Earnings call transcript Q2 2023

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to Instructure's Second 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 David Banks, Vice President, Investor Relations. ahead. go please David,

David Banks

Good Call. welcome Josh. 'XX Instructure's Earnings Conference afternoon you, to and QX Thank

discuss announced Instructure's will Dale close Steve We results and Bowen. today. after release Daly; With market issued me Financial are Chief Chief Officer, in Executive Officer, our press

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

today, For and based a us that time obligation Securities available to release to as we've July except to information factors statements. in to of and financial filings we Commission. results as XX update could time earnings future discussion the our with affect the Exchange on assume today, All and and by statements today's refer required law, are such and from no our other reports business, please any of made made disclosure

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

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

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

Steve Daly

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

our by the our headwind XX.X% model. million, XXX our QX efficient year-over-year a I exceeded unyielding dedication revenue our margin. share EBITDA guidance to XXXX. guidance a of of full and current was an our During $XXX.X $XX.X business currency the QX provide basis today's call, to previously We grew up Dale of market and and results results adjusted million, for QX fueled the range year-over-year of QX believe will revenue EBITDA effectiveness demonstrates of year and customer's the impacted by XX% XX.X% details organization performance strength for and satisfaction. committed points. driving adjusted QX QX constant our

want second Denver from InstructureCon to provide ago. into our place quarter, some from delve I Conference highlights that we Before days the in few took takeaways a

person X,XXX we We this event find X,XXX vibrant XXX such was nearly attendees XXXX. is since partners held had It community first ever. Instructure event. as over to The gratifying sold-out in as the and more at than customers,

enhanced for Learning around teaching save will time, lifelong and Platform Instructure believe learning and and solutions unveiled We new administrators. expanded personalized centered learning advanced core analytics, integration. students platform complex experiences innovation tasks learning, and simplify for these We educators

We feedback forward strategies our move by some also as excited are we with AI and that. of previewed our customers the from

from logo highlights key the and uplift, including quarter strong how power share will are our drivers, model. I our new strategy the four leveraging Now, of we business sales, platform cross-sell

across landscape. our solve learning across ability new logo challenges of our by markets, remained all real-world win First, driven to is our rates there and teaching the success strong

Our and lifelong in spearheaded and of universities frontrunner all University. made vocational focus the XX Teaching now significant in Canvas of this Impact, entire Learning United lifelong top implementations Studio a their transition the bolster LMS, learning being with education. with on training non-traditional of Duke investment and of resulted win Instructure Canvas ambition the Canvas Office to a with the platform States learning Credentials. Duke We in Canvas. Duke's serve in

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joined last as we competitive as quarterly position. in in the a market-leading quarter continued products K-XX solution, and Public recognize in of mentioned our American Canvas to In user continues platform The University QX to during decision-makers Schools strong our long-time our North shoots K-XX, resulted our call the support green mission-critical. bookings Cincinnati

ran lengthy Canvas to from innovative was implement matched LMS the strategy winner clearly parents, far feedback to away would a approach students. results. was teachers new best Their as and process deliver seeking the our breed a the in is Cincinnati LMS district's education. that

Our for feature support unmatched with releases, service experience student reputation and uptime, allowed provider Canvas. displace an and them confidently consistent unrivaled incumbent

of win Krems changing to skilled leading average traditional students. we age Among the to with secured deals student the public an demographic Austria, between education Krems increasing the as university is the international both University population Europe. for workforce new for needs in with their allowing retirement a them non-traditional in graduates serves address way QX, the gap a and Education serve Continuing Canvas continuing a direct in and our and

institutions to be other Krems has must Europe, privacy strict standards in their by partners. Similar met that

to our global to reducing to allows region. to Krems to see privacy. standards responding customers strategy customers' on Our centers privacy privacy student quote data with gratifying unwavering safeguarding in the and positively driven, our regulatory our rigorous dedication It's comply

we opportunity. secured largest $X needs demonstrates cross-sell institutions. Europe. one we of Second, see of This in learning registered organizations Europe, training meaningful to or the with making existing by customer user ability number billion-plus Internationally, where a drive with largest customers, up-sell continue through we serve our the to non-traditional also them up-sell our both RTOs growth growth, in and global

drives third student partnerships. strategy, validates strategy growth. key gives deals This better and district Charlotte-Mecklenburg platform driver to rigor solution in the the the customers. our suite by and MasteryConnect long-time accuracy and our a assessment such because Schools, This our strength and innovation fueled chose of platform is of insight that products. Canvas evaluation, of on Cross-sell multi-vendor further content our After of as the

Chief the new success. research of in the a future Officer our product a into preeminent to Among initiatives the we prove efficacy the to student provided wins devices. with wanted contract of to most education Vijiasingam, the many in technology partner-driven Shiren won that one designed important quarter, companies handheld ship world conduct InstructureCon, the efficiency Product glimpse During faster enhanced and paradigm,

created a to of proposal examined the that outcomes. impact of teacher our map student intervention We outcomes

win In that are Academy with at great Ultimately, teaching Khan in partnerships. big retention a business our large we teaming assistant addition are thinking Khan about we technology also participate of we announced looking large structured and research InstructureCon, together bringing to student-tutor are AI-powered that with platform to districts expanding partnership we the Khanmigo. learning with

educators content LMS, they Through this world-class students commercial offering journey. partnership, are meet to we widely where in to are used their the industry's generative with Khan most from empower leveraging AI educational Academy

safety process the that and the committed to learning that integrated are are marketplace to week, intent, We and with end, which AI AI gives into visibility To the to teaching the last and platform. also learning announced access educator equity. bringing Instructure emerging AI solutions the we

customers the we our and AI are Instructure across doubled partner last gives privacy to state We years, customers to define in within solutions our are Platform standards. security our each two truly partner and In committed access ensure innovation to Learning is working standards have marketplace landscape. just the in with the base, the investing nearly are entire

our invest because that durable our long-term finally, to drive ability we've are of in to been best-in-class in business, leverage in growth. the us turn drive And margins our investments to able disciplined allow platform deliver results our of and indicative

permits strong to sacrificing continue model Our business driving without margins top-line profitability. results us and

drive a during renewals QX pandemic COVID-XX With adjusted M&A adjusted normalized in we both to nearly approaching that saw margins record to organically as XX% evidence on As that see came of this, to XX%, in customers value flow through reinvest began continue and free to EBITDA and to will environment. more growth. margin gross long-term us expect we cash produce allow of durable

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

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

Dale Bowen

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

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

financial Investor adjusted continue our website. a strong top-line show growth to company's section margin. we GAAP be non-GAAP Our our should which earnings reconciliation release, and results EBITDA along Relations found in best-in-class and In QX, the is of the in GAAP with between results posted

Steve for XX% and As accounted million, up generated healthy mentioned, our cross-sell. growth of our support the with we total in of $XXX.X revenue K-XX GAAP and Subscription million. across of QX particular key $XXX.X driven emphasis year-over-year at by markets with all revenue XX%

billion, up with Professional services $XXX.X up QX We million, X% year-over-year. ended QX for million or other of Remaining Deferred the and XX% Obligation revenue our at was year-over-year. at QX of $XXX.X end year-over-year. up $XX.X RPO Performance revenue XX% revenue up X% accounted

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

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

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

expense. of expenses in for $XX.X and QX XX.X% QX from $X.X XX% QX marketing of revenue of or General to or million QX for X% for XX% of Research X% year. was $XX.X and were expenses million expenses of operating revenue QX down were Sales and from compared development XX% slightly Turning revenue, XXXX. million of QX now down in last revenue to in or of administrative XXXX.

XX.X% compared in year. for of operating in adjusted was per QX QX million representing share a XX.X% QX income QX last XX.X% EBITDA year ago. $XX.X operating $X.XX XXXX. net Non-GAAP or up was $XX per XX.X% EBITDA a million $XX.X a income adjusted million, margin, from share representing from million, up Non-GAAP of $X.XX was in with $XX.X margin, margin or QX

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

$XX.X in to strong million $X.X that year, costs year-over-year in for cash flow the quarter adjusts flow cash XXX% more flow prior the than XXX%. to was non-recurring $XX.X of for which was was the accelerating cash costs, paid costs, quite cash $XX.X Adjusted Free in the million, other quarter and this sponsor unlevered collections. chiefly up impaired transaction Note free compared free impact from million leases year-ago due quarter. our million

the that normalize will through move of expect as year. things the We we balance

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

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

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

million $X.X at we the midpoint the For range of in in year, provided full compared expect to with million the we be that up May. the $XXX to guidance revenue $XXX annual million,

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

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

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

free margin For cash at adjusted flow midpoint. XX.X% the unlevered of

drive first-half believe summary, XXXX our put in to a expected. better a an deliver marketplace momentum you about progress We margin. even our originally that on continuing guidance than combination In us and our and throughout couldn't growth best-in-class pleased rare level, exceeding results updating executed forward at look very high our we and more great We to double-digit be to XXXX. the in of position

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

Operator

question from Stanley. comes of the with Baer Josh Morgan first line Your Instructions] [Operator

line is Your open.

Josh Baer

growth margins those too? sense international to or assess could Great. higher ed across strong and Thanks congrats to question from Thanks. margins across to thinking give how a faster-growing to expectations I get impact kind segments, hoping mix was and get the gross also ranges wanted ask, about for a EBITDA updated K-XX on presumably an just margins there. international, maybe shift or I And the K-XX, you to sometimes on to impacts view quarter. margins the for that of contribution how

Steve Daly

Josh, Thanks, question. the appreciate and Yes.

growth America Ed be And the Higher in international and K-XX for to We look the double North we in in digits. expectations America digits, how be moving and that's have forward. at general the provided business some North terms higher to low single

that however, by those our about, margins, that we're any our are segments in model very we've very contribution we areas in broken different positive margins and we've say confident talked going of margins terms Now that we're of I forward. had will in each the of operating where not good

Dale Bowen

those investments our the negative were instance as margins program began we that Josh, still we've improve we've in able and made our investments to margins channel process. for in making frankly been

we're mix between to model those. as we'll the see that the that's continue taking we those see is even So improvements that shift

Josh Baer

those that's same is Okay, you. And helpful. in end competitive story? change markets or any the Thank across then, landscape Thanks. the it

Steve Daly

K-XX, Yes, dynamics competitive similar higher we're seeing ed international. across and

no there, change Josh. So

Operator

Citi. next question Enders from with Your comes of Steve the line

is Your open. line

Steve Enders

early feedback to, about layer for AI some over years? we here Okay, of should be know guess what's to I into of announcements, great. but there Thanks I in for lot I initiatives and the on the did that how thinking model of kind customers the here. talked I the from the product the asking guess that I from few taking about start potential question you've on and the next a to guess conference, takeaways are the want

Steve Daly

there, was good Steve. it you to Yes, see

was positive. feedback very the generally well, -- are We

probably, So were and areas groups, very XX with months the we make time where -- time with to customer before we really last us like pragmatic them were investments. we've that had worked they'd user taken understanding spent some

And well to so, language they the using that, intelligence very some of pieces we we research the of investments if of had one the the to as in through the environment adopter was you We of and in educational want to room, recognizing remote we some using excited future help customers were the that as received, -- about, being that create very, while create experience early of an as program stuff within that on a will, that do Canvas we lot a AI, within like sign-ups, regular very or some some language sentiment use pages it in details of part last, be showed the highlighted. moments those other well things did these. artificial work

working this say, going work changes looks customers those we which the I'd far have positive. value or of is still to understand to the very is the pricing and bringing long-term we're structure results general, through days in impact business with early model our as like. on as So, cost it's what what and functionality, this as that in

be little anything models, into it's building So a early the Steven. to

Steve Enders

environment and the I the good in kind and helpful that's about in here No, of good are follow-up kind guess opportunity budget going Perfect. it's bookings there. current the -- what's to you view How feeling activity quarter. the XQ? renewal of pipeline into

Steve Daly

half. pipeline finding good higher of good so feel of I going with say, help us. we long-term ed it's is the where deal we Yes, sits in the we read would all we're what those second about about lot you've our into general, those headlines some a -- a for is, that the challenges feel facing, them backdrop challenges

those, the strategic customers And they standardize of the work things have like investing education that give solutions that in all that really ensure one the so, institutions, for to we've growth. done a non-traditional see over starting us to durable last for consolidation happen, told long-term we're work good that want better to after to we really address we've us few backdrops go ours around years those to been being platforms, that two are non-traditional students,

feel So where perspective. we're about long-term half as the growth going we second into well in sitting, the as good really

Steve Enders

Okay, perfect. questions. the Thanks for taking

Dale Bowen

Steve. Thanks,

Operator

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

open. is line Your

Fred Havemeyer

on you quarter. very the and much congratulations Thank

a international asking little well by begin as too. just to like would I think I bit about

and generally you certainly the -- highlighted saw win. Just we Austria

do how partner the do are opportunity far just Just confident you program and your this balance you are in how into feel that throughout into think year you you of with go-to-market international of just opportunities? next course how international going the and about year, along

Steve Daly

question, positioning about Fred. a good our it's for good think feel international. really We I Yes,

script, we very So customers, and robust across Austria, the really as was we've European work that bring to Krems the wins of in privacy highlighted in we with value framework. proposition in a the but put part board is done the security the our that to even particularly

good feel is that regulatory particularly each you're those, with dealing when some of we the with. value this the the so of And dealing of regions demonstrates environments,

Moodie we still grower, big of can market over time. business grow, there about So we is to XX% good believe our to drive it's the the there. We feel fastest continue opportunity that in - and

as we little position and we're past So in a opportunity in as that occurs in again about similar our starting that about a particularly far see that's time to bit to impact as still still the be there some the to Channel the progress on continuing, the to something talked channel, feel probably meaningful but having about later top-line. win. Fred and able investment is

Fred Havemeyer

there. you, Thank

seen product too. we've of a you've your think course portfolio as been solid, of absolutely another broader one, just but is well, Canvas I performing is building solutions

curious where of trending adoption year? outside could a I'm and that's So you're also how just and add more this you Canvas if solutions core seeing little context throughout

Steve Daly

Yes.

So the Mastery we the content whether saw so assessments, particular or along the that. success MasteryConnect, drives that assessment with management in K-XX system the branded with products, it's

perspective, talked and quarter institutions, of we're either to of RTO those verse non-traditional good catalog ed in as some as from the we go higher organizations, seeing a non-traditional about address the with script. or help we lot -- that go after like we our So pickup we credentials

been cross-selling our a then And perspective, are LearnPlatform areas. successful So, from with particularly those two seeing we two acquisition. those good have success

has expectations has So from well the the to partners providers acquisition. doubled and been did either as it's we our -- to grown the services educational institution of sell network, the pipeline the both as selling met sides since ability nearly the and

we're So good. feeling

Fred Havemeyer

you much. Thank very

Steve Daly

Fred. Thanks,

Operator

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

Your line open. is

Stephen Sheldon

taking Thanks my guys. Hi, for questions.

see negatively and longer lengths, renewal period, renewal did up-sell like trends if to are maybe rates, in RPO, went term cetera, anything deal et through or contract renewal supporting that so consistently saw things trends duration either renewals. positively surprised terms as up great you in heavy you just such or one First there step you pricing, this here, any longer of the

detail on renewal the any Just activity?

Steve Daly

thanks historic really what number for out Yes, really it, pointing for call us our RPO, we out with did P&L renewables. Stephen. with the pleased We're pleased the is simply we're on the and

I platform out of that today ago constant a beginning value learning on group we around of come and we're the customers three years board still of thing the the in pandemic this with stages would seeing building platform. learning lot have say, So, finding one the and they're is

we seeing extending have deal the contract some additional at And in - high would so rate, space. products we portfolio. our renewals retention that ed are very thing the those length higher I coming very, say with are now length mainly other And

things really we strong So out coming good quarter of a closed. just

Stephen Sheldon

hear. appreciate to I that. Good

seems As follow-up, conference and the like Duke in at included user win. it week it last was credentialing higher the focus lot ed, like a of there's that looks on a

that seeing Is and you the that be are be customers? practically being frequently thinking view mean about for what included these relevant every solutions? with be could new in conversations will this medium-term going to in university and to of need how So existing over your ed to higher financial that opportunity with something types your

Steve Daly

to end they and is the the almost that how skills of their demonstrate conversation needs of than at every the just They're along future at educational how do a institution, this right. with meet journey. a Yes, looking the rather pointing diploma way in workforce they having the we're

we deal that almost have So, figure point my we're having how over a of selling that skills-based but the they're with opportunity customer go the kind enrollments the education to really going this are that every one conversation this from time, and addressing to have It an every of ensure out is it will it's perspective. in others confirming just really for forward. that and up is economy institution higher panels together, to not that conversation, belief absolutely is a also

Stephen Sheldon

Nice you. color. Great. Thank

Operator

Your next of line Vruwink question with Joe comes from the Baird.

open. is line Your

Joe Vruwink

RPO, quickly terms of and saw it possible to in Hi, like last net to is discussion the on I'll maybe back retention you financial translate Great. Maybe what everyone. go in metric just relative for or in activity? to recent renewal better about the are I talked terms cohorts evolving of you've changing past, XXX% the that to think is recent just worse your rates XXX% how

Dale Bowen

the for engagement really say, would that number that with is Joe, driver RPO And is business customers. our noisy. main the multiyear I

I as number the that index know would don't this that particular would of I though. to so it And I metrics. over say on translates any

this good growth. We in saw revenue. - in really RPO, have we growth saw bookings in our We had deferred we good and good quarter, growth really

On other the that some also that things which Duke you saw point growth probably products NRR, to there's increase. we to it, with be of price would of the adding the would couple

So that number. come does through the in NRR

Steve Daly

would We're our Joe, the NRR - be. think, don't going be the I think - I extrapolate holding to year. that's end read to NRR, through it tough on guidance to number I think we what still I to on where be is would RPO going to of

Joe Vruwink

low helpful. of earlier Okay, the then RPO of it been so entails much I there all half has you deployed of were the billings, year? gets quarter's of part rates single maybe how RPO I and the high just seem the about growth this the second matter trends when And that's year? of like wanted for of side, but the the growth maybe at about is to of kind timing back just it reflecting dipping think latter the an like next last in And and guidance, better look into ask is revenue to part of discussing the flip does number the feasibly digits low-double maybe just range, this in expectation, double-digit as a improvement RPO a on is then forecast looks range, bookings digits some year that

Dale Bowen

Joe, that that that fall aligns that systems base half we're revenues provide the are follows percent can we provide, we that. seasonal confident so of really most we of America's that the stable the follows us North always in we confidence see, school and into have our guidance gives built get customer to the normal we plan, delivering really start growth but guidance where it that so the second pattern

Steve Daly

And we'll QX XXXX in guide to our Joe. call, numbers

Joe Vruwink

enough. Thank Okay, fair you.

Operator

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

is line open. Your

Brian Peterson

the was Hi, quarter, see great last it week. gentlemen. on to you Congrats

So on you quarter. the cross-sell guys this that QX, referenced

dynamic contracts is to that's outside a coming kind of or So love that actually just of maybe a maybe the if the little as negotiation and understand to seeing more with that up you're on RFPs. cadence, love that of of bit. happening of I'd that part traditional cycle it renewal I'd unpack outside

Steve Daly

bit Yes, we Brian, see to August timeframes of and July, a mean, this June, I our -- renewal it's tough quarter. little kind did of we is cross-sell are break because biggest it out this the kind motion months good in our

cross-sell. helps. that it intercept yes, renewal we cross-sell outside still We renewal when don't always to cycles. to It's do So, comes of while -- good

the necessarily helps being comes and sense. renewal, things to absolutely able tied like when isn't but intercept the to it So if renewal budgets that to it that makes

Brian Peterson

or for that bookings that flow than how as the we revenue, does revenue? stream, as some we're Understood. like in newer about the Thanks diversification for a Dale, I'd it No, live book $X maybe I to love how LMS cross-sell does. just to byproduct, do think about much we of just going into follow-up. thinking But the is understand matter about a does guess of the it think products, Maybe guys. shorter $X

Dale Bowen

that, have we are that and products that. LP with renewal, contract that our customer will it we're really they a is issue and with of good of it's products good Yes, see like a buy value able for that to -- of is in a them in has products, show Impact example if with example to prior a good we're an question. capture we a finding some solution it the a What

usually ourselves to base. at see And time expand that where of the of then that what they part renewal happens, student their Brian, large we is a

just as happens when so start it to all time, as after the far looking happens all the it we going can customers' based that's the time and because upon needs. So

Brian Peterson

guys. Thanks Understood.

Operator

Securities. line Truist Your Terry next from Tillman comes question with of the

is line Your open.

Terry Tillman

worry. David, got and to I've not left. Steve, Hi, some questions Dale

basis like but in do bookings I where So conference. catalog, in way? time. an up set it's up simple, for related kind when of fifth basically regularly I been I'd you're talking not conferences coming on up know getting some of a coming just hoc you. attended your now ad was out cycle the years And have then products products that and because customers catalog at the times, and whether new -- to the modules asked stack I ask a other mix in of of those kind those of terms in the credentials actually I it two the and how from the coming for was has credentials I'm maybe we they adoption just virtually have curious Thank add-on pervasive to or are follow-up. And thought of many on It four I person. a was was versus

Steve Daly

break we percentage your kind mind days. institutions, bookings that as most don't point, it as is are out early products of between thing. for we Terry, to different far top of the still of But

from Duke pretty out of it So sounds small front. are some perspective, like to a lot of customers still we're that kind revenue still our of But it's up pilot committing -- right a rolling strategy, early pilots, conversations, contribution, lot innings. contribution

Terry Tillman

new academic going kind are the some of to we're in because how more to Okay, is Dale just about was are lifelong What around couple curious of terms got about it emerging new a of of learning, deal the of to this to all outside proliferate striking you the And not with follow-up I'm segment question narrative commentary in pipeline it. suggesting of starting is, kind the over the Understood. now much this another I in guess traditional how in where to opportunities. of it's kind and of much of segmentation kind reskilling shakeout of educational have that's I'm business like non-traditional where institutions? want have and the of your kind we that, terms is of these that activity, quarters some for institutions doesn't these talked deals starting deal but a

Steve Daly

detail, deals included We as because as this don't we've quarters been activity in a education lot I break mean more are RPO those that we of for out intentional that several level as we've institutions. in far our transcripts these Terry, again, seeing but last non-traditional further education, the

or -- be be believe customers right, far So or and an for do of for driver again institutions results. we to on a will long-term. us, long-term its institutions existing go existing over it'll contribution it'll that's our sides as far as non-traditional, be both important it's cross-sell whether upsell as it traditional offset for the a we're innings getting as for early a But driver those, enrollments growth overall still

Terry Tillman

Got I share part emerging it. if crystal on sales of or of do guess those reps anything be get deals, any different that the though of opportunistically needs it do ball business, to existing to with does kind about can on go-to-market kind you different? anything go-to-market need like And the

Steve Daly

a Yes, those non-traditional that can does that's things. different put if great not type it a reps messaging, go positioning, we believe on dedicated require We have of little packaging that do we group, bit question. -- learner we faster

segment existing out So Over we historically we have that'll higher-ed team. perspective. from addressed think a selling those with sales our time,

Terry Tillman

Thanks my for taking questions.

Steve Daly

only time. was That questions Derek. Thanks, three this

Operator

from line the comes question with Matt BTIG. of VanVliet next Your

line is open. Your

Matt VanVliet

being Nice guys. by some especially, be major LMS higher to you're kind going they look it to right, part up you with least at of using driven question is as the is still that may the all for customers, or deals components prospective ed when environment some quarter. at I starting traditional follow LMS All by taking then looking these conversations in of on the more the how into to driven what credentialing much, thanks be jump of are on a it? job maybe technology non-traditional of almost guess really canvas at or and

Steve Daly

Yes, there that it's because institutions an point most non-traditional interesting interest is the talking in we're selling that definitely process the within is to.

and look, how one -- these this want the just fully you on-campus a call of We're or a drive with credentials. that are right, coming from this the recognizing that's maybe experience trend to big it's they tried is you're just or it, other is does they've way what team to on-campus omnichannel, recognizing remote the they continuing all degree The historically they're after that or institutions separate team. and that's worried education experience to related -- or kind all to about re-skill we have doing time for is, one come want platform you full you're right, whether modalities, you're whether across go

the So okay, the the your sales need Credentialing, progression into discussions. catalog addition with then the address And sense. part platform far that of in the are that as, bigger which is the of those natural you overall of built that's makes driver as order of these organically Canvas things strategy, the to if of use platform

Matt VanVliet

provides other more this great. and That's this maybe has obviously of may at in it's one addressable topic, a not you done of potential or was but ed very terms maybe this very to it helpful. expansion internally much factors all of seems then additive and market backfill, good as share center much no, as how while commentary, Yes, the been the at your a willing for particularly that it some conference and on moment? And work or in you'd front higher of is declining very, offsetting but that's be little in sort be have

Steve Daly

a addressable for Yes, we number revenue students think far this the drivers. the and is of as opportunity us big as

space, the $X sized billion we've about So opportunity. market non-traditional it's

a market. incremental calculation traditional but Some lot we've of cross-sell with you and our the of the included that that billion is bigger kind existing in in past, is of than LMS $X of shared that much the

So believe growth other durable -- grower replacement versus in declining a places. revenues -- long-term we for will a it don't be we

Matt VanVliet

taking great. Thank questions. for you All my right,

Steve Daly

Matt. Thanks,

Operator

of from line question Capital KeyBanc Your comes with Devin Au Markets. the next

Your open. line is

Devin Au

question. Thanks Great. taking my for

first The higher you're adding for I have provided also one lands I don't remarks and the is, larger Ohio in in congrats product multiple Duke new multiple quite new and think U.S. attached, wins you've prepared see, some time. ed the to definitely encouraged on at

looking your strength the specifically, in there priority on attribute would overall these more execution better market you to attribute overall just from double-click maybe solutions that you side? or the from from just do to strength the to wanted just institutions strength add So increasing

Steve Daly

big we good of in the Yes, American that in the higher have wins do particularly enterprise ed, very last to North well had so This tend some I segment quarters. we and market think over several a share a on part the of have it's XX% it's that enrollments. it's where of momentum. started that is been -- market we part of just market and And we continuing market terms in now

rely around all that Those fact typical during we their And that just rapidly and market, factors bring so to pandemic our function our has lighthouse those references sort we scalable addition the have in up the platform can in scale is are a decision can scaled to the on that needs. in table what into discussions it we're accounts coming discussion. feature to the of to seeing is that position and they a

that during other a gone do that also is and all this, but trying trying single was many the favor, as for different in and consolidate the trying about I to that to win of thing earlier, vendors, pending the one to offer able across through have catalog are a we only they that's explosion that trying -- other our as reach are now to LMS opportunities we around in not to to platform they've to these strategic across that quick that as also few The and credentialing either, those. noted happened consists those particularly pandemic are are seeing but institutions talked really they

within the is position with that really higher North seen So of it a we've continuation America strength our ed.

Devin Au

for color impressive year? thanks go additional we any and on expect the the margin I should XX.X%, details. just there you in hear to margin quarter, higher can the have margin One and drove the to the quick higher what offer end gross really great gross That's of follow-up on is

Dale Bowen

a question. good It's

pleased the of part our with and over So, model just margins really we're had is Devin, in expanding of regular QX gross that time. figures margin this we

some timing partly of QX, However, revenue. see we by I driven would that say higher did some margins

to normalize future eight that steady expansion quarters. that quarters that expect back consistent we However, we've last seen the over

So in percent we we're our it targets making long-term clear to have will have margin and that be progress. set gross

Operator

question Company. Ryan from next MacDonald line and the Your Needham with of comes

open. is line Your

Ryan MacDonald

taking my demand now there was conference, week for at interest start questions. for that you're a wanted K-XX in in functionality on that quite I last and the that the customers. integrating the for in thanks bit to LearnPlatform rolling space, Hi, of

then Just And those to as types there. you Thanks. curious get in your cross-sell of about sort opportunity opportunity the funding more think of in an about demand of solutions, -- given assets -- your is lead then put K-XX think there over in with the how and door analytical for cross-sell sort and the foot you the time? then LMS

Steve Daly

Yes.

LearnPlatform. first the with cross-selling about start me question Let

dealing So that LearnPlatform what did was as right, did when the we this we a providers. ed was tech massive of ecosystem year, acquisition K-XX earlier recognized we with

So working, in not those they're looking environments. what's for help working in what's rationalizing

what's we with and do. education well the being used environment being So doing at have One are looking being as in of drive districts, really two is as claim really of to the network authorities, questions what's are what used, firms to sides the as schools a the they state LearnPlatform. how they it used tool

and and the Likewise, the it are side forward. they other and network wanting providing are understand is getting what outcomes trying providers of also on the right, they're that demonstrate is to they working, the that

of right, seeing which do state we're be district we're and going cross-sell that points great we a opportunities seeing on good is good integration networks, think So to build, this with those pipeline both sides Canvas. level

lot the integrated to generate overall that can we as start is build usage to to to see and Canvas dramatically. so pipeline a go they is lead-gen product. well be and a growing, for some us cross-sell We of rapid sell will that interest seeing service free expect pipeline drive that evidence that data continue into as of full-grown and reports announced growing for really pretty the selling the We're providers great and success

where driver question, is a for to for in it's we're key your a believe districts and us us driver will to growth important first future. be think for So and -- yes, it point going really it be to we going reaching big absolutely we the it's

have dropped these analytics the we with we with drive On customers our prospects. the -- when we our platform -- conversations side, strategy with a when and

this a a for part that. competitors it yes, of strategy in continue and to our differentiator key we'll And think is this that we key against like space use that landing it's so, us,

a willing platform that But a again for teaching the platform this idea with and that and learning is about do. they're to

our part yes, your second to answer cross-sell. addition part good the So of the part land can of I to a think strategy our in of your question, expand it be

Ryan MacDonald

solutions of international one some that just partner with And quarter, the for Thanks Asia channel, pipeline follow-up a success last see progressing sort is started how with you that Pac, maybe in to lot. the on and just as builds curious obviously just some international Thanks. there? the deals

Steve Daly

build generation, channel pretty with Yes, training in good bet we're pipeline believe we the are partners helping to those where be going space, that we are are seeing best we helping them lead we're with them are our up, we on deployments. focused them

making the we're So optimistic very progress there. about we're

year see the those we investments America ramp Asian Latin particularly that of in geographies. But start some next But as those we off good partners. our for as where really Again, partners. pay benefit channel see we'll probably to with and success the is most progress,

Ryan MacDonald

Excellent. taking for questions. Thanks my

Steve Daly

Thanks, Ryan.

Operator

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

open. is line Your

Noah Herman

Thanks questions. guys. taking our for Hi,

the so last one, in For to level? seen you you've higher change any have ed the in compared of before what or maybe at or first the consolidation seen pace K-XX year the Thanks.

Steve Daly

the modalities. education experience. get common platform would continuing or There year Yes, is the about some in have last year conversations the I of do been I a more say how campus department across in-person each traditional versus of or the so

So, fairly two I are is started reduce for would we more or do more. the been say, how us, those those to conversations new and can what better those have -- quarter last where those the and bigger the are suppliers, of common. consolidation yes, more around happen number in conversations

Noah Herman

quick a it. And Got follow-up. just then

forward compensation strategy? go-to-market As some the features the these reason see more new part change being of do to going platform, into structure are any the layered as of you sales

Steve Daly

how years top on that things year we don't any Canvas new as for -- in of we'll some of as that model -- on and you happened really we've comp comp each products think it, see features in the tweaked are the get changes far play cross-sell I know that question. changed compensate, and I We layer about instance, talking the coming that major

be do future. we what on have structure, So want change do to we on the in models massive and -- strategy occasionally incent, we so in fundamental there based structure have which cost won't we and do around the depending existing those products tiered comp in our

Noah Herman

Thank you. it. Got

Operator

Our of Brent question with the line Jefferies. from comes final Thill

open. is line Your

David Lustberg

it's this LMS, on it now is, know if K-XX. guys, curious with commentary to quarter thanks but sneaking update about from the Lustberg pandemic Hi, that's about there, held you remind was broadly, just us within maybe appreciate it's think the offering, the could in is And that to past three some it's the assessments, or last in assessing fastest-growing durability catching everyone appreciate that, why was we or if product thinking in it's the of more you than you But learning me David of could an as of QX? there? maybe on earlier. growth any And ARPU how that on not ask harder up Sorry, two just I on drilling a of you top true lot. the and is larger loss guys I think can Brent. for we're I maybe in be wanted I the add you durable? said it for in provide should so said color times more maybe I

Steve Daly

no, of perspective, just having idea learning some a tested it to solution to standards the hear against in and it digital able fastest-growing as endure to address be be growth and K-XX. system whether the to transformation the catalyst loss. strategy. those is doing learning a in to how in of of be due that's our -- is a important student great to something provide the for feedback in you From be there'll will digital place the against This year, to to being durability of this transformation is with classroom is end kind management as Yes, segment it's at from real-time not is able a that that But of was that's -- David. a happen teacher have and of a going going it's place

be really supports So important and it's flash absolutely strategy platform -- to the band part it growth believe that be going and it's a it. to for to driver us, the the going digital of is it's going in not of transformation be any

buy times assessment whole the us You're X be management content as the as well the average implementation. then could the stack right, they if system, the from in it including assessment selling of to X space, price Canvas

base penetration, a our penetration we're still double-digit assessment existing it into growth opportunity, does solutions. long-term create low for So the us low with

that perspective still from a to grow of there's room there. lot So

David Lustberg

Super up. follow-up wrap And let then we helpful. maybe one you it before guys

and good it you half always remain -- invented solutions unpaid? is just some is the still of driver may is to to be by these that to view to gets that 'XX that the you a free will obviously, continue for forever LMS really catalyst maybe premium or what's extra of can percentage may districts think is the to of again it, and free start that the any back these paying use dollar lightweight lightweight start it get half get I maybe towards there On some solutions, be or lose market there that just these of wanted on your using LMS, K-XX, the

Steve Daly

really district it an for start a and creates like or that's within is everything the is district funding talked -- maturity it interesting bit to transformation, to make as of be time digital it in the true elements something like an there do making that when a a about, backdrop right. ESSER you decisions think it it and is wants dynamic a really investment little for takes -- ready a commercial ours about Yes, far to takes as driver good that that. for I through

features, they entire they just that time, school, they solutions, more the will those in And integrated want visibility with not if that we transformation. kind planful, district take a so, into want analytics tend want in very classroom ecosystem, want more be enterprise across want or really take the they drivers those step for instance them of digital be to better right, the would they better in to a drive all where they'll their integrations

at whether pace feel again think, as eventually said does that a move ESSER and do there of enterprise or from that to was some need kids it everybody is is not or backdrop going that ever about an classroom. good digitally with some going this, conversion transform in is portion earlier, a not XX to paid in school level. we to be to might Maybe to the I be experience that everybody I that point XX free but is at for a So good to and

Operator

like There call back are remarks. to no for the further questions. closing Steve to I'd Daly, turn CEO,

Steve Daly

Great, questions insightful thank always. you. and as the again Thank you for

our today, drive for customers to As opportunities our shareholders investments to and platform unlock the dynamic our value and commitment in technology education believe you've heard in innovation, landscape. and we new customer disciplined will success continue

in to years look the as and future we growth come. We're drive continuing forward top-line the to well excited of profitability months the about to combination as and

again. with I for So, you time your look participation, to you and thank forward speaking and

Operator

today's concludes call. conference This

now may You disconnect.

Instructure (INST) 31 Jul 232023 Q2 Earnings call transcript