,094	$	44,113	$	23,981		54	%

~~Table~~Three ofmonth ~~Contents~~change

~~Six~~General ~~month~~and ~~change~~administrative expenses increased by $11.2 million for the three months ended September 30, 2024 due to increases in third-party contractor and consulting costs of $8.3 million, an increase in salaries, wages, and payroll-related benefits of $1.1 million, an increase in stock-based compensation of $0.3 million, an increase in bonuses of $1.3 million, an increase in systems and hardware expenses of $0.1 million, and other insignificant increases of $0.1 million.

~~Other~~Nine ~~income~~month (expense), net includes interest income and expense, the impact of foreign currency transaction gains and losses, losses on extinguishment of debt, and gains and losses related to the disposal of fixed assets. Other income (expense), net increased $30.9 million for the six months ended June 30, 2024 as a result of increased interest expense of $29.2 million due to additional borrowings on our Senior Term Loan (as defined below), an increase of $0.2 million due to loss on extinguishment of debt, and an increase in expense of $3.1 million related to realized and unrealized foreign currency losses. These increases were offset by an increase in interest income of $1.4 million and a gain of $0.2 million related to disposal of fixed assets.change

~~Income~~General ~~Tax~~and ~~Benefit~~administrative expenses increased by $24.0 million for the nine months ended September 30, 2024 due to increases in third-party contractor and consulting costs of $16.5 million, an increase in salaries, wages, and payroll-related benefits of $3.3 million, an increase in stock-based compensation of $2.1 million, an increase in bonus expenses of $1.9 million, an increase in sales tax expenses of $0.5 million, an increase in systems and hardware expenses of $0.3 million, and an increase in travel expenses of $0.1 million. These increases were offset by a decrease in business insurance expenses of $0.7 million.

	Three months endedJune 30,				Change					Six months endedJune 30,				Change
	2024		2023		Amount		%			2024		2023		Amount		%
	(dollars in thousands)
Income tax benefit	$	6,664	$	672	$	5,992		892	%	$	13,731	$	2,797	$	10,934		391	%

Other Income (Expense), Net

Three month change

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