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2015 12 08 inst ir deck

This document contains forward-looking statements about the company's future performance based on current beliefs and assumptions, which are subject to risks and uncertainties. It also discusses non-GAAP financial measures in addition to GAAP measures. The company uses non-GAAP measures to evaluate its performance excluding certain items to allow for more meaningful comparisons.

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FORWARDING LOOKING STATEMENTS & NON-GAAP MEASURES This presentation and the accompanying oral commentary contain “forward-looking” statements that are based on our beliefs and assumptions and on information currently available to us. Forward-looking statements include information concerning our possible or assumed future results of operations and financial performance, business strategies, potential growth opportunities and the effects of competition. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “believe,” “will,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “might,” approximately,” “expect,” “predict,” “could,” “potentially” or the negative of these terms or other similar expressions. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In evaluating these statements, you should specifically consider various factors, including the risks outlined under the caption “Risk Factors” set forth in our final prospectus for our initial public offering, which was filed with the Securities and Exchange Commission (the “SEC”) on November 13, 2015, and is available on the SEC’s website at www.sec.gov. Forward-looking statements represent our management’s beliefs and assumptions only as of the date of this presentation. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons why actual results could differ materially from those anticipated in the forward-looking statements, even if new information becomes available in the future. This presentation includes certain non-GAAP financial measures as defined by the SEC rules. These non-GAAP financial measures are in addition to, and not as a substitute for or superior to measures of financial performance prepared in accordance with U.S. GAAP. There are a number of limitations related to the use of these non-GAAP financial measures versus their nearest GAAP equivalents. For example, other companies may calculate non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. As required by Regulation G, we have provided a reconciliation of those measures to the most directly comparable GAAP measures, which is available in the appendix. 2
SOFTWARE PEOPLE SMARTER that makes 3
PRODUCT OVERVIEW 4
100% native cloud 70% visibility at 12/31/2013 >700 employees4 Headquartered in Salt Lake City THE INSTRUCTURE STORY High Growth Subscription Revenue >1,600 customers4 Customers in 25 countries4 >10 million users1 Recurring (2014 ~86%) Non-recurring (2014 ~14%) +197% +70% $44.4M 20142013 $26.1M 2012 $8.8M LTM1 $65.1M 5 Total Number of Customers2 100% Deferred Revenue Backlog $201M $145M $92M $58M $32M $19M $143M $113M $73M 20142013 Q3 2015 1Measured over the 12 months ended September 30, 2015. 2Measured as of month end, from January 2011 to September 2015. 3At 12/31/2013 the portion of backlog to be recognized in the following year plus the short-term deferred revenue balance accounted for approximately 70% of 2014 revenue. 4As of September 30, 2015. Backlog & Deferred Revenue Rapid Customer Adoption for 2014 revenue4
CURRENT LEARNING NEEDS ARE NOT BEING MET •  Limited Features •  Poor Uptime •  Expensive •  On Premise •  Lack of Data Solutions •  Poor Interface •  Limited Integration •  Unreliable •  Low Utilization •  Not Mobile TECHNOLOGY EXPERIENCE C:> C:> 6
INDUSTRY FORCES ARE CHANGING HOW PEOPLE WANT TO LEARN Consumerized Collaborative Mobile Engaging 7
OUR WINNING SOLUTION Collaborative 99.9% Uptime Guarantee Data Driven Customer Support Native Cloud Ease of Use 8
SUBSTANTIAL MARKET OPPORTUNITY With Numerous Adjacencies 2015 2018 Learning Management Performance Management Workforce Management Recruiting Compensation Management $7.8 Billion1 $6.4 Billion2 $4.1 Billion1 $5.1 Billion2 1 Learning Management System Market. Source: MarketsandMarkets, October 2013. 2 Represents market opportunity for Performance Management, Workforce Management, Recruiting and Compensation Management. Source: IDC, June 2015. These additional markets may present opportunities for Instructure. 9
THE CENTER OF THE LEARNING ECOSYSTEM Institutions Information Systems/AnalyticsContent Applications LEARNING MANAGEMENT SYSTEMS Instructors Learners 12
OUR EXTENSIBLE PLATFORM Education Corporate White-label Course CatalogMOOCAnalytics + Highly Extensible Designed to Scale Open Modern Architecture INSTRUCTURE CLOUD-BASED PLATFORM 11
OVER 1,600 CUSTOMERS ACROSS CATEGORIES HigherEdK–12InternationalCorporate City University of Hong Kong Used by 7 Ivy League Schools Used by K-12 Schools in 48 States Serving 25 Countries Used by Businesses and Academia TRINITY GRAMMAR SCHOOL 1As of September 30, 2015. 12
ONE CUSTOMER = MANY USERS 84 Schools in the District 9,200 Faculty and Staff Users in the District 68,000 Student Users in the District { 1 CUSTOMER } 13
CUSTOMER CASE STUDIES Customer since 2014 Uses: Bridge Developed 43 courses, enrolled ~1,600 employees Needed: Centralized platform for training a growing team Clearlink found the following benefits: •  Easy to navigate •  Intuitive user experience •  Easy creation of programs and quizzes •  Efficient interaction with Instructure team •  Significant cost savings •  Efficiency and sales number improvements Customer since 2012 Uses: Canvas, Canvas Data 12 colleges serving 61,000 students 38% of credit hours delivered online Needed: An extensible system to distribute online learning UCF found the following benefits: •  A customized platform •  Expanded capacity with custom integrations •  Continual updates •  High usage and user adoption 14
OUR USER’S EXPERIENCE 15
OUR GROWTH STRATEGY Grow US Customer Base Expand with Existing Customers New OfferingsInternational Expansion 16
INSIDE INSTRUCTURE POWERFUL MISSION OPEN CULTURE CUTTING EDGE TECH 17 CUSTOMER CONFERENCE
INNOVATIVE MANAGEMENT Josh Coates EMC Corp • Mozy.com • Scale Eight CEO Steve Kaminsky Radisphere • TriZetto • Ernst & Young • McDonald’s Corporation CFO SVP People and Places Jeff Weber Ancestry • The Russell Group • Shell Oil Company FamilySearch • Microsoft David Burggraaf SVP Engineering Vmware • InfoTrax Systems • GE Mitch Macfarlane SVP Customer Experience Marc Maloy HireRight • Certico EVP Worldwide Sales Misty Frost Datamark • Critical Mass • Sumus Interactive• Dahlin Smith White SVP Marketing 18 Matt Kaminer Collective • Epocrates • MediMedia USA • WebMD SVP General Counsel and Secretary Giorgio Vanzini SVP Product DirecTV • Microsoft • What You Want Computer Resource International • DEC
FINANCIAL HIGHLIGHTS Solid Revenue Growth Net Revenue Retention Greater than 100%1100% Investing for Continued Growth Attractive Long Range Model Strong Unit Economics$ Enhanced Visibility Through Multi-Year Contracts 1 Net revenue retention rate is calculated by dividing the total revenue obtained from a particular customer in a given month by the total revenue from that customer from the same month in the immediately preceding year. 19
Non-GAAP Operating Loss as a % of Revenue2Revenue Growth REVENUE & PROFITABILITY HISTORY 2012 – Q3 2015 1Non-GAAP gross margin is before stock-based compensation and payroll tax expense on secondary stock purchase transactions. 2Operating loss before stock-based compensation, payroll tax expense on secondary stock purchase transactions and amortization of acquisition-related intangibles 3Last twelve months (LTM) includes October 1, 2014 through September 30, 2015. Non-GAAP Gross Margin1 LTM32014201320122012 2014 LTM32013 $(16)M $(18)M $(29)M +70% $44.4M LTM32012 2014 +197% $8.8M $65.1M 2013 $26.1M $(41)M 20 19% 59% 67% 67% (68)% (186)% (66)% (62)% Recurring (2014 ~86%) Non-recurring (2014 ~14%)
Non-GAAP General and Administration1 (% of Revenue) Non-GAAP Sales and Marketing1 (% of Revenue) INVESTING FOR GROWTH 1Non-GAAP operating expenses are before stock-based compensation, payroll tax expense on secondary stock purchase transactions and amortization of acquisition-related intangibles. 2Last twelve months (LTM) includes October 1, 2014 through September 30, 2015. Non-GAAP Research and Development1 (% of Revenue) LTM22013 20142012LTM2201420132012201420132012 LTM2 21 130% 72% 73% 48% 36% 38% 27% 33% 19% 23% 23% 72%
FREE CASH FLOW Non-GAAP Gross Margin2 % 2014 – Q3 2015 1Free cash flow is a Non-GAAP measure and is derived by netting operating cash flow with capital expenditures and proceeds from disposal of property and equipment. $(8.3)M $(7.4)M $(14.5)M $(14.8)M $(15.0)M $20M $10M $0M -$10M -$20M $7.5M Q2-14Q1-14 Q3-14 Q3-15 $18.4M Q2-15  Q1-15  Q4-14   Free Cash Flow1 +145% 22
ENHANCED VISIBILITY INTO FUTURE PERIODS 2013 – Q3 2015 Backlog1Deferred Revenue 9/30/2015 $143M 12/31/2014 $113M $73M 12/31/201312/31/2013 9/30/2015 $32M 12/31/2014 $58M $19M 1Backlog represents future non-cancellable amounts to be invoiced under our agreements. 23
BUSINESS MODELCumulativeContribution 24 Lifetime Customer Acquisition Costs Breakeven Customer Lifetime Value ACQUIRE RETAIN RENEW
•  Contribution Margin: gross margin less sales, direct marketing, and account management •  Allocation Methodologies: o  Subscription cost allocation based on usage o  Customer support cost allocation based on service tickets o  Sales and direct marketing cost allocated to current period (2015) except commissions related to upsells for prior cohorts o  Account management cost allocation based on customer count CUSTOMER COHORT ANALYSIS 2015 Contribution Margin by customer cohort; based on Q1 – Q3 2015 revenue and expenses CM % 20152014201320122011 Customer Start Date 25 57% 65% 65% 53% (182)%
LONG-RANGE MODEL Revenue 100% 100% 100% 100% Cost of Revenue2 41% 33% 33% ~25% Non-GAAP Gross Margin 59% 67% 67% ~75% S&M3 72% 72% 73% 26-28% R&D3 36% 38% 33% 15-17% G&A3 19% 23% 23% 9-10% Non-GAAP Operating Income/Loss (68)% (66)% (62)% 20-25% 2013 2014 LTM1 Target 1Last twelve months (LTM) includes October 1, 2014 through September 30, 2015. 2Non-GAAP cost of revenue is before stock-based compensation and payroll tax expense on secondary stock purchase transactions 3Non-GAAP operating expenses are before stock-based compensation, payroll tax expense on secondary stock purchase transactions and amortization of acquisition-related intangibles. 26
INVESTMENT HIGHLIGHTS Market Ripe for Disruption Rapid and Widespread Customer Adoption Substantial Market Opportunity Native, Cloud-Based Platform Focused on User-Experience and Simplicity Solid Revenue Growth Enhanced Visibility Through Multi-Year Contracts 27
APPENDIX
29 (in thousands) Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Revenue $8,610 $9,566 $12,440 $13,736 $14,625 $15,877 $20,895 YoY% 76% 69% 71% 67% 70% 66% 68% Cost of Sales $2,933 $3,249 $4,081 $4,523 $4,863 $5,464 $6,700 Gross Profit $5,677 $6,317 $8,359 $9,213 $9,761 $10,413 $14,195 GM% 66% 66% 67% 67% 67% 66% 68% S&M $6,189 $7,899 $8,072 $9,891 $10,899 $13,808 $12,826 % of Rev 72% 83% 65% 72% 75% 87% 61% R&D $3,460 $4,189 $4,225 $4,786 $5,030 $5,356 $6,178 % of Rev 40% 44% 34% 35% 34% 34% 30% G&A $1,740 $2,239 $2,584 $3,572 $3,260 $3,760 $4,278 % of Rev 20% 23% 21% 26% 22% 24% 20% OPEX $11,389 $14,327 $14,881 $18,249 $19,189 $22,924 $23,282 % of Rev 132% 150% 120% 133% 131% 144% 111% Operating Loss $(5,712) $(8,010) $(6,522) $(9,036) $(9,428) $(12,512) $(9,087) % of Rev (66)% (84)% (52)% (66)% (64)% (79)% (43)% Net Operating Loss1 $(5,718) $(8,019) $(6,568) $(9,175) $(9,566) $(12,534) $(9,187) % of Rev (66)% (84)% (53)% (66)% (65)% (79)% (44)% NON GAAP INCOME STATEMENT 1Non GAAP Net Operating Loss excludes change in fair value warrant liability.
GAAP INCOME STATEMENT (in thousands) Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Revenue $8,610 $9,566 $12,440 $13,736 $14,625 $15,877 $20,894 YoY% 70% 66% 68% Cost of Sales $2,941 $3,263 $4,106 $4,803 $4,911 $5,532 $6,794 Gross Profit $5,669 $6,303 $8,334 $8,933 $9,714 $10,345 $14,100 GM% 66% 66% 67% 65% 66% 65% 67% S&M $6,231 $7,960 $8,144 $13,055 $11,081 $14,050 $13,172 % of Rev 72% 83% 65% 95% 76% 88% 63% R&D $3,506 $4,306 $4,372 $9,106 $5,271 $5,645 $6,525 % of Rev 41% 45% 35% 66% 36% 36% 31% G&A $1,823 $2,360 $2,707 $4,378 $10,046 $3,923 $4,506 % of Rev 21% 25% 22% 32% 69% 25% 22% OPEX $11,560 $14,626 $15,223 $26,539 $26,398 $23,618 $24,203 % of Rev 134% 153% 122% 193% 180% 149% 116% Loss From Operations $(5,891) $(8,323) $(6,889) $(17,606) $(16,684) $(13,273) $(10,103) % of Rev (68)% (87)% (55)% (128)% (114)% (84)% (48)% Change in fair value of warrant liability $(670) $(721) $(828) $(299) $(488) $(39) $(9) Other Income/Expense $(6) $(9) $(39) $(89) $(138) $(8) $(74) Loss before provision for income taxes $(6,567) $(9,053) $(7,756) $(17,994) $(17,310) $(13,320) $(10,186) Income tax expense $0 $0 $(7) $(50) $0 $(14) $(26) Net Income $(6,567) $(9,053) $(7,763) $(18,044) $(17,310) $(13,334) $(10,212) % of Rev (76)% (95)% (62%) (131)% (118)% (84)% (49)% 30
GAAP TO NON-GAAP RECONCILIATION (in thousands) 2012 2013 2014 LTM1 GAAP Operating Loss $(18,341) $(21,830) $(38,709) $(57,666) Amortization of Acquisition Related Intangibles Cost of Sales $- $- $- $- S&M - - - - R&D - - 6 9 G&A - - - - Total Amortization of Acquisition Related Intangibles $- $- $6 $9 Stock Compensation Expense Cost of Sales $12 $36 $297 $458 S&M 473 1,597 2,877 3,471 R&D 442 1,585 3,971 4,535 G&A 910 374 1,053 6,577 Total Stock Compensation Expense $1,837 $3,592 $8,198 $15,041 Payroll Tax on Secondary Stock Purchase Cost of Sales $- $- $30 $30 S&M 57 267 461 461 R&D 57 267 653 653 G&A 104 - 81 1,408 Total Payroll Tax on Secondary Stock Purchase $218 $534 $1,225 $2,552 Non-GAAP Operating Loss $(16,286) $(17,704) $(29,280) $(40,064) 31 1Last twelve months (LTM) includes October 1, 2014 through September 30, 2015.
GAAP TO NON-GAAP RECONCILIATION (in thousands) 2012 2013 2014 LTM1 Revenue $8,774 $26,055 $44,352 $65,133 GAAP Gross Margin $1,680 $15,435 $29,239 $43,092 Amortization of Acquisition Related Intangibles - - - Stock Compensation Expense 12 36 297 458 Payroll Tax on Secondary Stock Purchase - - 30 30 Non-GAAP Gross Margin $1,692 $15,471 $29,566 $43,581 Gross Margin % 19% 59% 67% 67% GAAP Sales & Marketing $11,912 $20,702 $35,390 $51,358 Amortization of Acquisition Related Intangibles - - - - Stock Compensation Expense 473 1,597 2,877 3,471 Payroll Tax on Secondary Stock Purchase 57 267 461 461 Non-GAAP Sales & Marketing $11,382 $18,838 $32,052 $47,426 Sales & Marketing % 130% 72% 72% 73% GAAP Research & Development $4,698 $11,242 $21,290 $26,547 Amortization of Acquisition Related Intangibles - - 6 9 Stock Compensation Expense 442 1,585 3,971 4,535 Payroll Tax on Secondary Stock Purchase 57 267 653 653 Non-GAAP Research & Development $4,199 $9,390 $16,660 $21,350 Research & Development % 48% 36% 38% 33% GAAP General & Administrative $3,411 $5,321 $11,268 $22,853 Amortization of Acquisition Related Intangibles - - - - Stock Compensation Expense 910 374 1,053 6,577 Payroll Tax on Secondary Stock Purchase 104 - 81 1,408 Non-GAAP General & Administrative $2,397 $4,947 $10,134 $14,877 General & Administrative % 27% 19% 23% 23% 32 1Last twelve months (LTM) includes October 1, 2014 through September 30, 2015.
FREE CASH FLOW RECONCILIATION (in thousands) Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3’15 Net cash provided by (used in) operating activities $(8,073) $(6,479) $8,084 $(13,927) $(13,915) $(12,797) $19,676 Purchase of property and equipment (264) (964) (600) (612) (927) (2,212) (1,324) Proceeds from disposal of property and equipment 2 6 7 22 9 9 35 Free Cash Flow $(8,335) $(7,437) $7,491 $(14,517) $(14,833) $(15,000) $18,387 33

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2015 12 08 inst ir deck

  • 2.
    FORWARDING LOOKING STATEMENTS& NON-GAAP MEASURES This presentation and the accompanying oral commentary contain “forward-looking” statements that are based on our beliefs and assumptions and on information currently available to us. Forward-looking statements include information concerning our possible or assumed future results of operations and financial performance, business strategies, potential growth opportunities and the effects of competition. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “believe,” “will,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “might,” approximately,” “expect,” “predict,” “could,” “potentially” or the negative of these terms or other similar expressions. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In evaluating these statements, you should specifically consider various factors, including the risks outlined under the caption “Risk Factors” set forth in our final prospectus for our initial public offering, which was filed with the Securities and Exchange Commission (the “SEC”) on November 13, 2015, and is available on the SEC’s website at www.sec.gov. Forward-looking statements represent our management’s beliefs and assumptions only as of the date of this presentation. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons why actual results could differ materially from those anticipated in the forward-looking statements, even if new information becomes available in the future. This presentation includes certain non-GAAP financial measures as defined by the SEC rules. These non-GAAP financial measures are in addition to, and not as a substitute for or superior to measures of financial performance prepared in accordance with U.S. GAAP. There are a number of limitations related to the use of these non-GAAP financial measures versus their nearest GAAP equivalents. For example, other companies may calculate non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. As required by Regulation G, we have provided a reconciliation of those measures to the most directly comparable GAAP measures, which is available in the appendix. 2
  • 3.
  • 4.
  • 5.
    100% native cloud 70%visibility at 12/31/2013 >700 employees4 Headquartered in Salt Lake City THE INSTRUCTURE STORY High Growth Subscription Revenue >1,600 customers4 Customers in 25 countries4 >10 million users1 Recurring (2014 ~86%) Non-recurring (2014 ~14%) +197% +70% $44.4M 20142013 $26.1M 2012 $8.8M LTM1 $65.1M 5 Total Number of Customers2 100% Deferred Revenue Backlog $201M $145M $92M $58M $32M $19M $143M $113M $73M 20142013 Q3 2015 1Measured over the 12 months ended September 30, 2015. 2Measured as of month end, from January 2011 to September 2015. 3At 12/31/2013 the portion of backlog to be recognized in the following year plus the short-term deferred revenue balance accounted for approximately 70% of 2014 revenue. 4As of September 30, 2015. Backlog & Deferred Revenue Rapid Customer Adoption for 2014 revenue4
  • 6.
    CURRENT LEARNING NEEDS ARENOT BEING MET •  Limited Features •  Poor Uptime •  Expensive •  On Premise •  Lack of Data Solutions •  Poor Interface •  Limited Integration •  Unreliable •  Low Utilization •  Not Mobile TECHNOLOGY EXPERIENCE C:> C:> 6
  • 7.
    INDUSTRY FORCES ARECHANGING HOW PEOPLE WANT TO LEARN Consumerized Collaborative Mobile Engaging 7
  • 8.
    OUR WINNING SOLUTION Collaborative99.9% Uptime Guarantee Data Driven Customer Support Native Cloud Ease of Use 8
  • 9.
    SUBSTANTIAL MARKET OPPORTUNITY WithNumerous Adjacencies 2015 2018 Learning Management Performance Management Workforce Management Recruiting Compensation Management $7.8 Billion1 $6.4 Billion2 $4.1 Billion1 $5.1 Billion2 1 Learning Management System Market. Source: MarketsandMarkets, October 2013. 2 Represents market opportunity for Performance Management, Workforce Management, Recruiting and Compensation Management. Source: IDC, June 2015. These additional markets may present opportunities for Instructure. 9
  • 10.
    THE CENTER OFTHE LEARNING ECOSYSTEM Institutions Information Systems/AnalyticsContent Applications LEARNING MANAGEMENT SYSTEMS Instructors Learners 12
  • 11.
    OUR EXTENSIBLE PLATFORM EducationCorporate White-label Course CatalogMOOCAnalytics + Highly Extensible Designed to Scale Open Modern Architecture INSTRUCTURE CLOUD-BASED PLATFORM 11
  • 12.
    OVER 1,600 CUSTOMERS ACROSSCATEGORIES HigherEdK–12InternationalCorporate City University of Hong Kong Used by 7 Ivy League Schools Used by K-12 Schools in 48 States Serving 25 Countries Used by Businesses and Academia TRINITY GRAMMAR SCHOOL 1As of September 30, 2015. 12
  • 13.
    ONE CUSTOMER =MANY USERS 84 Schools in the District 9,200 Faculty and Staff Users in the District 68,000 Student Users in the District { 1 CUSTOMER } 13
  • 14.
    CUSTOMER CASE STUDIES Customersince 2014 Uses: Bridge Developed 43 courses, enrolled ~1,600 employees Needed: Centralized platform for training a growing team Clearlink found the following benefits: •  Easy to navigate •  Intuitive user experience •  Easy creation of programs and quizzes •  Efficient interaction with Instructure team •  Significant cost savings •  Efficiency and sales number improvements Customer since 2012 Uses: Canvas, Canvas Data 12 colleges serving 61,000 students 38% of credit hours delivered online Needed: An extensible system to distribute online learning UCF found the following benefits: •  A customized platform •  Expanded capacity with custom integrations •  Continual updates •  High usage and user adoption 14
  • 15.
  • 16.
    OUR GROWTH STRATEGY GrowUS Customer Base Expand with Existing Customers New OfferingsInternational Expansion 16
  • 17.
    INSIDE INSTRUCTURE POWERFUL MISSIONOPEN CULTURE CUTTING EDGE TECH 17 CUSTOMER CONFERENCE
  • 18.
    INNOVATIVE MANAGEMENT Josh Coates EMCCorp • Mozy.com • Scale Eight CEO Steve Kaminsky Radisphere • TriZetto • Ernst & Young • McDonald’s Corporation CFO SVP People and Places Jeff Weber Ancestry • The Russell Group • Shell Oil Company FamilySearch • Microsoft David Burggraaf SVP Engineering Vmware • InfoTrax Systems • GE Mitch Macfarlane SVP Customer Experience Marc Maloy HireRight • Certico EVP Worldwide Sales Misty Frost Datamark • Critical Mass • Sumus Interactive• Dahlin Smith White SVP Marketing 18 Matt Kaminer Collective • Epocrates • MediMedia USA • WebMD SVP General Counsel and Secretary Giorgio Vanzini SVP Product DirecTV • Microsoft • What You Want Computer Resource International • DEC
  • 19.
    FINANCIAL HIGHLIGHTS Solid RevenueGrowth Net Revenue Retention Greater than 100%1100% Investing for Continued Growth Attractive Long Range Model Strong Unit Economics$ Enhanced Visibility Through Multi-Year Contracts 1 Net revenue retention rate is calculated by dividing the total revenue obtained from a particular customer in a given month by the total revenue from that customer from the same month in the immediately preceding year. 19
  • 20.
    Non-GAAP Operating Lossas a % of Revenue2Revenue Growth REVENUE & PROFITABILITY HISTORY 2012 – Q3 2015 1Non-GAAP gross margin is before stock-based compensation and payroll tax expense on secondary stock purchase transactions. 2Operating loss before stock-based compensation, payroll tax expense on secondary stock purchase transactions and amortization of acquisition-related intangibles 3Last twelve months (LTM) includes October 1, 2014 through September 30, 2015. Non-GAAP Gross Margin1 LTM32014201320122012 2014 LTM32013 $(16)M $(18)M $(29)M +70% $44.4M LTM32012 2014 +197% $8.8M $65.1M 2013 $26.1M $(41)M 20 19% 59% 67% 67% (68)% (186)% (66)% (62)% Recurring (2014 ~86%) Non-recurring (2014 ~14%)
  • 21.
    Non-GAAP General and Administration1 (%of Revenue) Non-GAAP Sales and Marketing1 (% of Revenue) INVESTING FOR GROWTH 1Non-GAAP operating expenses are before stock-based compensation, payroll tax expense on secondary stock purchase transactions and amortization of acquisition-related intangibles. 2Last twelve months (LTM) includes October 1, 2014 through September 30, 2015. Non-GAAP Research and Development1 (% of Revenue) LTM22013 20142012LTM2201420132012201420132012 LTM2 21 130% 72% 73% 48% 36% 38% 27% 33% 19% 23% 23% 72%
  • 22.
    FREE CASH FLOW Non-GAAPGross Margin2 % 2014 – Q3 2015 1Free cash flow is a Non-GAAP measure and is derived by netting operating cash flow with capital expenditures and proceeds from disposal of property and equipment. $(8.3)M $(7.4)M $(14.5)M $(14.8)M $(15.0)M $20M $10M $0M -$10M -$20M $7.5M Q2-14Q1-14 Q3-14 Q3-15 $18.4M Q2-15  Q1-15  Q4-14   Free Cash Flow1 +145% 22
  • 23.
    ENHANCED VISIBILITY INTO FUTUREPERIODS 2013 – Q3 2015 Backlog1Deferred Revenue 9/30/2015 $143M 12/31/2014 $113M $73M 12/31/201312/31/2013 9/30/2015 $32M 12/31/2014 $58M $19M 1Backlog represents future non-cancellable amounts to be invoiced under our agreements. 23
  • 24.
  • 25.
    •  Contribution Margin:gross margin less sales, direct marketing, and account management •  Allocation Methodologies: o  Subscription cost allocation based on usage o  Customer support cost allocation based on service tickets o  Sales and direct marketing cost allocated to current period (2015) except commissions related to upsells for prior cohorts o  Account management cost allocation based on customer count CUSTOMER COHORT ANALYSIS 2015 Contribution Margin by customer cohort; based on Q1 – Q3 2015 revenue and expenses CM % 20152014201320122011 Customer Start Date 25 57% 65% 65% 53% (182)%
  • 26.
    LONG-RANGE MODEL Revenue 100%100% 100% 100% Cost of Revenue2 41% 33% 33% ~25% Non-GAAP Gross Margin 59% 67% 67% ~75% S&M3 72% 72% 73% 26-28% R&D3 36% 38% 33% 15-17% G&A3 19% 23% 23% 9-10% Non-GAAP Operating Income/Loss (68)% (66)% (62)% 20-25% 2013 2014 LTM1 Target 1Last twelve months (LTM) includes October 1, 2014 through September 30, 2015. 2Non-GAAP cost of revenue is before stock-based compensation and payroll tax expense on secondary stock purchase transactions 3Non-GAAP operating expenses are before stock-based compensation, payroll tax expense on secondary stock purchase transactions and amortization of acquisition-related intangibles. 26
  • 27.
    INVESTMENT HIGHLIGHTS Market Ripefor Disruption Rapid and Widespread Customer Adoption Substantial Market Opportunity Native, Cloud-Based Platform Focused on User-Experience and Simplicity Solid Revenue Growth Enhanced Visibility Through Multi-Year Contracts 27
  • 28.
  • 29.
    29 (in thousands) Q1'14 Q2'14Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Revenue $8,610 $9,566 $12,440 $13,736 $14,625 $15,877 $20,895 YoY% 76% 69% 71% 67% 70% 66% 68% Cost of Sales $2,933 $3,249 $4,081 $4,523 $4,863 $5,464 $6,700 Gross Profit $5,677 $6,317 $8,359 $9,213 $9,761 $10,413 $14,195 GM% 66% 66% 67% 67% 67% 66% 68% S&M $6,189 $7,899 $8,072 $9,891 $10,899 $13,808 $12,826 % of Rev 72% 83% 65% 72% 75% 87% 61% R&D $3,460 $4,189 $4,225 $4,786 $5,030 $5,356 $6,178 % of Rev 40% 44% 34% 35% 34% 34% 30% G&A $1,740 $2,239 $2,584 $3,572 $3,260 $3,760 $4,278 % of Rev 20% 23% 21% 26% 22% 24% 20% OPEX $11,389 $14,327 $14,881 $18,249 $19,189 $22,924 $23,282 % of Rev 132% 150% 120% 133% 131% 144% 111% Operating Loss $(5,712) $(8,010) $(6,522) $(9,036) $(9,428) $(12,512) $(9,087) % of Rev (66)% (84)% (52)% (66)% (64)% (79)% (43)% Net Operating Loss1 $(5,718) $(8,019) $(6,568) $(9,175) $(9,566) $(12,534) $(9,187) % of Rev (66)% (84)% (53)% (66)% (65)% (79)% (44)% NON GAAP INCOME STATEMENT 1Non GAAP Net Operating Loss excludes change in fair value warrant liability.
  • 30.
    GAAP INCOME STATEMENT (inthousands) Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Revenue $8,610 $9,566 $12,440 $13,736 $14,625 $15,877 $20,894 YoY% 70% 66% 68% Cost of Sales $2,941 $3,263 $4,106 $4,803 $4,911 $5,532 $6,794 Gross Profit $5,669 $6,303 $8,334 $8,933 $9,714 $10,345 $14,100 GM% 66% 66% 67% 65% 66% 65% 67% S&M $6,231 $7,960 $8,144 $13,055 $11,081 $14,050 $13,172 % of Rev 72% 83% 65% 95% 76% 88% 63% R&D $3,506 $4,306 $4,372 $9,106 $5,271 $5,645 $6,525 % of Rev 41% 45% 35% 66% 36% 36% 31% G&A $1,823 $2,360 $2,707 $4,378 $10,046 $3,923 $4,506 % of Rev 21% 25% 22% 32% 69% 25% 22% OPEX $11,560 $14,626 $15,223 $26,539 $26,398 $23,618 $24,203 % of Rev 134% 153% 122% 193% 180% 149% 116% Loss From Operations $(5,891) $(8,323) $(6,889) $(17,606) $(16,684) $(13,273) $(10,103) % of Rev (68)% (87)% (55)% (128)% (114)% (84)% (48)% Change in fair value of warrant liability $(670) $(721) $(828) $(299) $(488) $(39) $(9) Other Income/Expense $(6) $(9) $(39) $(89) $(138) $(8) $(74) Loss before provision for income taxes $(6,567) $(9,053) $(7,756) $(17,994) $(17,310) $(13,320) $(10,186) Income tax expense $0 $0 $(7) $(50) $0 $(14) $(26) Net Income $(6,567) $(9,053) $(7,763) $(18,044) $(17,310) $(13,334) $(10,212) % of Rev (76)% (95)% (62%) (131)% (118)% (84)% (49)% 30
  • 31.
    GAAP TO NON-GAAPRECONCILIATION (in thousands) 2012 2013 2014 LTM1 GAAP Operating Loss $(18,341) $(21,830) $(38,709) $(57,666) Amortization of Acquisition Related Intangibles Cost of Sales $- $- $- $- S&M - - - - R&D - - 6 9 G&A - - - - Total Amortization of Acquisition Related Intangibles $- $- $6 $9 Stock Compensation Expense Cost of Sales $12 $36 $297 $458 S&M 473 1,597 2,877 3,471 R&D 442 1,585 3,971 4,535 G&A 910 374 1,053 6,577 Total Stock Compensation Expense $1,837 $3,592 $8,198 $15,041 Payroll Tax on Secondary Stock Purchase Cost of Sales $- $- $30 $30 S&M 57 267 461 461 R&D 57 267 653 653 G&A 104 - 81 1,408 Total Payroll Tax on Secondary Stock Purchase $218 $534 $1,225 $2,552 Non-GAAP Operating Loss $(16,286) $(17,704) $(29,280) $(40,064) 31 1Last twelve months (LTM) includes October 1, 2014 through September 30, 2015.
  • 32.
    GAAP TO NON-GAAPRECONCILIATION (in thousands) 2012 2013 2014 LTM1 Revenue $8,774 $26,055 $44,352 $65,133 GAAP Gross Margin $1,680 $15,435 $29,239 $43,092 Amortization of Acquisition Related Intangibles - - - Stock Compensation Expense 12 36 297 458 Payroll Tax on Secondary Stock Purchase - - 30 30 Non-GAAP Gross Margin $1,692 $15,471 $29,566 $43,581 Gross Margin % 19% 59% 67% 67% GAAP Sales & Marketing $11,912 $20,702 $35,390 $51,358 Amortization of Acquisition Related Intangibles - - - - Stock Compensation Expense 473 1,597 2,877 3,471 Payroll Tax on Secondary Stock Purchase 57 267 461 461 Non-GAAP Sales & Marketing $11,382 $18,838 $32,052 $47,426 Sales & Marketing % 130% 72% 72% 73% GAAP Research & Development $4,698 $11,242 $21,290 $26,547 Amortization of Acquisition Related Intangibles - - 6 9 Stock Compensation Expense 442 1,585 3,971 4,535 Payroll Tax on Secondary Stock Purchase 57 267 653 653 Non-GAAP Research & Development $4,199 $9,390 $16,660 $21,350 Research & Development % 48% 36% 38% 33% GAAP General & Administrative $3,411 $5,321 $11,268 $22,853 Amortization of Acquisition Related Intangibles - - - - Stock Compensation Expense 910 374 1,053 6,577 Payroll Tax on Secondary Stock Purchase 104 - 81 1,408 Non-GAAP General & Administrative $2,397 $4,947 $10,134 $14,877 General & Administrative % 27% 19% 23% 23% 32 1Last twelve months (LTM) includes October 1, 2014 through September 30, 2015.
  • 33.
    FREE CASH FLOWRECONCILIATION (in thousands) Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3’15 Net cash provided by (used in) operating activities $(8,073) $(6,479) $8,084 $(13,927) $(13,915) $(12,797) $19,676 Purchase of property and equipment (264) (964) (600) (612) (927) (2,212) (1,324) Proceeds from disposal of property and equipment 2 6 7 22 9 9 35 Free Cash Flow $(8,335) $(7,437) $7,491 $(14,517) $(14,833) $(15,000) $18,387 33