INST - Earnings call 3 2023 | Instructure Holdings, Inc.

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Operator

Ladies and gentlemen, thanks for standing by, and welcome to Instructure's Third Quarter 2023 Earnings Conference Call. [Operator Instructions] 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. Mr. Banks, please go ahead.

David Banks

you. Thank welcome XXXX and Conference Instructure's to afternoon, Earnings QX Call. Good assume Officer, are also Chief will CFO Instructure's me November Steve Instructure Peter role on of Chief who and With Bowen; Executive Daly, XX. of Dale Financial Walker, the Officer,

discuss Parchment, (sic) [ our academic platform. the as world's earnings XXXX definitive a XXXX signing the leading as of QX agreement will ] results We well to acquire credentialing

financials an provide initial of the on well to as conducted an their overview transaction view as date. into We based diligence due will

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

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

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

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

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

with expected without header Note Parchment provide that association we've of are Investor efforts. EBITDA leverage adjusted combined purchase the on Presentations section reconciliation net ratio the supplemental Relations our a materials and also expected unable In the included Parchment, Events of of website. or unreasonable under to we

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

Stephen Daly

today's delighted I'm to call. Thanks, welcome everyone to David.

to share of Parchment. excited acquisition our details are of and announce We

XXXX. and be Dale reviewing the and providing year full I results In addition for QX to and guidance QX our will

fits this results, what announcement the program has I very does, details world's solutions verifications leading with to over platform, primarily enrollment to me the how integrated is a provide XXX acquisition credentialing product badges than discuss provide The credentialing and million model business company's of our mobility. markets, is XX,XXX I quarterly certificates, discuss support key the of Parchment customers, more and Parchment. the academic will strategically, the diplomas, and of exciting north explain learner acquisition details exchanged about XX,XXX in is more Parchment X Before some a several North Parchment pending credentials than let the presence with Parchment transaction. of customers. issuing international in decades. America transcripts, Award of leading

helps and teaching. student learning recruit credentials Instructure all to our solution, efficiently more systems. success dual goal rich X,XXX than elevate that income Strategically, and reach evidence learning help Instructure, and enrollment their types At is is the connect acquisition platform. goal experiences to of core the process scale power of Pathways, credentials accelerate transcripts, learning to across enrollment to through of institutions, will those opportunity. Parchment and enable provide Parchment's provide this amplify the students, sharing support of

Instructure reskill, the lifelong for points, in together transitioning engage at learners and will companion their platform platform, upscale high these the of the educators learning student transition points workforce or college to the the and to are learner journey, journey. the to learner for school we bring learning transition their learning wishing instructure applying learning college those can friction the or workforce, evidence the senior on that throughout As or their X be whether remove key companies a lifelong we providing

and with higher significant we admissions education, In and more and meaningful stream high-quality traditional organic expect continues. become profitable and buyers important our new Instructure learners as customer both will In a addition traditional Parchment to revenue bring integration registrars powerful a our the base, market, total strategic we to opportunities. offices, expect of nontraditional relationships expansion fit, addressable the has in which of with growth with Parchment much relationships important

relationships future opportunity Based learning. on become with XX% the demonstration integral and Instructure strong multiple we TAM $X avenues for Additionally, diligence, approximately these high to high-quality the up billion as estimated gross to recurring retention our open Parchment's is an of due XXs mid- revenue in for growth.

the expect is today Instructure. a company conversion, achieve we as very flow we profitable and cost to Importantly, with integrate cash high businesses synergies incremental Parchment into

have long-term M&A to is our drive communicated, an strategy consistently important part growth. we As durable of

last companies, the We have completing a X strong track successfully integrations acquired X integrating in years. of record

similarly We XXXX million, we'll expected adjusted approximately net anticipated million of transaction of tax inclusive cost $XX a $XXX The is or all-cash Parchment. XXx rate Parchment's EBITDA, with execute confidence have run valued synergies. at asset

sheet the to $XXX remain to cash our cash Parchment to flow debt Once expect in balance deal is and finance completed, facility. net expected We double-digit generate approximately million EBITDA. our under combined approximately be low the adjusted in managing to acquisition. in credit incremental with net and to Xx this range. debt committed strong is XXXX to the and leverage expected We company's existing grow through is expected revenue

We adjusted expect we as grow continue to delever EBITDA and rapidly cash generate flow. to

in conditions, of customary deal regulatory quarter Pending the approval first expect XXXX. close other the we and to

efficient grew headwind $XXX.X to revenue QX range and was for now by committed by EBITDA, impacted results revenue revenue and currency a and to satisfaction. organization financial XX million, points. customer basis exceeded our up XX.X% results. fueled our QX year-over-year, unyielding guidance go-to-market of $XXX.X support Turning our Subscription adjusted XX.X%. previously million dedication of

performance driving to effectiveness We strength of the model. margin. year-over-year XX% QX believe grew strong business demonstrates EBITDA a our our of EBITDA the $XX.X adjusted XX.X% million, adjusted QX

we of America, usage With August exception spiked time use as year the active our era. X This new and was lines The during resiliency more year North delivered COVID per year platform. as again the in of day Canvas the with than during in evident remained most X our than of school availability. million was the September concurrent consistent our to our more onset September, volumes platform of for users this period, of no early utilization

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

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continue model margins margins produce cash results flow strong Our EBITDA exceeding to that allow to we gross to XX% reinvest to long-term durable and organically expect sacrificing through margins to With adjusted both driving profitability. M&A top us business and drive us approaching permits will without and XX%, continue adjusted free line growth.

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

company. the call financial public has will successfully November XXXX. Instructure and Instructure full from private performance I QX great to XX. it Dale He the with XXXX Dale's final for his including to the transitions, contributions in shift our the during made earnings from to our guidance Dale company he the turn over to effective will retiring QX years public navigate and be us further is Now helped provide to markets XXXX. and our X important This year return markets with as details on

a He agreed and services go and our Dale, culture of XXXX. a his March transparency to leader. ahead. through established foundation consistency strong please next During for transition strong built also X, tenure, he provide has

Dale Bowen

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

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

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

a we QX, In best-in-class combination margins. adjusted to continue growth show of EBITDA and

basis year-over-year, As points. and headwind basis a XX% support of by Steve at XX.X% impacted revenue million, impacted headwind we Subscription currency of generated approximately $XXX.X our total mentioned, points. QX revenue XX.X% of of XX by $XXX.X currency GAAP accounted a XX up and up million, approximately for

in up X% pull $XXX.X in ended revenue at performance million with of year-over-year. at end We year. through unexpected last as compared obligations, million year-over-year. other This QX $XXX.X change and $XX.X revenue for there a $XX.X Professional was the remaining accounted of services QX with was slight Deferred QX X% QX. of was not million, or up of X% QX RPO, our revenue million,

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

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

profile and demand. by model flexible optimized scales customer margin was seasonal gross Our cloud meet to supported that support architecture our

QX margin, In XXXX. a was gross in QX, XX.X% gross representing from $XXX.X of profit million, XX.X% up

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

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

due in cash trailing Turning EBITDA cash, $XXX.X Recall million in flow very net XX-month quarter $XXX.X $XXX.X of million strong. flow cash net was balance flow ratio. QX cash historically Free in our cash and to of prior the growth cash We statement. X.XXx equivalents and our with third the restricted that adjusted debt, up resulting strong sheet in was $XXX.X a ended QX timing. to to X% million and million long-term compared debt in year, primarily free discount, with

X.X% in costs, impact unlevered of up from year-over-year other which the Adjusted for year million, flow, million free the ago sponsor and cash costs, cost $XXX.X transaction Impaired nonrecurring paid adjusts quarter. was leases in $XXX.X cash

year-over-year the reflected quarter, normalized that. activity this so Our increase collections

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

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

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

year, QX For annual the July. expect we our compared million provided million, $X.X the revenue million guidance of be at $XXX range to full $XXX call on the up the to with midpoint in we in

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

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

at to midpoint. free an million margin unlevered $XXX adjusted unlevered adjusted the expect of cash we for in cash flow the year, full to of flow million be free the XX.X% $XXX range For

In as guidance. summary, and very year-to-date our once exceeded were QX again, strong, we results our

to free We best-in-class strong execute a cash continue at high flow. to level deliver growth, margins and

you leave I financial to delighted CFO have I'm colleagues to have executing. continue of I and and depart I'm a business for years, company such its confidence as I the in our in this and and of utmost people X last opportunity Instructure, As been to the want for position. thank analysts the investors great to say to my well. grateful all to the ability

I'm as Canvas As you I Learning Salt step Middle Lake from role. he I'll be you the term, in enjoy in share to if a the certain all will haven't well Platform near delighted the his Instructure, and already. as substitute I Schools. with math assumes Area that wish him away teacher leveraging role this -- Peter I'm working meeting

Steve. back I'll turn it With that, to

Stephen Daly

thanks to in and of shape to carry Peter? the track record XX CFO. you've your at we financially. my on for and continue He confidence that great has incoming execute our established. to introduce executive service years appreciate currently years the business Walker. I that Sterling the Dale, XX. Instructure. experience, now Instructure you, great will is CFO the left Corporation Thank Peter pleasure than XX-plus CFO, have of you've start We such more again It's November and on as every including Peter Check will all

Unknown Executive

Instructure's CFO. Thank you, to Steve. I'm next thrilled be

You and as Strategy scale CFO fit a were and with both Officer technology My culture roles my global start-up your a executive I reduce in team significant experience will values for Instructure's we responsibility to leading and next $X organic add grow costs move customer leadership beyond. plus billion be the will into as team. My improve that ownership $X.X inorganic and billion revenue, success and just a of to market-leading XX business in to and P&L Chief growth, with years from prior revenue and strategies and have impactful immediately designing from depth aspirations. in a global great and built public knew companies people mission-driven Instructure's in experience phase

to Relations. particularly about expand Instructure's to stakeholders the grow profitability. value as passionate business for excited Investor and we continue create I'm I'm

building I investor James roadmap, of all more that passionate the the early investor New and is my Raymond the meeting there. in with leading forward work attend engagement first I developing has December Conference done. look been of I'm also strong community team. Steve. priorities One Instructure's great on to will about finance in York our

this remarks. time, At line prepared our operator, concludes up That open please the questions. for

Operator

go afternoon William [Operator Instructions] Stephen Blair. to Sheldon at first We'll this

Stephen Sheldon

with working and you, Dale, great you, working forward look been to It's with Peter.

any between the opportunities growth cross-selling growth what on sounds low expecting benefit just on look there's think And deal, a detail an maybe from it accelerate here especially cross-selling there double-digit Parchment you could to that like opportunity businesses? there. do with But you're any First the X rate, like.

Stephen Daly

for Thanks Stephen. Yes. Yes. the question,

We acquisition. been about have excited this really

way the is we really think that's I with ability it classroom what, and in the happened what's industry and the to and the also their that their connects the do learners accomplishments -- what the it our demonstrate that, that our demonstrate skills learning needs, can accelerates one, evidence the of strategy.

-- is believe we've are There this. modeling, we've guidance around in think, synergies we've reality as models conservative, The done where as over areas that line I time. top set are appropriately been there we've as built the the we

the into so we do record points, guidance. cross work our or the all that modeled they comprehensive those both drivers those the believe product, businesses we're models enrollment, dual We students will for over accretive those just haven't us. those built works time, transition haven't badges be think the particularly really to as with growth that but yet well into We we about doing, our across share learning courses today, as the ability campuses catalog

Stephen Sheldon

admissions, this done getting maybe moving And sense. of ton also end the you've deal, by a stack of software a what Makes in higher into scope you're enrollment. beyond it. the historically little with Got

about move front has So see new be ed? generally, to a at how want just on software changed more you areas. curious your opportunities platform thinking broad in of that And if you higher to all into

Stephen Daly

will. you've this look where Yes. you the those we It's What around before for the are overlap is I I at a think business question if where learning, in there and say that areas adjacencies our diagram, as Venn well. an we're current would asked teaching looking as is to

be maybe we combine of see the the to of those X kind parts classroom it parts doing the And of this applicable in So of where for things one of organizations. using. we're that the where to in was what areas very institution us made new may that lot a are sense

with we Platform, still we similar some and of address our our the was Learn users side, very last existing there's new the K-XX where on buyers. a acquisition but buyers, did lot overlap

can look And up relationships. this expect continue like to us expanding opportunities to us new I So organically for to for you new us adjacencies nice do inorganically, experiences, fertile both where open just new provides to that and it continue their think ground up platform. open yes, us close budgets, to

Operator

Stanley. We'll Morgan to now at go next Josh Baer

Josh Baer

I for you bit the attracted you to next were and you Peter? the finding Dale, for? of you it opportunity? One for that was looking the Steve, led Instructure luck good to great a could things this most into was And ahead. some with working hoping you were one Peter, ultimately, CFO. process What talk what for what about then And

Stephen Daly

Yes. for asking Great. question, that Josh. Thank you

took, we very conversations had about that process looking a where I wanted was do -- things. when, to do, this those process. wanted what to deliberate were We Dale he it was some he So with a

that PE being good And know growth. worked drive the Street were have articulating levers looking had that in at investors to so public that are has that help We markets. growth, for and ownership, somebody to wanted look approached we the to understand in able great had for as to very growth strategies of within companies the that how experience we it somebody our models

long felt for me while like helped was felt very would work term good and We how recruiters. how cultural he fit. of And of with about do investors work. like that he affect key He working long It understanding could really passionate met that the We forward our long to the business and a engaged ours explaining with with team. the a them he deal would model the A with mission. would and good his drivers was like the we get results a different sealed a those a lot of public Peter detailed kind We've people. this. the process. brought What well markets. approached the going lot way the fairly way of tenure like experience a really understand he and I took of

a find long it want and right Peter, process very was rigorous to to the pretty again, So person. you share?

Unknown Executive

Yes. Happy to in. jump

So on was the by Instructure. can passionate first and been what a I'd people about basis. do say I mission global for attracted Always of that extremely education

And a got the what that's how so brought operates interested, with fast of growing. starting is me TAM that in. in. I And I first large then TAM once the process company diligent have pretty that is How

large So I excited about that was rate there. TAM really and information the learned as Instructure, about growth significant I

Next, the then it X. get is I was for the Clearly, involved through from management first and once public. and a is #X company people in the for like to at very from a one rest goes of a ownership, the team, firm who met interesting markets in deal the that, number me natural who And a with the they the what the Instructure just with play. the company Then culture. And is #X still very great that is the I I market. I but sealed day company time look great and that's Steve fit it really company. look the or Found also owns

and we're forward. all value opportunity create excited going this about excited to the going about really So

Operator

now to at Kurosawa We Citi. George next go

George Michael Kurosawa

working and with to the Dale. Parchment over for on on you start great the Steve, Maybe deal. I'm years, to

customers. on much if there You with could disclosed does that what And Maybe give customer overlap is footprint the a how existing little color look XX,XXX base? you like.

Stephen Daly

Yes.

customer in higher the customer within those expand the -- when are base. ed ed in as our customers. our footprint We within those base, there Parchment's so the -- we with I some have will even look well, share is we overall We and overlap that higher at market part joint -- leading obviously, relationships as we when is relationship -- exciting the

that to But kind -- as as will further so better we feel And that we'll overlap know closer we able that on has, be that list little us disclose we'll to to base get customers we the about opportunity this reputation show have expand a Parchment one is. our a Instructure be to that similar our of good we we significant with the the is And feel we customer that share there's customer Learning bit to you have able customers. those they and deal, where Platform. close that close the relationships with just for

George Michael Kurosawa

has understand where the That makes could Parchment and of in then brings. you some today. us kind level help And Instructure credentialing platform in capabilities functionality the that real Maybe just of sense. ups clearly terms features

Stephen Daly

that willing you most they're more words, a looking I more and full experiences. making, learners since there's Yes. particularly to So for they're pandemic -- lifestyle, or up a your mobile willing for they're what kind to And whether the their more use and much that that right? and we're time level where all, is that's comes The are first couple in working more match, of transition convenient go some areas students seeing mix see to of when it are they're to will, -- their if to to educational that school. much of do way the

that share process. ability those -- think both fall university area footprint and those when And within going while in living able a be high can school to the decide they're to the their transfer around to college, winter. well during to to college as the so get high there's an the whether of our of school, enroll a map students, credits kind can ability an number completing Parchment technologies they're the transfer that have when dual community go home, be And that is able to we can to we state our so that technology a courses local student maybe courses allowing they're those but they're to credits in ability institutions at acceleration they road share customer that a diploma. There's in system where around credit and as get in to

learner record of The our lot is leverage other data a to we and that a we and that piece being feel work to faster area. around of comprehensive students, we're provide map that got the rich able road can development portfolio for a in early done record they've on go in much where

exciting that road going for really long-term our to map long-term few a us ultimately drive areas drive and is is we to think going growth. drive So

Operator

We go Joe now Baird. Vruwink next at to

Joseph Vruwink

happening past, starting take Is on year this kind wishes that higher then why going be want Just whatever But closings is my the ed and to your delay best to teaching slowness was maybe elevated in in now? as and this in it to and talked ed. just and well? higher XXXX. makes to go of experience. maybe substitute to me on XXXX kind is about a in should back you be environment you've starting comment RFP next guess about of and that activity Or out RFP closing? X in is, the deal Dale to the still question be into made grade are what's you I And get elevated just it to just recalibrate the teaching

Stephen Daly

share ed. the American and North better edutechnica is We is -- in only felt It's gaining The competitive the Yes. gain portfolio overall business, the our data Thank question, breadth -- X per just our position. I'll share Canvas LMS you about never the momentum Joe. to market. our start shows higher that continue that with market we of in so the for in really I've

good. I perspective, that feel from So really

are we're our good. seeing is it's seeing What because -- activity we interesting is

acutely to years space, more deals feel is have activity right, we've the overindex it's we're North highest of that XX% fact I But a But seeing on the RFP been the higher the these right? telling in ed. in still enrollments, in trends feel in really dealing stimulus higher our and we the X we federal surprise, think us and the had world, talking of about we challenges. education, of deferring it these because about not it's of the higher customers where American the macro with business. across they're But again, look, last America. In mean some pace U.S. little And removal North world across our is, -- in what projects. mean RFP RFP bigger in some of slowed XX% we it, the I don't they're ed declining when around about a ask funding challenges, budget all I of

go what strategy student? the they're nontraditional our out. we gain streams? button How being so do to starts their as transformation so and very strategies get work they're is us that address projects that look, is -- And what through do hitting they're through, telling this. we've shift, thoughtful trying And to How we digital go to until pause mix got figured new revenue We're and on they our about work strategy. our what is,

we're about perspective, -- very nontraditional from traditional that really I address Now or our good to it's feel student. a well positioned it, because we're whether

to really space. is of It address conversations I to grown portfolio that our of years. M&A are long growth in able long-term be again, adviser. both that term. seeing we're in as the that that's pace to able trusted to several drive to we're for today closed. been the last at we bodes has again, the As we're It It's activity having going the in active. that slowdown we're products more deals be not the us really seeing And a And over this because well temporary believe fact those the them, with have table these organic and we through continue

Joseph Vruwink

And development then terms to this, guidance if financial of at just Is what you're good. implication think really in alluding on this. if of you RPO that implied follow-up assistance great. any see particular just I give this look you of just That's seems the are, your comment? of or can Because there or a the bookings related kind kind

backdrop? you're I I'm numbers. you're could higher maybe is in guess the delivering you're so with taking not share difficult expectation to your like XXXX it manifest trying growth get a this maybe how to that totally case for because Instructure led And to more ultimately an and ed on

Stephen Daly

will temporary we long-range those deals. the really We strategic be good, again, positioned, do in this term the not it me -- will slowdown, we're a do these you, well XXXX, to I a is plans. Yes. is, guide prospects feel we're those questions, growth And right, good business. Joe, I tell to a slowdown seeing but to And XXXX. to think try start like we're we through you near are for institutions of right, very but at of long-term What Joe, lengthening the really particularly like guiding kind their as said, are get work

Operator

at to We'll go Havemeyer next Macquarie. now Fred

Frederick Havemeyer

Dale, absolute with And you. working firstly, been has it pleasure an

really honestly, gig working substitute have go, you I'm see That's envious with a And a you. fantastic. I'm to forward teacher already. that Sorry Peter, little up I lined but you looking to

in Montana your you release, this Curious K-XX competitive hear to called for Pasadena, education in you out and respectively. called that particularly the quarter, interested and press and I'm higher the win some what Just a for competitive hear Instructure? I'm factors aspects deliberately more quite drove of differentiating What the to that curious those those wins. little led are here, to qualitatively wins? out

Stephen Daly

more journey, move a right, be I university. right? and great Yes. do their there to It choosing, -- by particularly picking we're went X question, my went student kind is are better more applied, The student got I It's this degree. how in want this They at I trend through to It's the I for to address more right? to learning mobile. mobile nowadays. years, able more systems of much that be expectation, much It's the we a seeing change looking used education Fred. and towards

starting this Montana the student California Canvas. Community we're this so what's and say, us what consistent that experience best-in-class systems and is the that best seeing that? And starting, student way like College Alabama at provide is to a look right, to what System, we for And so across are saw, they're Montana, Community share be that ability students we on looked courses. We somebody to able okay, at said, -- with experience. They standardized that for like looked particularly that kind and want the they at was to of they want said, College System is

part deal, portfolio of that of enough, there. Interestingly the which is they had Parchment part as in

Montana, them make within transition and we make we that do so K-XX from and simpler. see easier And we looking systems how them at that see

I was of factor. relationships large have working which them. share that was we ed, position of advantage technologies have and that the that community on we have that well our the stuff scale done The the ability across institutions fact other. would fact market-leading a demonstrated decision we've they we So catalog, for we've higher to that had really in with and some of key nontraditional both for we the say, us, implementations talk some And was with to with good been that that to address then that strategic have K-XX a things can similar the each the system

big All factor of market-leading both even those them the omnichannel to has we things had of the a past the X that decision ago really pieces years all for was on LMS, What platform that top we've added than and that traditional the them. but much that fact address is in a have broader the in referred nontraditional.

Operator

Brian to Peterson now next at go James. We Raymond

Brian Peterson

with you. I've really Dale, working enjoyed

there to over and at up for done some in a so Utah meeting Peter, the forward You've lessons. look math maybe conference. I you the lot can taught join Joe remedial years, me of

Parchment, maybe you million products on revenue. in the adoption Is share what a ahead guys anything have or can you white that platform part of most space? curve there incremental that products some just and Steve, $XXX mentioned about TAM, are the So billion the their in $X of

Dale Bowen

good a It's question. Yes.

closed. We me a do -- let XXXX review when a fulsome much level, guidance this high just when give But has deal you after will of our our we plan we give more you Brian. this

is credentialing between the of a revenue, product. at and down the the TAM breaks pathways look you pieces As the lot that overall awards product, which

part their around transcripts a the Within is good, business credentials, grower. diplomas, and steady of

we're is that space mix requesting is amount in What the credentials of and seeing individual that an student that is increasing.

this And students requests expecting, make right, of so transcripts. that these mobility they are more with to need

growth student through that perspective, from we number per So that we're seeing. see the just

be it addition, portfolio, broader, that get an will of grower those as the you as In more in transcripts about get think a you context about our right, in start -- as think opinion. outsized as to it badging,

days on process. we enrollment sharing, dual it's more it's about the conversation when much -- talk selling a a course And the it's in becoming much topic pathway more still of side, early of kind and

business as area will that show makes outsized the rest of well. That growth So versus sense. the

Stephen Daly

company They in rate believe We worldwide. the grow there's kind based of me above infrastructure have of the Australia. company growth out a based international international. to Brian, let that as small They footprint bought just add. a very average was we our opportunity an for internationally that leverage

Brian Peterson

are customers from going what struggling nontraditional doing there to they of budget some other your be be as how of up this would just are to Understood. maybe there? questions with? following at it activity Is on and there, be those leveraging you ambitions just dynamic? an of may I'd more the you the Or and And noncustomers kind what is of say LMS look versus prior And curious year. a your it's Steve, lens insight Canvas learning priority some existing dynamic? more a of there

Stephen Daly

a it's question. good No, Yes.

the have I bit both play. for and going future. into think new of in they budget revenue little been And need we're that right? out tight part and the and bit education, a come find We priority streams, the to prioritization, are to a decline. They budgets enrollment is -- And to it's higher we do of figure so little right? that of got the know what

if we outside do experience? looking experience the environment remote outside how Our to into demonstrate learning or right? hybrid of to the learners they're all in then of that lot the out challenges, our traditional demonstrate extend energy, how the we are grappling we do we're existing X are conversations will, for about Canvas we customers skills, around lot same as omnichannel How to of go create the this student do or of with that all walls, the either -- And do are you a getting person? workforce? for how A

a rates. went over The our rates, massive so so right? on because asking just quarters, are improvement customers last And our cycle sticky, through renewal our also, year-over-year we renewal X And rate the the -- saw renewal for we solutions they're thing. are same

also address to our platform So the really as opportunities. doubling they're platform down on those

Operator

to with go Tillman We'll Terry next now Truist.

Terrell Tillman

in a And I'm be you. to couple was acquisition. you on question advance I'm I Parchment to looking Congrats the then a I on going and a first sorry first, congratulations, on of retirement. amazing multiparter. you're Parchment I actually an know forward follow-up. follow congratulations hope might your the up teacher. questions had And to that in prior Dale, Peter.

On curious and opportunity. billion in of this really TAM, X% some you but part this monetize where are fast-growing awards, credentialing market to the Parchment, to biggest build like, small component, in I there Just $X donors you of is said pieces. like at all is legacy we it's interesting -- try system? share And $XXX at Or sounds oversimplifying it look kind biggest are million et greenfield, the work if folks like terms I this look That of there's their point. But seems own share. small as kind if a did we pretty cetera, it, is of know market? brownfield, and I it this the way at and probably other the Steve, awards think,

Stephen Daly

came the relationship back view with Yes. The view in very and are the of on that in the National our they NSC, space Student feedback -- this as their positive have primary far technology, And of the the the as shareholders Parchment Clearinghouse from diligence, Parchment. customers.

that in so And right? a the business. high really when perspective, the retention. That's diploma kind XXs transcript pretty business, the those and It's at X, that's of to from stable that is of gross is gross high retention. -- -- it is And you it mid- so side very look

opportunity, had where growth. we'll sale learner record, is market new those that a is again, greenfield perspective, the The share -- bit we've comprehensive predictable, opportunity is we about a greenfield. problems. of comes drive which to where the credentialing, It's to pieces product, it share. of and in interested type from very we The enroll badging then I of those that the starting Parchment than when had dual strong And And to of the it. emerge. market that a pieces is the were is is a it, takeaway. is historically, able to because And of are of greenfield reasons So solutions core more That's one the Pathways all be haven't it very right? market number that conversations really sharing like new said, is a

So see kind the areas of key those are drive that we growth. can we where

Terrell Tillman

you could bit of this just the feel follow-up it does more by is it I international. same share business, Or year-over-year? like Dale, the North related percentage actually question guess does America And the amount higher in Maybe what revenue growth is to the it was seem a being impacted ed? resilient?

Dale Bowen

Yes.

So the But detail you the we'll little about. all is Terry, days, that. on next Q here the of fastest-growing talked that segment of XX% our international we drop in it's We'll more basis, XX. growth couple was International out a give a currency constant still on

pretty with it. we're so pleased And

Stephen Daly

meet we at? find Australia, student, how students this new about we everybody are strategy trying week do transformation see higher with North where nontraditional And and in they're headwinds but institutions is strategies. long-term in to higher there, spent from streams, acute questions digital grappling maybe in of answer perspective we question of see level not -- many just the America, ed all a second we do asking a not are that revenue your the same Terry, a sneaked we similar the address is and questions. Those that ed, that things do all you same in part to do how these the as I where

Operator

at We'll Au next Devin to now KeyBanc. go

Devin Au

Dale, to Great. asked about congrats Unlike one to Peter, my and wins end. large you, continued more. forward you see with nice working it's nice and looking from that question been When to in Maybe work just in the with K-XX? K-XX, out deal of you within that Or given deadline in weakness cycle, called any seen you in segment, approaching? uptick which the ESSER ed, sales perhaps uptick RFP sort in funding whole any the just closing higher have some market.

Stephen Daly

quarters, right? of There's K-XX. been in activity about activity of has a lot -- the couple we've the talked last in Devin, Yes. been

depending still funds that ESSER all there's X/X committed yet. to the the been right, estimate, on haven't of You're -- X/X

some And seeing in so where we K-XX was see is good activity activity around Nevada of the -- that We're last quarter. cross-sell cross-sell the assessment. probably think this of in an our we'll do MasteryConnect. we're seeing we K-XX good And greatest example

funds we next this So expect season continue the finally will ESSER when buying that through expire.

Operator

Needham. MacDonald at Ryan to now next go We'll

Ryan MacDonald

sounded seeing and But you to that that just interest pretty of high a user maybe starting seeing post cross-sell in what free conference. on of there know for like at ability sort of platform I the was you're in what launched your bit in Curious the some more. with Steve, interested the it to sort functionality you're And K-XX. just event. the start Learn it.

Stephen Daly

Yes. We've seeing we've what we're is a a -- lot of activity. seen -- of lot

it start So growth. the as pipeline of we've forward, put our conversations we some good into made that those and we acquisition able hands be sellers seen to to carrying

look And platform so it's Learn high. as interest, I extremely the of at kind

need. see We continue to a

interest more that technology pipeline Our this. customers we're are what doubled this in and see telling that us has during our they're since think rationalize And than that -- all to the we it's as about acquisition, seeing pandemic, did looks like. of real was trying the deployed we we

of feel as that pretty and talked that about I minimis into XXXX, about level interest de in the that's go being confident So we But contribution XXXX. I expect the we activity going seating to just we starting our going base, as to And believe strategy customer part more even is you and about, Learn. that's talked pipeline. drive with on hold in take of

Ryan MacDonald

then And that industry connection the in I the maybe at Parchment. a got on organizations. color. enterprise into and from noticed just helpful workforce, website company looking one Super organizations sort of they've

forward? a or this should they of portion find back validating about as credentials the to this and Just new them sort pathways that go of learners, for those think student of loop help nontraditional can that you sort try of curious how of Canvas into that on kind the upskilling role. strategy acquisition we maybe those and then workforce if close the bringing a acquisition moving Is think

Stephen Daly

deeper how give -- talked the we Ryan. think we exactly the play It -- but with today, should workforce. within about it you relationships us institutions creates about inside is That it, that also connections does

opportunity us through So become the with of a over the connect term. will the and strategy, time, the will opportunity record for more become much important to for that learning students long part comprehensive learning outcomes that

those So yes, about relationships. we're excited very

Operator

we'll at to go BTIG. now VanVliet And next Matt

Matthew VanVliet

a approaches over last the Maybe that around years. you've Steve, just it's catalog some on that omnichannel-type a maybe helped working the now or this product highlighting accelerate? had gaps with catalyze there. been other you to the you of with of Dale, done Parchment the the last question, pleasure couple or road little need of some map, having, deal the get on whether much maybe customers, the the of but follow-up conversations it's How been

Stephen Daly

have M&A a very -- map. changed I deal done. active getting Matt, urgency not -- Yes. This don't we the the -- is I'm it sure of road these are necessarily

deals an with for seeing just for We've But be have have in of We business, done, opportunities. over companies. there's order active it. engagement as years a different get Parchment with to had their X.X ready lot as to partnering far parties conversations both understanding if

them so it's And being us need to a I fill a function a think, more feeling hole. necessarily of of ready, than

perspective, out team's address students. up have this ramped say will to the go really I Now we've in conversations probably last at got X we how of months, perspective, from concept the to the had the that conversations management I've had from InstructureCon figure that my these nontraditional

timing the perspective the is for -- from at time perfect is I front of need a because base. is The mind. the think customer So our hitting when it pain that mind front of is need we're

deal a it to time perspective. is -- market -- for just timing from it's great us think a I do this So from

Matthew VanVliet

the sales on then And longer quickly helpful. cycles. follow-up Very just other one of some

sort some If make your opportunities eventually you these closed, in does and the push these more is sort deals some it's, is this next try -- season? of get Or of to some best interim catalyst already over summer these those as were of estimate when could happen you're on this on forward starting before again, the of of feel cycle line buying buying to the big likely? like that of to nontraditional maybe the next the goal you working

Stephen Daly

right call is to try this Yes. In to That's our international, big one a tough quarter. now.

deals about we go share, whether forward, and would these view meet QX they say continue getting then do so North good see We'll the still these year have we of of around to talk school time winning, cycles have gain kind feel to are of I kind deals matriculate. impetus -- now. to lot as better we'll There their And to how in around to done, a we XXXX. for right? we'll as America, decide is the for in And about we're this see that a again we instance. them budget

I a do a We're in about when these win good come. close. when great feel crystal we'll now, right do do far But will ball So them. Matt, I as have to again, position as I they -- don't --

Operator

Noah now next at Herman We'll to go JPMorgan.

Noah Herman

well, you, working look been it. really It's to forward with appreciate you great with And working Dale. Peter. as I

little a bit international to partner program. on touch go-to-market Just the wanted

you about on are you layering far strategy? into how that Parchment thinking along Just how are that? And

Stephen Daly

Yes.

We and we So talked some have some Philippines talked going targeted perspective, we about Philippines. won Japan countries it well. kind some as of to from as is those, the that had continue program that about partner we're refine the is. good in after. in that one we move model do a forward. and of deal just we We've We've wins

on now, is. support to be our region, that to our focus of on focused ability we're expect that's focused partners I We're enabling. lot and where -- really in of it's again, So the a right -- we're -- customers

that suspect we'll still over good, the space, in time. are be the see growth while will I And dollars grow that and that small

add we've some think up So thing that for is to opportunity open areas the I -- some us that's I that that It address give it markets had does would limitations. us. an does new other

but instance, have. us for direct and So gives relationships contracts go and in to the don't Philippines, we access channel, that it we government

get they're get that that doing the as an we into that evaluate really to digging integration at haven't continue a long together and for as any we It's integration, as a part into plans, international that channel we'll strategy. term on we'll acceleration integral driver growth believe we perspective, partners. From with modeled that us the to of an area time. to key due part use in it's in our them the Parchment So

-- frankly. models, but any into And not so guidance of again, built our or our

Operator

We'll question Brent take our final Thill from at Jefferies.

David Lustberg

to the tough is A way around This David there's for on answer know on. this lot talk is learner, clear a of super if question a it's a give what nontraditional And so fairly do expect learner. we if you time? small? where can frame of to percent XX today that, look But helpful nontraditional I at years assuming from Brent. to comes probably business the over get this maybe that

Stephen Daly

pandemic they the over really is I still journey. per last and is pathways is learners different I What Yes. out great become will -- And a -- break nontraditional in se. that the learning And right? we learner the mean the don't changed David. the want segments say That what's happening, learning -- engaged to follow that in their have since pursue since much is more question,

have drive have, seeing more a a we're to driver and an across to growth this continue existing our work be business. opportunity us lot as than their through historically they so historically students than they more for will strategy. it they And for the growth as It's customers address students long-term an to opportunity

as mix. our back with into details we more We'll long-term as you -- turn corner mentioned. will, kind we in growth So we we'll details get early about XXXX, more we the models update as of our to -- -- and days, you but Parchment, about will a Still XXXX. growing it's growth

David Lustberg

Got you. on just quickly And beta. AI maybe sneak the if one I just more could in

and If you just it to remind you can to be any would just relates as us feedback bring guys bring us us experimenting early with speed AI on helpful. -- what are

Stephen Daly

Yes.

exciting. We're early betas. focused on. those that our getting we're There's is this in from few are areas that So involved a feedback those customers, real-time

one course creation. So is content and

be we allows natural for language. So to inside able that able have be of to allow, will teachers Canvas courses to language us use natural models instance, that to create

For as use headers that. instance, that to it as I and wanted these to have content create kind X columns in like well stuff my course I and of questions like and quiz want things

all is they piece is to teachers second all they're search. across content be The know content, to able to what do and search to ability around for. to what we for the students That able in a able semantic it and call to that looking have be don't exactly way be course

sort deliver of It's and artificial kind and Boolean used we from Picasso. and use a InstructureCon sort about the able didn't by "Hey, all example the to mandolin to student through results I that perspective it instance, having using remember talked the teacher kind for logic they was intelligence violin, So about painting -- talking stuff. to of really they without says, a that through and my all

organize where able in data use third to processing And and here teachers students and able I for Again, lives way make all start it have for as students use Show That are language can it missed be easier as goal natural that. in kind the which It's to X teachers naturally and administrators well. learners -- that so "Hey, that assignments. administrators can and with have say, want of a me engagement. this." we that -- go well make that is to create the more analytics the is for simpler struggling -- to as they see the for then is are really to intuitive

are now, that in right those really areas we're David. experimenting the So

Operator

things afternoon. I'd this that for any the to for have to And . all we like Daly, you is hand Mr. closing back questions time comments.

Stephen Daly

education help quarter and Parchment of going value our us, improving to the while We another opportunity time. alike. technology Well, everybody. or CFO. are Instructure. unlocking to to Peter, thank we Combined adding profitability solid teachers drive matching believe And incoming to welcome we our over and the and learners you continue once excited for with execution, joining of it's for again, new growth We're about team as believe

continue we investors, you, to drive Thanks, we quarter. and our connecting profitability will to everyone. growth next forward for look So balanced with and you

Operator

thank your you, that remainder like Thank all gentlemen, Earnings for and Instructure's of us Daly. day. you you a XXXX joining great Goodbye. all wish Ladies conclude Quarter so much Third and to will I'd Mr. Call.

Instructure (INST) 30 Oct 232023 Q3 Earnings call transcript