INST - Earnings call transcript Q1 2024 | Instructure Holdings, Inc.

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to Instructure's First Quarter 2024 Earnings 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, Matthew Wells, Senior Vice President, Investor Relations. Matthew, please go ahead.

Matthew Wells

to Quarter welcome Call. Earnings and afternoon, Instructure's XXXX First Conference Good

And discussion, will results to to press this in today. quarter discussing our release remarks. presentation, accompany updated earlier We I first review announced Investor and Relations be encourage earnings uploaded we've an guidance, website. as published alongside to presentation prepared the you our our

Daly; have and today, the we Instructure's Chief Officer, Walker. call Financial Chief Steve Officer, Peter On Executive

remind to you materially presentation cause to today's uncertainties we conference statements. earnings like Before to from begin, may and that will These call I'd differ that expectations. results our statements risks forward-looking listed include are subject and

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

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

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

call Steve. the to me over with turn let And that,

Stephen Daly

I'd earnings Day and Matt, like Investor call. XXXX you, thank thank Thank also quarter everyone joining you for year. attended first to all this earlier our who our

and of our passion opportunity that I did the for business, commitment lifelong us attend, resonated. grow ahead that to those team's learners and hope to educators For the our

is into Day, the X, during Investor to learning that lifetime that learning and off as powers opportunities. on our Slide Kicking a for be it turns ecosystem shared vision

their vertical learning learners the well to we in journey. are education, leader across positioned lifelong software As connect

the ecosystem the America. share North in is Anchoring market leader the Canvas LMS,

and whether go-to-market revenue company the we making to they excited partner degree a by mission as nontraditional become for believe are create or $X billion by are platform, a XXXX. We deliver structure a real durable learners, us and learner. across traditional seeker Instructure our outcomes we long-term in ecosystem I'm invested are We the a a investments plan company set growth, position to to the

Turning growth. to Slide year-over-year, first XX.X% highlights. X.X% constant subscription $XXX.X including currency million increased including XX.X%, quarter currency X. revenue $XXX.X X.X% organic I'll and Subscription revenue Total organic discuss growth. revenue constant support revenue million of increased and support of

rates our reminder, constant exclude growth of As Parchment. the acquisition a impact currency organic of

Parchment revenue business exceeded Instructure our expectations digits single recurring digits and in for combined revenue the Parchment quarter, year-over-year. In forma annual first grew high the grew year-over-year. double the pro and

our in with In solutions addition, core growth medium-term and growth from annual was our targets. line revenue recurring

As we and adjusted of of significantly outlook year XX.X% we We and ranges business we move XX.X% will year outlook Peter across performance this later grew EBITDA to profitability, $XX.X benefited margin spending to and expanded as the in continued this scale year-over-year million from discuss our a shift and in to adjusted EBITDA quarter, our XXXX year. our shortly. the our of through accordingly. high full metrics, you guided positively are the guidance end details exceeded revising quarterly all fiscal take

We teachers, for that continue and highest areas students also innovate impact to the have will in educators.

LMS we AI-enabled are the DNA, the our a Day. space, innovation our highlighted we customer-centric approach solutions similar and As early to during is Investor taking leaders at refining in that

we engage have positive, been while customers positive our driving how indications day-to-day community and from beta continue enhance best around outcomes. to Early to their student

the taking place at XX innovation X Vegas. July our showcase Las to excited are in XXXX through We InstructureCon

impactful student success spotlight some During of customer enhancements product highlight share event, most stories, the we our and will outcomes.

Turning to X. Slide

we are solve position and large, company, just software are problems investment of more and having we to our customers customer for a in vertical opportunity cross-sell that a our to asking only loyal base. starting are in us monetize. As a the These created businesses has massive them, referenceable enviable scaled growth

and education on focus the Our excellence. needs focused laser remain as world-class customers expertise margins our contributed on have our of operational we to

portfolio, We of In have that invest we mission-critical business in us we operate business the the platform, opportunities, allows in summary, to large our position created durably Instructure the through both and and profitably. model great growth model diversified grow nature that a that our flexibility to organically believe product in us markets world-class M&A.

X. customers recurring on Slide the we continue Throughout value underpin with to Flipping in the deliver. and themes that up partners, conversations quarter to pick we

continues our universities pressure. in there level and funding that attract strategies to more as in changing are of an regulatory to commitments uncertainty markets retain environment schools be learners First, and has and developing a

important are transformations. digital these customers decision-making continue as headwinds even remains with them macro our This us temporary. help grappling to gives come remains activity As RFP confidence challenges, these to they to elongated. are their that high navigate Instructure

platform partner be resources as happen. especially our and trend, and of EdTech pulling us and the consolidation. portfolio solutions, as are believe discussions tech long-term for the consolidations broad-based reach continues of position Customers our see Second, of as optimization their expanding This well stack. the a place consolidating LMS digital to of products, and priority, consolidation the choice transformation ecosystem for is partner our high extensive us Instructure as to is for we technology the a into natural a effectiveness more

and learners the addressable the nontraditional of is that shift to Third, continued programs can and certification we reach. our customers increasing market

solutions, existing I'm professional to the created our adopting we and our pleased with customer progress newly nontraditional see are seeing with teams. from traction our particularly learning customers We continue

can nontraditional for are only Parchment, and end-to-end provide With traditional the of that addition a we believe complete we solution EdTech both learners. platform the

demonstrate our base. wins breadth our highlights Slide the of standout I'm customer X, offering to quarter of handful that Turning the the a share customer and to of in on excited diversity

our headwinds, win University to customers American remains key elongated, School significant North Despite win-back High While of a new markets Alberta LMS logos in turning continue the Union core environment a as and us District. we the such to are Tempe these competitive at as strategic partner. decision-making near-term

stood The future. Alberta footprint Credentials Canadian the School XX,XXX us improved over of on This displaced and experience High a Canvas provider. an LMS, based Instructure management another as XXXX, in services Union that for a lackluster was solutions user University competitor win district excellent District of across education the additional the the power to platform. LMS after market. out and Studio, LMS across learning to university's system the platform teams with return platform a in Tempe support its and our legacy decided selected Instructure experience we will as is the learners. left notable Canvas

Across and in Studio areas our Canvas nontraditional learning in located we to platform learners. the growth and professional than as LMS, of XX,XXX power Parchment learning. University Adelaide Australia, positive momentum Credentials business, across continue more and internationally see selected to a

their Our Adelaide's meet ambitious focused were on platform aligned in their to skills-focused they offerings preparing mission are with a where journey. students future students educational for and

Dame. better broad is manage and learning Already evident selected record their Learner portfolio, The accessible learner Parchment, Record including Notre credentials the of support addition of Parchment's journey. they University with more value to customer, and help staff the their comprehensive to Comprehensive students Parchment a a and of Canvas LMS and Instructure's

familiarity and And traction Studio market. gaining as learning of Instructure I'm in LMS association. professional power Realtors I Indiana. our teams relators strongly this education encouraged the to focus with earlier, Association Indiana more members the platform of mentioned and of by of resonated than the the the XX,XXX training with new state and in are experience Canvas The Past selected

X. Moving to Slide

the and of the business offerings. model QX our Our durability breadth our demonstrate of platform results

leader in in year. growth serve the a well making LMS as deliver half we expansion space, and profitability As in the in feel continued investments And ability are scale. growth delivering positioned Peter the of the confident the will at while we platform future in margin to educational explain, as our second to while

enter buying summary, prime the as the season. excited In about I'm we business

partners for is learning. with we of addition Parchment, enhanced as our ecosystem the position unparalleled. students modern Our have further the choice of and educators, And of platform

innovate engaging to impactful and We solutions. educators deliver most partners thoughtfully across by also our ecosystem to the continue

world-class this all makes is this continuing really I'm while possible. across that of All drive proud to margins. of done world our the team

With more in that, over will now I detail. to financials call the discuss turn Peter the to

Peter Walker

Steve, Thanks, everyone. and good afternoon,

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

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

and profitability, X.X%, Total excludes impact XX.X% we Slide million, constant FX for points of delivered guided and In of the with combination XX. we quarterly compounding revenue growth minimis. $XXX.X which XX to quarter, Turning Parchment. revenue durable a exceeded of growth headwinds were of first revenue basis quarter currency metrics. strong approximately to grew de organic the all the

to revenue for quarter support Subscription growth with organic XX.X% Subscription and revenue revenue increase Parchment. first over the growing subscription XX% support total basis and in $XXX.X impact excludes total revenue revenue point which currency a million, growth, year. X.X%, accounted prior of and support constant outpaced of the quarter, XXX of the

quarter revenue and months. X.X% other at next million, $XXX was year-over-year, XX X% to accounts million. for $XXX.X up end year-over-year. $XX.X performance XX% of over grew first and revenue, year-over-year expect services RPO which Remaining revenue, just Professional we obligations total XX.X% the increased now million Deferred of recognize of the the X.X% of to

Let's turn Slide XX. to

on us businesses. the digits annual strategy growth and growth businesses revenue strategy Parchment in As deliver growth discussed the the recurring pro quarter. forma is first diversifies our our our focused positions growth and algorithm during single Day, high core for Investor in and Instructure to combined This

recurring statement, growth unless the We XXXX deliver to billion on XX%, of our $X billion annual discussing revenue to also please in that, are In by non-GAAP velocity. basis. of note revenue path annual stated, otherwise recurring $X the are X% medium-term a revenue to and exit income all remainder in positioned powering organic references

XX. Slide to Turning

cloud flywheel gross Subscription expanded deliver expanded scale, year-over-year very XX%. strong, reflecting the share to our and continued in efficiently platform XX%. quarter, the across profile our more basis non-GAAP basis underpinned XXX support our margin a of operational gross of In points greater coupled to year-over-year non-GAAP to XX points platform Our base. gross revenue, with margin margin and solutions customer excellence profit first recurring investments by remains

the XX. Slide year. seasonality we leverage of expect of the in growth. to investments, to from benefit organization to revenue grow in of shift Turning the the a In upside some Operating profitability us ahead positions reinvest saw such, of this profitability as approximately as QX, This we continue expanding to and continues scales. half remainder

of income driven net million $XX.X operating XX.X%, delivered million points adjusted EBITDA XX.X%, And XX.X% increased of XXX year-over-year, expanding year-over-year. XXX income margins by of $XX.X Non-GAAP basis year-over-year. similarly, of $XX.X of profitability basis delivered the expanded in quarter. million expanded Non-GAAP margins points

from and of interest and $XX.X similar free primarily $XX.X were collections early free cash line of million million higher $XX with Operating our negative the to of Parchment. was year. million negative flow during in QX I earnings prior year acquisition million million negative adjusted due that expectations flow negative call in discussed to expense cash Unlevered cash $XX unlevered $XX.X QX of last and last compared year, to of flow

cash, the of with funds Let's cover decrease million metrics. cash to turn on funding leverage The of equivalents, $XX.X balance is restricted from cash and quarter driven first cash ended and behalf held to year-end customers. Parchment in XXXX the We $XXX by sheet of XX in acquisition. the million Slide

X.Xx. ratio leverage Our net first was quarter

X in quarter. of first ratio calculate However, this Parchment's been captures Parchment's the lower months have prior we ratio leverage EBITDA, months adjusted would EBITDA. the calculation the XX only If using of adjusted leverage the

are track with of leverage for approximately year-end X.Xx, on provided ratio the at net Investor guidance we consistent We Day.

unchanged remain and a priorities organic sheet. maintaining our IPO, pursuing growth, allocation capital since balance revenue M&A healthy Our investing in

discuss our and updated QX now year will I full guidance outlook.

the in midpoint. the to Turning growing at quarter, revenue the XX. $XXX.X In Slide million XX.X% year-over-year we of $XXX.X to range second expect million,

EBITDA basis in of margins of $XX.X XX.X% adjusted in of year-over-year. expect million, We XXX the million to at range the $XX.X midpoint points resulting expansion and

to XX. Slide Turning

growth QX incremental We we the our acquisition of and revenue growing range the beat expect the full in now the full For includes to $XXX.X reflect million year-over-year million, the guidance expectations of excluding year, $XXX.X are an currency at This XX.X% raising constant midpoint. midpoint, revenue raise. to and with revenue initial at of impact Parchment. X% organic of the consistent our

high the business. We Instructure pro recurring revenue also in Parchment annual digits single forma and for expect the combined

EBITDA. adjusted to Turning

$XXX margins of growth the We raise million of expansion to partial in expect XX.X% an reinvestment results reflects full year million, XX year-over-year. of QX the adjusted EBITDA points a remainder $XXX midpoint, EBITDA of year. the The range basis $X.X at of with initiatives million of in adjusted in and target the flow-through

cash unlevered the of in raise free midpoint $XXX million to at reflecting XX.X% at expect when increase XX% adjusted and year-over-year midpoint. million in flow margins last range We an year. represents the the $XX of $XXX of million of early $X.X adjusted for This a or XX% million, of collections QX of

XX. Turning Slide to

We at Investor our medium-term reaffirming are Day. shared target

annual revenue believe, growth in XXXX are revenue expanding revenue that and We As targets, well will to margins. the the annual medium-term recurring scales, engine of revenue billion by and target in business positioned view platform we evolves as toward $X our velocity. recurring and as our power continue billion subscription the exit support $X we

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

Operator

your [Operator line the Instructions] question James. Raymond comes And of first Peterson from Brian with

Jessica Ng

This is Jessica for Brian today. on

just schools districts year? and parts school core what year, So budget looking with, priorities what off education institutions with of far school address to XXXX, school of end pain want resonating hearing points? to the you higher the with so for start for LMS, XXXX are the are next Like outside I

Stephen Daly

is that been process than the make Thanks, think, the to key that long-term are higher get looking into what the They're strategy of going -- to learners to the order that perspective. about more address on coming How to Jessica. degree. as some in digital U.S., talking go And investments to matriculating I at from about, address transformation just very what going they It's are specifically their a similar we to are traditional right? budgeting we've students have campus they're effectively it's a some of ed, population. within what

investments. consolidation. We evaluating continued where which and see tech -- to we tech into budgets investment improve to So are going in see their them tap increase

to enrollment do looking of from seeing. And is tech trends, learners at impact into reach the part You of then of those our that more money heard moving at Investor enrollment Day how and physical as funds. what of some the locations we kind that trends they're we're again,

X that conversations to having months. been the we've So over very X last similar

Jessica Ng

for What so into go-to-market are during are then Parchment business And Like the customers interested milestones Parchment overall integrating early double-clicking it. Got also, has Parchment with on XXXX? Instructure and Parchment. on how responses? you focusing integrating far, what into cross-sell? in And

Stephen Daly

area Yes, to there are integration clear, on. it's an back in be office. we're particularly the efforts, ongoing very focused that And just

systems focused our And so very happening. We're bringing integration this is on year. G&A on to them

together. talking encouraged, buying a Our the out customers, with the been positive companies as way been about plan been has run X bringing to the where go-to-market understand are. they've to centers, synergies I'm separate the as understand very I've anecdotally,

one they can and of or sparking the weeks X conversations, it our salespeople to was benefits the Parchment with were with both consortia our was introduce learning. X interest we see and were to ago, of of bringing of the where evidence having of delivery the I learning because registrars about they wanting some just

structure how to into come the early but -- positive, to those the signals decisions we're X give XXXX. like that we're ourselves year about how looks what are of together some the make going and So going teams

Operator

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

Noah Herman

teams. sort a this X the to year, of both first different land-and-expand sales I new motions, rolled maybe know of in Just go-to-market. starting January out it's on you organization

what to on that in progress terms sort there what inning in, And of front? go-to-market maybe we has been this of curious are transition? the Just see

Stephen Daly

I've a to We've experience. from Good seen seeing customer that and I level drive Noah. CSMs from we you. customers. of with between Thanks, from seeing. seen pleased customers. progress close Yes. the I'm hear existing -- collaboration. collaboration more teams in a particularly lot within are the a engagement, seen very expand a which the very the with are the call in more sales level have we're teams lead what generation We're and teams, lot that our the of

is in customers So really up it we're starts by I'm encouraged buying quarter about unified season taking that predictive very as to the usually what with QX. not is customers. for -- I'm the from I'm us, build. the approach QX encouraged. getting a our But I that see pipeline from QX the right, crank encouraged from I'm and a feedback

progress. still the should I'm -- -- innings, we So early with are but pleased we

Noah Herman

you In realize forward. also going the to Yes. No, areas that you savings different out actually prepared you called invest to plan quarter, in remarks, incrementally that's and great to were able additional into hear. some your

Just curious, approach of bulk the what are season? incremental you're estimates of making we the buying as that some those

Peter Walker

Noah, Yes. for question. the thanks

some on specifically, technology we So just there's program in back half of into the executing spend. that be ROI higher We shifted and there'll believe on a the year. half spend program back the particularly infrastructure the year, that spend of the

Operator

question next of Morgan Baer Stanley. Josh line comes Your the from with

Josh Baer

X in CAGR regard really it ARR growth like doesn't have, the paint and as looking or about as growth we year all of year what's contributing for or thinking picture to the Just far necessarily next breakouts X ahead, this businesses is XXXX the years. versus the in

I was color. hoping a So of for little bit

years? you going be one growing like the this What's the really versus a move walk contributor. is maybe year needle few to could nontraditional, in ecosystem, that's a the big platform international. assessments, so of businesses, double help Parchment through within bigger maybe to digits, assets growth Obviously, But going the

Peter Walker

the for question. Thanks Josh. Yes,

our performance the expectations. medium-term single in were line then forma really with high growth And from businesses in our pleased and digits, line target. our with we're our in ARR So growth growth pro core and ARR with QX

So improve big say, at Day of on to we Investor everything and with. call. we're a kind track at disclosure We've shared Day, made I'd that today's Investor effort obviously in even

not time, we're disclosure we to each that spoke going cetera. we'll to -- wins et to But about of further. over beyond individual areas client So comment even look improve the the today, continue

Josh Baer

Okay. the update you rates. wondering gross I any retention if just on Got was have it.

Just this at point? wondering trending how that's

Peter Walker

Yes.

our cetera. basis, all do season, we kicks metric really a QX, cetera, provide happen, our renewals that et So right, selling et of quarterly main on in, in not QX, and when

So I the about feeling retention very our would rates. gross say, positive we go in year

Operator

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

Stephen Sheldon

I earlier wanted then other to the follow process. changes up on about some sales and Noah's to question you've ask made

I think how I bundling firstly, in a think quarter. know, you impactful this that doing just about more of quarter as said next couple sales started far multiple and been. change so as seen we year. coming we've selling could including over packaging the massive up first you the has do times, of But breadth And change solutions to is think how year? you've key this months, what given contracts in be the you're season this curious impactful

Stephen Daly

your I to around pipeline Stephen, point, selling QX early, color can the is season is, you we that's for and what not can building us. big those feel But bundles. good it Yes. about the give is commentary I

product those noticed wins. the As wins you prepared were may have in remarks, multiple that

the we sold. So bundles those mix in some products. cases, In some cases, were they a that of were

we're opportunity. use, just than a it a about able going conversations encouraging is platform what the to to in sales to being full walk finding And about in bigger our solution. having success we're rather about LMS But conversation

of give QX rates, with feel world-class predictive are we've that, more again, QX a able that done trend win be deals -- again, number will multiproduct and for good. us. still and so me been we to have And We've good

Stephen Sheldon

to cycles a it That's helpful. as just Got sales continuing you're And follow-up, sounds higher it. in see like ed. elongated then

So any been to for curious could ecosystem that's -- you've recent And relative gotten better in take that the in you worse or ease? quarters. it what what if do to seeing pressure generally, what

Stephen Daly

Yes.

those any seen predictive the for of in types is a us. We QX and change, of Stephen, quarter not material things. the length kind cycle haven't of Again, great

tell, catalyst start get made. like what left I to starting be just and year. these to are their next for institutions optimistic. Again, that's the decisions this for some looks digest And to of I'm to that time as of be a budgets what that's, but going for cautiously will have they year, they One believe,

Operator

comes Next line question Vruwink the Baird. from Joe of with

Joseph Vruwink

areas a coverage and ask high-growth about of to in the of Or byproduct that coverage those opportunities? benefits is product the is specifically changes just there? some nontraditional and the go-to-market are perhaps? actually going big we opportunities. wanted more go-to-market the I itself sales for wins product and speaking of drive Are seeing some dedicated your suited the currently to is So those for the well later on, still having

Stephen Daly

for fact first we I starting are have pay to encouraged, dedicated Joe. XXX% our that even sales this market question, good seeing that that and we is focused are now marketing think sales team part now. team, have on this a we of So is I'm us a the for It's do quarter I would a CSM with say us have dividends team. -- that right? the

And that more come so but the so I'm happy think do I that we've with to progress far. there, made there's

we we've dedicated lot just sales been prior we've Now to mentioned a having requests team catching. there's the -- been as fit, a that kind of in our inbound been Investor product of Day,

we we and -- And But that's believe that. I am the fit a here. on there team product do the have the encouraged by focus so good executing that's

Joseph Vruwink

and the within if And best That's can parse the organic be practice. RPO Okay. then you growth That in a earnings M&A between in contribution reported quarter. the great. bridge helpful. that's wondering release, the should out I'm

Peter Walker

Yes.

So I appreciate question. the

it The transactional. So business Instructure double X/X to remaining obviously so that strong subscription, is rate of growth Parchment. Parchment's from and you of But digits. at taking think a remind X/X business important is portion I year-over-year. The we look it's was about had rate impact a is growth RPO, would XX% RPO,

Operator

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

Matthew Shea

on Shea Matt is for Ryan. This

sprawl of was have out conference of biggest to recent particular, market, K-XX is vendor the going coming just post-ESSER takeaway the that to this through ASU I in funding. go rationalization think GSV our

in I but coming? season, you how guys and rationalization So are the to know ultimately position products your early that changing just with for if the starting if cliff of season demand see just or that selling selling you Learn you're curious, platform kind it's funding just curious

update love platform would Learn side. an higher the just on the with then And ed

You guys of roll of pace in are still on to beta half institutions. those any second signs the out And early demand? that

Stephen Daly

I at saw GSV, heard thing Yes. the we've Matt. And we and it seen ASC -- same in the market.

In I fact, because is anecdotally, K-XX the that I've space. with conversation apps in have or every leader again, that to superintendent still sprawl an conversation a a is particularly easy -- there in there had, the it's massive within of --

it And value is so resonating. proposition is resonating. The

We got ensure and to continues the have we've those dedicated work opportunities. that positioning opportunity team to a on best penetrate that

From higher ed unrealized of those on. perspective, is opportunities a that one working that we're

a the for track of We driver are expect growth and in be for second effectiveness beta particularly the we so to securing on working in be -- and EdTech space. design are half partners to the right long-term year that now us,

Matthew Shea

on, enrollments other your signals that Got maybe college to the higher informing So we for vast to hear are on Day." College outlook just kind starting thinking anything their there? curious like enrollment cross of And Or XX are it. guys months. looks good the next have from you XX then this but any next "National the fiasco about your months? what partners if just to Obviously, XX, That's just ed did we hear. X, over Decision going X

Stephen Daly

a us early little get that feedback. It's for to bit

that As time, this they're will, some of getting you a some last the like But said, trends, of we're say, a you firming bit fixed. year. causing at Tesla would that a kind is uncertainty. getting vibration, saw of feels same there And lot deadline. past the just I of is it trends if little -- we

And you world, highed how focused are, that, we and reach is will. learners do as long-term our do we ed still we institution more and how on trend learners. our The more of one, on more more talk so to but into focused the also reach bring they if institutions,

Operator

Your from comes George next Citi. Kurosawa the line of question with

George Michael Kurosawa

for Steve Enders. I'm on

just Parchment coming out click little called to Maybe of what seemed on You early expected. on working some than double in that, be better kind here? a

Stephen Daly

there's a couple Yes. things. Well, of

need as think for it's their is as the products for traditional product. been their I that just important Awards

good some traction saw we Awards. within So

more some coming. as more addition, -- to some are traction. that for up pipeline there we're conversations future products encouragement see In a Pathways the We the in company there's open that's combined that are and able build me gaining give the

So these have X combined that Learner then one really the more of with will follow Comprehensive message being a companies only as stand-alone. be that I of rich That can could experience the then good do is than either their the and that the about evidence become student feel us Record. to companies record is marry and resonating and holding delivery able power more bringing how learning together, learning can the of much

George Michael Kurosawa

you're year season. And a how great start Maybe relative informs few being confidence side on the next just the That's could alluded on of into of season? the color. and I seeing quarter to and going last what times pipeline the contrast selling think the call kind you've to your you compare if that bigger

Stephen Daly

Yes.

look at was pipeline expected. trending As the this we for keep we for that, we're and QX, of track quarter as as

we growth in pipeline. we're about renewals guidance. that new a highlighted we've in we the So expected the with the feel -- our confident seeing that perspective, very our we from then overall renewal business, And

Operator

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

Devin Au

is tack deals the that on to context if little of pipeline get winning more just deal. kind the term? a on service I Congrats solutions win-back want have curious there there I the What in are these the of on? more they one And do on win-back. I'm near customer perspective. in mainly one. know But First that you I guys on you about talked just

Stephen Daly

Yes. It for can always win the that left. into was It's us. you a nice good when somebody fold back bring

that the mentioned remarks, usability that were and matched experience So they competition. wasn't and X last have was support And in us us service they they experience from with other years, for And well XXXX. after solutions, over They got away they of my the Canvas against had left the that as level feedback the gave as as us. the they the back. in came with X our enticed their or a differentiator us was I

a be is have feeling it And is to to that those win-backs. sweet just nice. So clear,

a Our cobbling where there that's with over us kind opportunity big quite for still bit of free that's several next the there's and the growth a tools, of market and together of opportunity part big we the greenfield a is is of biggest still Canvas, -- years. out still believe biggest part the

Devin Au

Got And for ed context past the looking higher then in you're one longer. to XX elevated consistent was from I But days, headwinds quick like downed like seems the the sounds rates it to remain appreciate it. a facing quite quarter. prior there. have Macro with Peter. in

any changes the So into ago? the versus year macro my quarter is, you your any initially when question Just assumptions around changes set guide a there? here being outlook built full

Peter Walker

the Appreciate question. Yes.

to view there's the since environment been changes Our is we macro no material spoke. last

if and need really core as in macro. that changes We guide get the a to will no of us been there's buying change there's a that. So in tell result into season, our our

Stephen Daly

again, that, and those is the related economic of big economic bigger If there, enrollments I the are right? This than is less to the trends is macro. and sensitive this of out George, types more add macro tuition things there, backdrop would market some it that to macro

transformation in thing visibility of are longer trends. because those a pretty get nice because in strategy. a But we're term, macro we trusted is the that longer-term is, this bigger, digital early talking part We partner,

that into consistently, we're were that see view why same because of talking you happening. about trends -- is we those that's early got changes kind consistent the So

Operator

from Your next question with comes Terrell Truist Securities. Tillman

Connor Passarella

Passarella Connor a the Terry. times for you on mentioned Steve, the partner remarks. in prepared ecosystem few

either on You're and now. us ability Could at partners an Instructure? influence to just for revenue you XXX or give -- person directly maybe business their indirectly update

Stephen Daly

process. into of moat, it's the an for It you in competitive it from because It Yes. It's the Sure. good Connor. to is seeing whenever breadth, of and we're good. a is -- opportunity, nice hear walk advantage the as size, us a selling if you, competitive will, a we because

So it that for integrated into instance, Montana we learn because was that we of into University That to for deal. that allowed think system. ago, about instance, of win us won just to -- technology I a or some quarter Canvas X was when talked because

it in integrations that We technology differentiate I see gave competition. my examples us some that allowed against where prepared to of had the remarks, we in

really to it advantages competition we be those for replicate continue difficult a that as to selling one would So competitive into go does opportunity. be our of

as quarter the Lucidchart, in their customers purchase announce did Canvas to a collaboration we available part -- where integrated the are well LMS. our the of would free, with into tools and I of as for

leader have and that of are on a process. the as competitive advantages gives advantage market of being again, that teachers students the so our us And more platform selling the we by some these network huge having in that us make

Connor Passarella

I quarter, activity that in Yes. a I think of U.K. appreciate how deal? that. the the you're called win for just seeing region. more so would follow-up. you on play I'm of Manchester University post far win specifically out just The that last curious lighthouse Maybe the be quick out a as

Stephen Daly

Yes, it them. process. early -- U.K., still our towards. particularly with those look other the outcome very selling We're it part days team institutions in with we're that are of institutions, happy there. the We're And is. as one EMEA our It's of using

that so going it And success internationally. to them does even our the be more we're But strategy international we'll able into the validate leverage really seeing future. and

Operator

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

Matthew VanVliet

learner, them? on margin-friendly and on more that other how programs or for to look maybe I that as universities of even is tech on whether how curious attention stack guess maybe a looks building themselves pipeline create as like Studio nontraditional program the you're at more institutions to what out type Catalog the attention getting and it's much more and the for

Stephen Daly

that go Yes. part of saw opportunity. it's positioning marketing business. strategies, the it's -- we space particularly And this about bringing is pricing the we number in of that bundle that products of a that it's your I'm more quarter. That's It's into of point, areas products. a and it last do that, that to out of with in one good is, We're pleased performance seeing

we hit at QX, when of can from kind We're that So look nontraditional. that our QX pipeline, encouraged good. looks I really a from commitments --

Matthew VanVliet

season a how seeing towards perspective? you're pipeline is from approach. coming think how customers here kind up, budget land-and-expand plans indications you from terms in early size look prime sizes, much overall you selling of the to on thoughts should of a deal as about early then the deal longer-term what Any And versus in available more have of

Stephen Daly

nontraditional these are our part -- that why seeing Yes. in we're The say, would and the than because discussions they're more we've of reason of some deals is strategic I elongating what Matt, much an had past the discussions right? It end organization. do institution, they much because higher go -- revenue more talking for these How attract learners. we overall we becomes in in calling of the up about are

to do that these size are takes in the when it the by higher perspective, up conversations, encouraged we get the So deal have about we into counteracted fact longer of from organization. that those conversations

I counteracted we reason a middle focus was because, hesitating a was a same bit. little Now at in just time, created Matt, little the also our go-to-market. The it's market bit,

had we've So calling call segment been a a smaller on to at little we bit historically, of -- same called the is that, market dedicated on on. we we time, that haven't a are, team haven't the

us. it bigger when each these And sale a -- so they balance a other. up are being having it of discussions, kind bigger I obviously, are would for we out But strategic say, ends

Operator

turn conference That Daly, concludes over to back CEO, closing I will remarks. the session. our Q&A for now Steve

Stephen Daly

Thank joining today. for you, everybody, us

was at strategy shareholders. XXXX teaching elevate strong durable We enhanced increasing learning us. updated educators go-to-market year you our and and driven growth portfolio students retooled delivering remainder Thank of be scale. creating to of focused excited value for advantage, while joining and and about on more quarter for a for I meaningfully and broader our execution the a competitive our scale, with first our guidance exceptional head expanding products by profitability. Our into fiscal couldn't ability personally

Operator

call. Ladies Thank you all and gentlemen, that joining. for concludes today's

now may disconnect. You

Instructure (INST) 8 May 242024 Q1 Earnings call transcript