Earnings call transcript Q1 2023

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to Instructure's First Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that this conference is being recorded.

I would now like to turn the conference over to your first speaker, April Scee, Investor Relations. ahead. go please April,

April Scee

me welcome be first in discussing after Financial today. release and Steve Executive conference and Daly; our XXXX call. issued Chief With closed market We'll the Dale the Instructure's to afternoon, Chief quarter Officer, Bowen. Instructure's Officer, earnings press are Good results announced

a forward-looking risks forward-looking like the company's on uncertainties I'd begin, that statements we results materially. based subject remind you may significant today's expectations. statements These number conference and our Before to call and are to will of include differ current

discussion Securities For we release filings future to Exchange and and business, factors the a results refer the and reports file of Commission. our from that could please earnings other financial time affect disclosure to today's in with and time

today, such statements information required by All are on us and obligation of no statements. any assume as made to except based today, our update law, as to available of we

GAAP will non-GAAP During we the measures. and financial call, also to refer both

can press release, of You our Relations posted the on included is section our non-GAAP Investor measures find GAAP our which in website. to reconciliation of the

that, turn let over call Steve. With the to me

Steve Daly

Thanks, to XXXX call. Instructure's welcome to earnings April. QX delighted I'm everyone

details Dale the guidance During will today's and year of and our results share XXXX. for call, quarter the full first and I provide QX

fueled XXXX quarter satisfaction. efficient our by go-to-market EBITDA, for results to organization adjusted customer First exceeded unyielding and our ranges previously guidance revenue and dedication commuted

million, up foreign $XXX.X year-over-year, was from exchange. basis revenue quarter headwind an First XX.X% including XX point

demonstrates of business year-over-year million, quarter strength to our a power $XX.X XX.X% First our performance The quarter of adjusted grew margin. first model. XX.X% EBITDA the

logo the from platform of wins our non-traditional strategy, contributed efficiency. and strong I'll traction next to continued power our success: share businesses operational education, sales, in continued our new acquired that areas five

ability engine, across real-world strong set and our remain the rates offerings of learning landscape. win our to go-to-market and focused solve Success challenges driven our logo markets. all across customer new our experience, best-in-class is being of by First, expanded teaching

in as areas this solution In and categories functions shines, power, such Instructure one our innovative above we XXX% win where that are perfect us scored power. product and to the helps beyond our drive our and a response and vision features These of RFP of quarter, consistently and problem-solving our growth. in completeness

In North new market value than our win have RFP activity continue we and line see ed, high deals percentage higher American recognize customers of with we a as the XX% greater offer. to share, a expectations. in we We very

University Massachusetts During the the and quarter, the of we pilot engagement. chose on feedback Amherst, positive Instructure a with learning which platform faculty had win based students a significant during successful from

able to for LMS to They their for future. their Amherst as students partner with impact. replace UMass UMass for experience a and chose faculty, students with were Canvas learning engaged all education. Instructure also whether in We're a traditional proud vendors partner Amherst they in-person, common an wanted exceptional experience were to online and and multiple providing faculty. catalog They or incorporate and their nontraditional the in platform studio with

tailored position in and products makers mentioned we decision green drive continue our our success XX% QX critical. support to continue platform quarterly with during services mission our K-XX, continue our last The shoots market-leading K-XX bookings to to American according North In call, Tech. Ed share resulted as as for to List nearly and strong recognize

and pleased the particularly traction with assessments. We are

comprehensive products. ability suite data and solution, capabilities MasteryConnect. a benchmark of seven District, and mastery Sioux to customization we competitive to RFP In the full Canvas we our migrate included Falls products; incumbents won displaced the During due the so, and our doing LMS, QX, LMS to Studio School AMS for which our district's

and increasing we as feel prospects multi-product suites our about continue focus Looking deal great K-XX sizes. in ahead, on we to

with channel fastest the strong direct part We performance the and of growing both requirements from replace can LMS. FX its outdated our a education in CVO no customer from the program. our meet chose because other Instructure, business Gent, vendor business with in our school remained an excluding International the part in partner The win quarter, Belgium impact secured a to continuing extensive during direct RFP.

ongoing Underscoring deal multiple Separately, our relationship. largest success level already a partner to program. channel of highlighting platform, we received date our as of their high in satisfaction had channel our have our with we APAC, referrals result the of

billion the to our industry our success be We in technology driven our and ahead that terms in of over curve customer this to opportunity of continues breadth our advantage capturing to innovation. Second, our take solutions. stay see $X ability opportunity customers as strong and the by product lineup estimate continue success strategy our education the to base, existing platform current represents of cross-sell we of

products we seeing strong, customers use Our our and as positive trends look to are outcomes. and teaching pipeline improve their is learning of in to expand cross-selling our

proud our a also penetration year-over-year and products report We District. Green credentials. Area and are penetration across are Bay School the Public district catalog deals assessments, This of Fueling base. customer MasteryConnect like to our rate higher higher added

ecosystem. example, of a us set Public for that product competition. helped our demonstrate wins, able partner and included our us average apart from We were current The also our for for NIPV, another largest acquisition, learning needs. since of above the deal provide our our our rates Dream saw platform the contract elevate Safety, challenges help customers' this and partnerships power with a increase for new software power strategy Instructure complete we together. These Concentric The of and their Institute products contract products. meet value. win [ph] super platform Comparing quarter the the openness Dutch educational us partners in we highlighting integrate solution our over the win our the seamlessly extends beyond win, to to since our during eight them, drive NIPV's area. allowed the Sky In allows robust our times And platform uniquely platform's with contract credentials an the to potential closed to growth

that Third, our the meet our capabilities helped company, our growth needs innovative nontraditional of are providing evolving for have we solutions committed and drive customers. to

learning current on multiyear Delton quarter, against Our with a and completed in other of number in a a Netherlands in which exciting College vocational we competitors deal training EU this process. four focus resulted wins, the has including tender rigorous lifelong

Canvas partnership, to this XX,XXX will made training for company available education, With be courses more. continuing and students

Catalog on enable customer Additionally, by a training to access development courses. existing large professional K-XX Canvas to enrolling demand self in purchased teachers

will We operational to train on This as update large our less be and than an nontraditional now PeopleCert of -- is now quarters. our used Finally, certify is one significant milestone fully Canvas after two on it this worldwide. deals. a the in nontraditional educational learners company PeopleCert drive for years our excited partnership we're come. XXX,XXX see how address platform power to believe to to growth will and that the demonstrates of our paths

to drive in confident, value customers for unlock technology we dynamic continue new our are will opportunities space. education the and We

Fourth, quarter. from potential revealed platform strong we our Learn for pipeline The uptake acquisition for both the expectations are growth Learn and strong seeing existing and results untapped significant the new with has exceeding from M&A or strategy Recent to efficacy given evidence-based and decision-makers suite recognizing K-XX education of with by partners, of Learn value regulators. capabilities their the of evaluate Platform's mind full customers. learn tools. manage platform's proof ability and required top technology are are platform

our on into We us we technology inorganic can of to enhance to that through go-to-market keep platform this meaningful organic and the will believe Learn motion, integrate platform As our means, the space. opportunity. forefront growth believe we capitalize continue plan our further at education we

highlight want continued to I growth. our profitable Finally,

embedded make new analytics to a investments long-term us enabled disciplined platform the platform platform extend have margins data the Canvas best-in-class with for Instructure learning quarter. Our during administrators, drive and expand investments our progress quizzes including new making in access that and to growth,

healthy to profitability, investments, up-level to flexibility invest maintaining balance of we under we able can high-return Ball. believe addition engine maintain product In these of Chris and growth opportunities. to go-to-market We our while the in also leadership are a

our conclusion, shareholders the and Edge In months leader and look position impressive ahead. in technology years the QX drive clear value for expanding education continuing education customers impact our the to as and in us forward space, to we results and on

on full Now, the I the and QX please ahead. go for over Dale our further financial turn Dale, it to details provide XXXX. and QX guidance year will performance to

Dale Bowen

everyone Steve, today. us you, and again for joining Thank thanks to

like Before that detailed point I'd non-GAAP certain discussing in be financial I'll results, discussing results, out results. to GAAP addition our to our

financial results, earnings non-GAAP our a GAAP GAAP and release, which between the Investor Our with in found along be of reconciliation website. results our in posted Relations section is can

strong continue we EBITDA show quarter, and of margins. the to In top line best-in-class combination a growth first

continued momentum in XX% XX.X% products, at as our first revenue the accounted of total our XXXX Steve both Canvas $XXX.X primarily core quarter cross-sell our support subscription to and and we As strong up million, internationally, of of products. of and a addition result other the $XXX.X mentioned, domestically year-over-year, for quarter revenue first generated million, LMS within GAAP upsell

Professional RPO, for at at quarter services $XXX.X $XXX.X and up the up million, XX.X% up X% at Deferred X% end other revenue of quarter Remaining year-over-year. were our first revenue year-over-year. obligations, accounted $XX.X the first the million, quarter, was year-over-year. X.X% revenue the of performance first or end million of

to RPO XX% of over next approximately XX recognize our on expect months. revenue We the

basis. the stated, a references are share statement, otherwise and operating In please results our income discussing note of non-GAAP unless the to remainder count expenses, that all on

seasonal and XX.X% XX.X% model down profit Our In gross in demand. a representing optimized that from margin, strong quarter XXXX. first gross the quarter, million, was of flexible customer architecture to gross margin profile our was scales meet supported by the cloud support first $XXX.X

expenses or we XX.X% XXXX. million compared the road up ACR, map. first Turning of of robust pursue to in development product quarter XXXX, million Sales for now for quarter of were XX.X% or expenses to first our quarter and and $XX.X expenses. from were Research ACR marketing the XX.X% quarter the to operating first as $XX.X XX.X% invested in first of the

Non-GAAP down for down administrative in and or quarter expenses of XXXX. operating from first from quarter of was in XX.X% $X.X million, margin a the were X.X% first quarter the X.X% for XX.X% of million XXXX. $XX.X operating ACR, General the the quarter representing income first first

a $XX.X XX.X% quarter quarter, share ago. share million adjustments, XX.X% the first in per down or the normalized $XX.X $X.XX year first Non-GAAP million income, was to First per newly adjusted tax effective $X.XX added from representing net or a $XX.X million, compared adjusted margin, for quarter EBITDA in XXXX. was of EBITDA the

to resulting $XXX.X million cash Turning statement. $XXX.X X.XX of and times sheet discount, with of ratio. flow and trailing equivalents cash million We the debt adjusted first net long-term cash to ended a in EBITDA debt, balance XX-month cash, in the and restricted quarter net

for a million which flow, cash year, adjusts million compared $XX.X with flow cash the quarter in million, X.X% line $XX.X the impact of unlevered negative decrease transaction for to negative costs non-recurring in quarter. the and free costs, ago Adjusted from sponsor costs, in negative year-over-year year prior our Free leases $XX.X the other was $XX.X expectations. was impaired in cash paid million negative

for I guidance will providing for of call and revenue now the for and conclude year XXXX the full adjusted QX EBITDA. by

have We in our press earnings additional release. provided guidance details

of quarter second million. $XXX.X in of revenue the For XXXX, the $XXX.X million to we fiscal expect range

we year, be full $XXX.X range million million. the to expect $XXX.X For revenue the to in of

second at EBITDA XX.X% of We representing of million, adjusted million expect margin range. quarter to range an $XX.X the of the the $XX.X midpoint in adjusted EBITDA

year, the For of at EBITDA EBITDA XX.X% the million, of range million expect $XXX.X in full adjusted to range. $XXX.X adjusted the margin representing midpoint we of an the

unlevered year, million full flow the the For $XXX.X expect range to to of cash be adjusted in million. $XXX.X free we

the at great a look more and a double-digit start throughout forward pleased rare We couldn't our In be to while on XXXX. deliver you margins. provided best-in-class summary, very about our continuing a executed to high marketplace -- exceeded our We guidance growth level of combination the and continuing quarter XXXX. and in and updating to momentum first progress

and Steve of questions. I to that, take happy your With any are

Operator

Thank you.

question now We of of comes Instructions] question-and-answer [Operator begin line the the Josh go Stanley. Morgan session. Please Baer first ahead. Your will from

Unidentified Analyst

last question. K-XX. if It's taking Matt know the Baer. Austin qualitative It's of other commentary any curious provide were you're noted guys. kind QX in I'm there's bookings to shortages for strong I Hey on and pushing can what issues around had for that you staffing seeing that there guys nice Thanks year, that are Josh deals just some out. [ph] are you guys the hear there.

there is or I'm if Just potentially have those Thanks. helpful. uplift of what curious kind the or commentary that multi-product additional both? is So resolved adoption be any creating would potentially

Steve Daly

Yeah, happy to.

in activity So in in seeing about we throughout the quarter. more last call, our lot talked particular the that continued space K-XX a and

So a couple that there. of things happening are

the First teacher resolved. of shortage all, been hasn't

on a recognize So they're that, with can still they've a that helping what this play deal technology dealing started term longer with role but to in is basis.

can And we of things can technology time, lot problem. a help up free solve so with some with that that to help there's teacher we can subs,

that other to spent, ready more the digital we perspective, from and piece that of interest figuring cycle while year, XXXX. they start in more out how that was be hunkering activity, The down, are administrator were an seeing recognizing last second fall the half come for more transformation accelerate need to they

And differences, would we the I versus so say, QX things half. really, the are in what -- saw those two two second in

Unidentified Analyst

Yeah. Thanks. helpful. That’s

Operator

comes question next line Havemeyer ahead. Your go from Fred Macquarie. Please of with the

Fred Havemeyer

thank congratulations Hey, kind to the at you just ask, ESSER with on looking much, you're K-XX flowing the I landscape year, strong of love of and this shape quarter parter two very deals funds and very a here. as would here. in still

going build this the seeing the you you're you year the cycle? certainly are purchasing K-XX Firstly, as are or into seeing pipeline and how throughout

secondly, And is these to being get perhaps How something perhaps the deals you your are across side? you funds. seeing you deployed? that's the and then And implementation some ESSER line it helping seeing are ability of on

Steve Daly

Yes. Those Thank Fred, hear you. you. for questions, to are good good

seeing and into a So, of that we're lot the as saw of year we're July. the of activity this end pipeline the the pipeline build going seeing year interest, we you a then into increased the the first from new lot build, here, quarter with that nicely. seeing, activity of going budget investment along a we're coming of start the into, mentioned, And

good seeing build pipeline well. as for is looking pipeline the We're the We've good quarter. out got coverage So good.

we've So we for this rest on be point -- of think should at the year. the the track got where to we year we're of

get of things I would and funding we would say asked this perspective, from an always question ESSER I couple is say. the

in they sales the to dollars being with First we've enduring creating the tell the nice sure it's of at that sponsors. and and legislatures kind we're of are I it's us for K-XX, XX ESSER -- working process But We're digital not? would least ensure funding of multiyear. of macro the for what used got in the for system, directly. that that make we all, is there lot Are are months, where or foundation durable funding that our our as strategies are really are with it's these is transformation working In local background solutions, to that in a say, funds next condition. a still difficult

dollars of And so, kind a perspective more the I would of from system. that a say, the of kind tailwind it's of in macro, lots of

of -- What lot we these that, are with is are couple dollars seeing a coming with things. a this of

that to for this Is these so fact pipeline related business, efficacy that, lot of apps for are expected? we used tools would exploded interest on it bought K-XX, with expect number of us were well that help the as, platform get as impact a Again, enduring funding demand kind products. that's of well? be around in in we've what's rationalize so, getting being characterize some through we're time being purchased driving a of the that's how ESSER, used had on outcomes lot of And being Learn being overall as we technology lot tools having indirectly I help demand of Is that visibility rich Fred. legislatively, So that ESSER's the that show our dollars, having these we a during the that acquired, to in used. build it of and the our us

Fred Havemeyer

think quite are has comes market share some about are to Ed. that ask context. very I'd robust question which saturation. where called time in Thank had what you actually higher there market about market out, there share And a share, concerns much had raised another reached you that for I love a and you, company

you point company already robust to market your just have generally, just general I with pipeline you're So share? the think platform means some kind this also about can you there, respect for And hit as wanted of saturation. to expanding specifically that how what context you a whether Ed, strategy market you ask, seeing build of higher provide in

Steve Daly

It Fred. is Yes, gotten number of times, we've question yes. a that a

You're data, Ed looking XX% about perspective. first and -- the in institution all, would at institutions of XX% Still by we are say using that, by latest higher right. XX% an enrollment perspective, I have US of about Blackboard Moodle. and the

there's so really if not too worried us And still perspective their the a to higher and in the ed slowdown, in seeing market digital future. for will, you a of are for room transformation US not run lot looking as what's from strategy people and for interest share

share On market the in, that internationally. I markets high would we all single across also it's that our of much penetration were add lower average, play digits.

for a to of lot as run in share still there's So well. from market international perspective us room a

Fred Havemeyer

much. very you, Thank

Operator

next Please, Your Joe Vruwink Baird. from comes of the question line with go ahead.

Joe Vruwink

everyone. Hi, Great.

this interesting gave guess, their platform. scope vendor? where of one Is omnichannel an You one to to institution that Amherst you're typical all seeing an Canvas learning RFPs in becomes, now sort where on example with it's wants UMS a I offerings platform, consolidate of

when guess, larger, the comment that that higher even question, And getting of is made activity RFP opportunities are terms in the of is opportunities if number that is with expectations dollar ed, the in you maybe in in of line embedded I RFPs? quantity line? your

Steve Daly

Yes. Good questions.

yes, one, So is to on the the absolutely, your answer question first short omnichannel. about

a in that system They Amherst traditional or this online UMass on-campus they process right? saying, is -- system we right, a processes matriculating they're and had different and look, for for with they that a up with students. different their had used whole particular, So set they've changing,

point some in their at going The to both learning students are be journey.

university. that -- that part was -- we're need our we're a we And to together happy we're bring strategy as of -- so, and to

the this an We matriculating about and thinking whether are online now wants who traditional that board in more bring program differently, more in existing with across or students to not. line the seeing customer they're their

be think driver. do will key driver a from that a our key I So It sales perspective. is

From a your what from a -- seeing of part are from question around we the RFP perspective. second

deal varying. So we sizes are seeing are

are seeing We like some Amherst. deals UMass big

I think, consistent but ones, dollar it's the sizes than existing past, the RFP very very a they the RXs far amount some an smaller we have little of dollar as by these of are and successful bigger from virtue are the of with perspective. the in deal seeing that as fact been we're some perspective, in the

amount Volume than is dollar the is. more up

talk that with dollar figure referring of about really we than I when consistent So volume expectations, to kind that figure. our the was rather

Joe Vruwink

great. And just Okay, I on guess then outlook. updated the EBITDA

in I half margins the you think, on second Anything just the improvement XX% half higher that's probably half. versus margin, something can embedded in outlook? better terms EBITDA the forecast of first entails back the or touch in

Dale Bowen

the and Yeah. we as timing have our where second We have provided sequential half. had of associated confidence the the the we noise Sure. some -- seen bit so that guidance services. of do in of little with QX with from margins QX in a expand in But growth some business leverage in margins in XXXX, our our we've to margins you've got

Joe Vruwink

you. Thank Great. Okay,

Operator

of ahead. Raymond Your go James. with next question line comes Peterson from Brian the Please

Brian Peterson

guys. on strong the Congrats results,

of is to the Maybe working double the pipeline is the international Steve, just click And understand if the you some in move you in starting regions? direct or I how the more indirect So that developed with on pipeline strength of international. would into markets? there's working? on certain could there these maybe want say pace how

Steve Daly

Yes. Thanks, Brian. Sure.

markets development would We're I into there. the a into perspective from year a the our build program. we're channel as almost we're channel still about new of So pipeline say in

than will, indirect. you if much maturity, in direct our the ahead is So further

good So from build. we're pipeline direct perspective that seeing alone,

same that our good really of in from selling from the that program, Now track support types a including capability, we're perspective those different we time, metrics channel and things, channel and space. capability, enablement with at seeing progress build --

had America are well Those we've are some APAC. EMEA. our term I and Now longer in Latin going efforts partners the earlier would our channel, in channel more say, and channel

good those across too. geo. And from little bit a pretty the is international progress bit may say, others, so board, the little of that But in direct EMEA we're would across -- ahead the And a of is ahead maturity seeing channel probably perspective. just summary, pretty be a I

Brian Peterson

might more that's I a products Thanks that like something at follow-up. they looking more with been this multi-product at in in pipeline, building? multiple for be sell. Steve. understand Is mentality or people the guys. Got now same is coming in are just you buying time. maybe products interest you're there, -- past? kind more I It know the the people that it. so of if you the to a sounds recent color And have I'd like phenomenon, K-XX if lot did can really than a Thanks there

Steve Daly

Yeah.

been has this for while. a a us So focus I from clearly a perspective for think strategy

we've I sell We've of for in more solution and -- it packaging our and selling think are them maturing with better. ways and pieces, also us the is models to came part more added as out tightly our in this platform we've process. integrated some

say need been learning mind for the out changed, I they assess things coming loss, those have all to new customers. pandemic, So with our need right, would hasn't the K-XX of top of --

year, of activities quarter. has interest again, picking we picked I first just general also kind ability in sell up. back the saw last to the I back second half But slowdown, of better. up think and now think, it's a our gotten The and

of it's and platform much selling strategy deliver a to integration ability the the is market So, the need and as on as it the our motion.

Operator

line Terry ahead. Please question Truist. comes from next of Your go the with Tillman

Terry Tillman

had Hey and from me. questions. two afternoon, I Steve good Dale, and congrats

do really you What deals? monetization funds. platform And acquisition? synergies? terms you in follow-up. care they that bigger the anything who and it giving do side, all where curious have driving K-XX into platform as base very the or driving of the share on revenue Learn with? feeding and you Are you given installed a Because market emerging can had were the of just have you they the or evidence maybe timely I see and seems all is, I'm contribution about like as their Services service First, a evidence ESSER then an products strategy a I And a engaging in more know the that lot

Steve Daly

Yes.

our Learn XXXX build and service absolutely go evidence timely. from are in QX. be areas was stand-alone. acquisition. kind a We a part the faster So, going is, important as Learn drive I you're Very need investment which right. that would de believe was platform as thesis It in yes, could the than that much to evidence say, for of more over growth, -- about where time. good couple of pipeline there's positioned we help really, The kind acquisition. accelerate the -- mentioned, to there's we of expect a the they starting where minimis lot really feel we after uniquely year of our impact to later as will we saw happen a ability Again, good in But we kind of XXXX couple platform to things into we're business a of a impact the

the probably is provider business. biggest The in

community. We ecosystem with of of already technologies already have the with had. learning of We they our like other had ISV a It's the Certica, an through community, structured tech it combining ad XXX, some some much the to the robust more partners by solution some that platform. into of have that to take are Kimono technologies we the integrated acquisitions now and XXX

just their them, operating very go-to-market part and to was was been only a a to that of reach it's about They'd faster. right? business that perspective ability when go so from quarter providers. new And lot we a And our bought selling to a our adding

And so will that's acceleration where believe come. a of we lot that

learn number state-level In we a lot to perspective of well. from using state of a lot of LEA existing the that a to kind our There's within can or We're have of skids do the we're leverage the contracts taking within we a K-XX have purchasing those that grease as -- contracts. addition, purchasing we into. things

quarters. three synergies So, next leverage we a four believe to we over lot the of good can that

Terry Tillman

honeymoon don't And guess Ball about helpful. was Got kind of are an increase X quarters early or it. value That's deal, the some on belt. District if going Chris What in got Thank the some still of, impressive. I Wisconsin of School contract the assuming is phase, he's you. areas I having to times Chris I that -- side, his work, low-hanging contract several but the he's fruit kind under is I'm his ask Ball effect? increase but of know is

Steve Daly

Terry. question, Great Yes.

do As Terry. job XX the days. Chris always, you The great questions, on -- for has been

to that I over sensationalize is, selling the a want suite. has don't on on So focus I will What our solution on big he say to had impact impact. how sell whole

And so, he in yes, deal I particular. that an there's a -- on had impact definitely, would say,

right, But job really sales what bringing together, he's the teams done the and teams. marketing a is good really at two and customer success

seamless, we how we our marrying So more that seller. customer more in help with that, is to the ensure customers, that he's are the do opportunities ways really -- success do make manager they're to we how excited, they're energized, they're journey on really with leaning find sure able customer in

one much deeply us or And better much two to we believe, cross-sell ultimately, which will a just than help more our customers products. and drive allow

far with what about go-to-market has our so, to we'll fingerprints I'm Chris the able coming pleased put motion. -- be I'm excited that so you you really with good and really quarters start on so his progress as And in to made, share the

Terry Tillman

Thanks. hear. to good It’s

Operator

question of next of ahead. comes Please, BTIG. go from line the Your Matt VanVliet

Matt VanVliet

get of Curious Thanks. demand, the selling. could the update appreciate if multi-product first, how catalog afternoon. commentary ed especially Yes. product taking we is guess, much driving I on platform there? an on and question. I Good higher the in

them you're are at, versus XX any a or and of X their maybe just that around number revamping Is going ago? today own online schools programs or looking either demand environment that, still it months the with something or to commentary launching help

Steve Daly

in context a school a answer go classroom. the either of that we going short bring or really demand. in of or online I'm is, of the right, the help kind on we do yes, lot And to kind Yes. address see experience, how of online that omnichannel

with It's while. in a been starting now that that -- our for the to a students for but marrying acquisition a also really map years, to whole the Aura investment now last Badge ability made that of badging, catalog, increase concerted product for building we've to Sky been online and two off a has us. is programs in pipeline credentials, lead or The an the a pay with the is Concentric credential effort the

have doing as couple customers. a sides things of, One, a to our the a It's ability of it's good UMass go much again, be lot us as opportunity Amherst for we it's solution both well giving of and a offering as really we provider of kind a into solution where like for deal of more a us. differentiator existing cross-sell robust on

So, part yes, that for for delivering experience and universities nice a the overall us. that of it's omni-channel of creating solution a differentiation is for kind key

Matt VanVliet

another selections is to Okay. then modern Very to out happen, and two. have more sort figuring year as helpful. I'm of no to market. they they that of the it starting or just matter towards you understand making -- which can mentioned, for still upgrade or gotten renewals setting are year need of now haven't How going even schools calendar, you've Moodle yet? where or of not Is a it's best anything a that And XX% those and if out vendor road implement the signed contract down their I a to something kind sure meeting Blackboard that already guess kick we to number look we're of ed right the higher often you to point maybe do and the decision a

Steve Daly

to just happen, this the weren't the that not the behavior we I'm a me -- been or okay, trying what was more renew activity, next But we're they lot activity platform a -- sure It's closer they it more when out, decade time figure of lot my the to a of for for is change. make say, right? much isn't going next It's place a phenomenon, what but new had something so two, to has latter. were and to -- And we right? saw in is to pandemic, now going Yeah. of and to --

do long-term -- very And right, it's time the lot -- the technology so and road, articulated this recognizing to moved was question, either a the we're very this I stage the about haven't we'll for, these deliberate not or it the we're change But how in rollout right technologies. kicking think can do these but deployment again, existing -- how they've signing near change. in again, now that -- very management future Matt, and And of are it's of that customers you that out, just been of being are down are we to time. we going over they're plan

Matt VanVliet

Right. Great. Thank you. Very helpful.

Operator

comes Your William next Sheldon line Stephen question go the Blair. with ahead. from Please of

Stephen Sheldon

Hey, thanks.

falling in market last and higher LMS maybe ed Another on here question share off question. that

steady be stepping to legacy Will look? and renewals LMS do pace As how market you share relative right on of lower-end if now? there have solutions you into the over or much next the institutions to about few does potential near-term think gains have that them, XX% years? the you of opportunities replace for so, the visibility And

Steve Daly

renewals, it's reasonable mining into renewals. Yeah. those motion. is I sales have the of we part in Everybody territory and out mean, those view their for a

So deliberate it similar what year. fairly steady it everybody to to don't do we share, gain expect a for seen it instance, be we've measured -- a is it see move. the to be in market next going over year, is last but I will

pandemic bunch of the when coming there I a of think steady than kind was right we we're state in of a of did more out activity.

Stephen Sheldon

quickly on it. that between you customers win just And When wins? How on look does much great. as assessment a love Got update is is different in greenfield K-XX. that side, then new it And an districts? given way your adoption bigger next mainly growth of across an would That's follow-up, there outsized what any few And assessment frame is to solutions how school smaller and do the will be are over think you're this you seeing? years, growing platform? area

Steve Daly

on consolidate of a is as well this vendors, as move try number there I Yeah. would -- say a platform. a to to

and with we the engaging what's how with that loop closing taught, we way. how get content, standards sales a is the LMS a into they're our when at assessment that a so, fact integration then being solutions you doing, closed the doing opportunity, but And that value sell the loop with only and not go look against really can they who's the and are that well student the

really the is so, And accrues. that where value

people combination It that system as of there one well as existing an in paper, talked we already. off moving assessment was is of about and pen we a of the deals the script, management displaced

they're the that of that learning each have those and remediations that opportunity in for helps very so whether address address the in combination real that of teaching bit understand of But students. a loss again, really, it to are the feedback is some they're that tightly those loop, closes little we individualized the is integrated putting solution So, make get they and two. changes teachers working of a that doing can near time, place a

last cross-sell. -- a was So -- I it K-XX It our of opportunity in a still lot quarter. fastest-growing believe lot to this of product was

So, Stephen. I contributor us for do believe a that, while, that will to be growth a

Stephen Sheldon

to hear. Thank you. Good

Operator

comes question ahead. from next Brent go with of the Your Please Thill Jefferies. line

Dave Lustberg

good Hey Lustberg is for This on guys. Brent. Dave afternoon

some Sorry, of I'm the a and teachers' where impact plug down on of improve call that efficiencies education addressed. maybe call help just time tech -- has have And cut right, but much been and potentially the of opportunities, too think having off as to the if teachers. the some said into headwind AI that another guys, LMS said they an AI of I become getting maybe another on don't story. these they to you AI where

guys level, you then of asked, there thinking can again, at -- the but sorry do impact it? had And about guys this anything are a high AI? follow-up. how a if you with been that And Just I is potentially has

Steve Daly

Yes.

you I question well, answered actually. think, the pretty David,

for we're you marry you do replace thank that environment. there's that think really this are of that a when with in doesn't So, right? leading -- But is number that we We that the It's witness not we your opportunity an AI exploring. us. think for anything The really the reality is, opinion, interesting on one. share areas the LMS, we

So, how do to quizzes, And control tutoring things by their course generate LMS, opportunity We the built will we give used of ability life you help the -- those school get way into it's LMS, they technology assessments that and helping the And part the their tutoring. LMS, authoring, of to that of teachers for also of questions manual makes it in things. better ongoing the creation, that of it's one on integrate mentioned in districts do the think designed when and There's with it all Dave. workflow it like types the much those scope engaged to simplifying them they're that some of whether because of teachers. tasks, of whether virtual at integrating the in instance, give their easier. the is the kind institutions, as

they So can -- the of and it because LMS. limit

institutions into for third for And training skills based also, in skilled students going course and taxonomies, map use work think opportunity to big schools, to or high reskilling, simply, much the against going the a allowing technology work to there's instance. then, directly address to is to ability with the easily them workforce, that for -- map the we and be more universities their accelerating to are

will it actually think or do competency-based education forward. accelerate we So going skills-based

again, we your those, right, believe them an opportunity integrating by LMS, in to of us. point, it's All for

because have opportunity learners I and on and also whole to and the of a manage teaching the process the for of it's teachers mean, -- learning. it's an with providers unique And technology relationships opportunity delivering we LMS

we're excited working already things. the and things working about opportunity on So on --

Dave Lustberg

down then, else Thanks business, and and like don't helpful. then your think I a I little LMS you have, if is think everything K-XX. is Super shifting you normally the right, this how for gears just right, mentioned K-XX, But there. product in phrase it. would break And the color bit. fastest-growing core in assessments we kind of

and at you are business, talk I And seeing take But how those growing? accelerating? the growth commitments if out about bit a there? look strong the is businesses really LMS Are little

stuff be about doing tends some interesting as obviously, relates just of most focus, the talk get to interesting other super because, like LMS are to now assessment non-LMS to business the Would things. but it and guys part you the

to any So you hear can color it there. would great provide be

Steve Daly

Sure.

I that, different been breaking types we've of different say areas I specifically cross-selling that, out those would not products, we think, cross-selling. consistent the improving. pretty are we're the that in is

than deals have one than more one the on to the from add the new number with product well We both sale as initial that customers continue logos, number of us. have as more that solution of

The opportunity we're huge opportunity acceleration. growers We now, a nontraditional in that a -- think I ways. for the not the growth two assessment us is and biggest is addressing right opportunity -- great seeing learner

to that about in we is nontraditional PeopleCert institutions higher One training like with, is you that as the already have well a ed talked cross-selling what institution. existing a educators script consider that learning relationships would of traditionally in as the we outside

the do and and most we ones the growth biggest the contributing near And our are probably those the growth most two seeing term. we're that think drivers so, in to growth the

Dave Lustberg

guys. it, Appreciate helpful. Super

Steve Daly

Dave. Thanks, Yes.

Operator

Steve Citi. live question -- with go line Enders comes sorry, next Please of from the the Your ahead.

Steve Enders

in But I here. beat and outlook, should at and good that here? as for conservatism QX little on revenue a of did be Thanks second think there the I guess the want question here. added we're we great. the bit the at taking particular. looking I Okay, about here? thinking how I guess, half to raise ask particular in Is an level in guide

Dale Bowen

great Yeah. numbers we anything out over-performance as Steve about, looking we of put for year in the bit And of already talked feel of that little think confident there's achieving. the don't we're half We guide. do what the our bookings. a I had outside talked there second QX, a in in we've about that

ability And and hit them. so we we've with targets good to you our that feel shared about the

Steve Enders

K-XX, environment Okay. of in there's XX% this at been I I the think guess, think plus as in we reports funding at about point. coming funding

to think So begins go funding or we about maybe how I left how of how the the pace there is close for quarters out And that still environment you're guess, much next six thinking so? as about that to in do after? you

Steve Daly

background. Steve, have really it, of investments. hard us about that macro a to is it still cash. us to is, flush for schools we it's appetite digital ESSER for that what all, down creates the these will when K-XX backdrop in an in that the make was digital in around think are we way The our interest The provide first assessment closed still for technologies with break that particularly nice say that Yeah. seeing the reality we They must-have the transformation. in or we're the I infrastructure there. ESSER funds that But funds, core was is LMS There the and recognition -- deal, management, that around in transformation,

lot dollars when level that decision these conversations, We spend with as so XX funding state sources left there. working that ensured out sources. the that again, still the makers is existing well at as the are are months we're our of have a these durable funding are to And we

lot a will So the this -- we is for that be think for do expect we us. XX next a XX And macro background activity to we'll backdrop this do still months. still that favorable have of

Steve Enders

Perfect. Appreciate you taking the questions.

Operator

comes Please Your with go ahead. the from JPMorgan. next line of Herman Noah question

Noah Herman

taking the thanks for question. Hey guys,

our Just one end. on

point? for The so durable more point. into customer I see like you with And mean, today? as do opportunity. feel opportunity another growing or two That after strong bright this Sort at coming how lever non-traditional more do seems acting non-university revenue non-traditional that a fruition spot quarters. growth see PeopleCert the the you of, coming Thanks. data really really back how to the customers

Steve Daly

to talk starting believe Yeah. non-traditional, they your that a but haven't are I'm of a we also when because market just we traditional glad into. how whole you do institutions do that asked is student not -- we out But trying that non-traditional. we to that figure just base address tap we're question there have about that installed

all in those those, nontraditional & today nontraditional The CBO is Guilds are City not PeopleCert institutions is one about call of talked We students. Gent the about Belgium, one. just on another

we so, the for past. that addressed market an that in And we is this think haven't opportunity emerging a do It's us.

market. address. nice days to tapping up into still a it opens And in us that for early So TAM we're

early that that turnaround And ability drive kind up customer, future. So again, gotten. market confidence for double-digit it one growth. drive in those foreseeable growth of to really gives our growth accounts lot line us pleased an And well reference in we're, us the the of running we've of ongoing known traction quick and top with the help a excellent the PeopleCert to and lighthouse --

Noah Herman

Great. Thank so much. you,

Operator

back There to will the are no Daly. further call questions at I turn Steve CEO, time. this

Steve Daly

Thank And thank everybody. you, you, operator.

in we opportunities As to market future. in world-class line feel days innovation, that educational like disciplined opportunity investments drive early but to transformation that platform. We months the our also you about heard as customers of we're We're continuing today, the a excited technology. drive new margins and space we're look We'll in very playing our seeing continue years in this company. the also in commitment this value We're to success to and dynamic our education, to a customer so for shareholders unlock and and growth, top nontraditional ahead. still drive growth lot digital our forward across with and

another you thank for Thanks, forward to your So in time, talking you we everybody. look to and quarter.

Operator

conference concludes This today's call.

disconnect You now your may lines.

Instructure (INST) 1 May 232023 Q1 Earnings call transcript