Ladies and gentlemen, thank you for standing by, and welcome to Instructure's second quarter 2021 earnings call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your first speaker today, April Scee, Investor Relations. April, please go ahead. Good afternoon and welcome to Instructure's second quarter 2021 earnings call. We will be discussing the results announced in our press release issued after the market closed today. With me are Instructure's Chief Executive Officer, Steve Daly, and Chief Financial Officer, Dale Bowen. Before we begin, I'd like to remind you that today's conference call will include forward-looking statements based on the company's current expectations. These forward-looking statements are subject to a number of significant risks and uncertainties, and our actual results may differ materially. For a discussion of factors that could affect our future financial results and business, please refer to the disclosure in today's earnings release and the other reports and filings we file from time to time with the Securities and Exchange Commission. All our statements are made as of today based on information available to us today. Except as required by law, we assume no obligation to update any such statements. During the call, we will also refer to both GAAP and non-GAAP financial measures. You can find a reconciliation of our GAAP to non-GAAP measures included in our press release, which is posted to the investor relations section of the website. All of our non-revenue financial measures we discuss today are non-GAAP, unless we state that the measure is a GAAP measure. With that, let me turn the call over to Steve. Thank you, April, and good afternoon, everyone. Thank you all for joining us on our first earnings call following our recent IPO. I will say that I've been looking forward to this call and the chance we have to share the tremendous momentum we have in the business. During today's call, Dale and I will provide details on our Q2 results, as well as share Q3 and 2021 guidance. We will also cover the business, market, and opportunity, as many of you may be newer to the Instructure story. First, I'll kick this off with a few highlights from our financial results. Q2 GAAP revenue was $93.6 million, up 52% year-over-year, while total Allocated Combined Receipts, or ACR, was $95.9 million, up 28% year-over-year. We think ACR is the best way to look at the business because it gives investors better visibility into the underlying health of our business. Importantly, we delivered these results while continuing to drive operating leverage across the business with Q2 adjusted EBITDA margins of 33%, up over 1,400 basis points year-over-year. I couldn't be prouder of the team and would like to acknowledge all of the Instructure employees for all their hard work in the first half of the year. Instructure provides a SaaS platform for teaching and learning called the Instructure Learning Platform that is built around the Canvas learning management system, or what's commonly called an LMS. The Instructure Learning Platform is a 100% cloud-native hub that connects educato rs, students, administrators, parents, and partners and is used for in-person, online, or hybrid modes of learning. We are the North American LMS market share leader in both higher education and among paid K-12 solutions. We have an international presence with over 6,000 customers and over 30 million contracted Canvas LMS users globally. We continue to successfully sell into established institutions with massive opportunities remaining both domestically and internationally. The past year has been highly transformative for our business, both from an operational and from an industry perspective. We have re-entered the public market as a fit-for-purpose learning platform leader focused exclusively on the immense education opportunity and well-positioned for long-term durable growth. Operationally, we simplified our organizational structure by divesting our corporate LMS business, Bridge, streamlined our cost structure, implemented a strong focus on efficient capital allocation, and realigned our sales and marketing motion to be more efficient and effective than ever before. The education technology market is at a critical inflection point. During 2020, when we were a private company, digital transformation accelerated meaningfully, one of the greatest and quickest digital transformations in any industry. As a result, we've seen long-lasting adoption of our technology. This has changed how educators and students participate in the learning process, and it further cemented Canvas as a mission-critical learning platform for our customers. We are deeply embedded in the world's educational workflows. We believe the change is here to stay. Technology-enhanced models are now as standard in education as video conferencing is in business communication. Industry research and direct engagement with customers indicate that K-12 districts will maintain their LMS subscriptions post-COVID. In fact, according to a third-party study, more than 80% of K-12 educators view the LMS as the main platform for instruction and expect usage to remain at elevated levels. We believe our market opportunity now is greater than ever, and Instructure is in prime position to emerge as the platform leader across higher education and K-12 institutions. The education technology market that we address is large and rapidly growing. Global expenditu res on educational technology have accelerated and are expected to grow to $404 billion in 2025, according to HolonIQ. We estimate our total market opportunity is approximately $30 billion, comprised of an LMS market opportunity of approximately $5 billion, a market opportunity for our non-LMS products of approximately $10 billion, and new market expansion opportunities approximately $15 billion. Our key differentiators, usability, reliability and scalability, and our broad open platform, give us confidence in our ability to continue winning. Let's briefly touch on these differentiators. First is usability. Educators and administrators spend nearly 90% of their working hours logged into the LMS, and students now spend a significant portion of their week on activities that are touched by the LMS. It's important that they love the experience, and when using Instructure, they do. While legacy technology was built with a focus on administrators, Canvas was built with the teachers and learners in mind. Those teachers and learners are a vibrant online Canvas community of more than 1 million members, and according to third-party research, our satisfaction is 50% higher than the number two competitor in higher ed, and 60%-70% higher than the number two competitor in K-12. Because this is such a highly referential sale, these happy customers are some of our best salespeople. Second is reliability and scalability. Learning platforms are mission-critical systems for education providers and students, and must be reliable, available, enterprise-grade, and scalable. The ability to handle the usage, fluctuating demand, and changing workload patterns while maintaining high availability is a critical differentiator. We guarantee 99.9% uptime through service level agreements and have been able to scale up dynamically and dramatically amidst abrupt changes in usage during COVID. In contrast, COVID highlighted deficiencies of our competitors, whose legacy systems struggled to scale and remain available. At the institutional level, we provide solutions that can manage entire learning environments of any size, from a single school district to a large multi-entity state or countrywide deployment. This scalability drives very high win rates and helped us win 11 out of 12 state K-12 RFPs last year. Third is our broad open platform. Our learning platform is much more than just the LMS. We are a SaaS learning platform that has the ability to span across all areas of teaching and learning. Canvas is the core, complemented by assessment solutions from our MasteryConnect and Certica acquisitions that allow educators to assess student learning and make plans that guide an individual approach for each learner and their outcomes. Since our technology touches 90% of all the work to be done in teaching and learning, our customers look to us and rely on us to continue automating and simplifying more and more of the teaching and learning workflows, including analytics, online education, and managing video learning experiences. Since we are an open architecture, we also extend through our ecosystem of more than 500 partners with over 1 billion launches of those partner tools from our platform last year. Our partners include some of the world's largest technology companies, as well as niche point solutions. They span content and hardware providers, collaboration and productivity tools, and publishers. Looking ahead, we have multiple vectors of growth. Let's touch on those vectors in more detail. In higher education, Canvas holds the leading LMS market share in North America based on number of institutions, with a meaningful opportunity to increase market share internationally. Our growth strategy in higher education includes ongoing efforts to replace legacy LMS systems, strategically targeting international markets, and taking advantage of a land and expand strategy to both upsell and cross-sell. In K-12 and county districts, Canvas has emerged as the market share leader of paid LMS in the U.S. and has a meaningful international opportunity. We are seeing incredible growth in technology investments, due in part to increased funding for digital transformation projects, which is driving more districts to move from free solutions to enterprise-class LMS. As a result, there is a meaningful opportunity to secure greenfield wins in districts that aren't currently using a paid LMS. We will also continue working to secure state-level deals in large districts and expand our footprint as we upsell and cross-sell additional modules of our learning platform. In international markets, we are focused on countries that have the best connectivity and student-to-device ratios. Our goal is to disrupt these markets like we disrupted the U.S. markets 10 years ago. We are using a proven playbook to do it. Internationally, the markets are highly fragmented, with many institutions using legacy open source and sluggish, constrained on-premise systems. We are seeing strong interest in replacing these legacy systems with a modern learning platform. Over time, we expect our international business to be at least as large as our U.S. business. We also have a strong land and expand motion. We are still in the early innings here, and we believe the opportunity is immense. With our current product portfolio representing three-quarters of a billion dollars in cross-sell opportunity in our existing customer base alone. Since 90% of instructional workflows are facilitated by an LMS, we are well-positioned to cross-sell other modules that we continue to add to through organic innovation and M&A. I would note that we are going after these opportunities with a substantially improved go-to-market model that includes a single outbound sales motion. These efforts have resulted in the number of customers that have more than one product to increase from 24%-34% in the last 18 months. We still have much room to grow in our cross-sell business. As of the end of Q2, only 34% of our customers had purchased two or more of our solutions, and only 9% had purchased three or more of our 11 available solutions. We have a robust organic and inorganic product expansion roadmap that we expect to continue to expand our TAM and feed our land and expand motion. One recent example of our organic innovation engine is the way we enhanced our platform to meet the needs of our youngest learners. The result was Canvas K-5, which we developed side by side with teachers who were yearning for a more native experience to deliver instruction. Canvas K-5 is an easy-to-use, simple user interface that is suited to demands of a primary school environment. Over a quarter of our customers have already activated these new features in the first few weeks of release, and reviewers are using superlatives like stunning and game-changer. An example of recent inorganic expansion was our acquisition of EesySoft, a Netherlands-based provider of SaaS experience management solutions for education that we acquired in Q2. While we expect minimal impact to our 2021 financial results from EesySoft, we believe these solutions will provide growth in 2022 and add approximately $500 million in available TAM. These both are great examples of the rich innovation and M&A opportunities available to expand our platform and our available markets for years to come. In summary, I've never been more confident and optimistic about our business than I am today. We are well-positioned for durable growth and expanding profitability, and I will now turn the call over to Dale to talk about our financial results and the exciting momentum we are seeing in the business. Thanks, Steve, and thanks again to everyone for joining us today. Since this is our first earnings call, I will start by providing a brief overview of our financial model, and then I will go through our second quarter results in detail before moving on to guidance for the third quarter and full year 2021. Before discussing detailed financial results, I'd like to point out that in addition to our GAAP results, I will be discussing certain non-GAAP results. Our GAAP financial results, along with the reconciliation between GAAP and non-GAAP results, can be found in our earnings release, which is posted in the investor relations section of our website. To begin, Instructure's financial profile is characterized by a unique combination of both strong organic growth and best-in-class margins. In the first half of 2021, we were a Rule of 66 company, with first half ACR growth of 33% and first-half adjusted EBITDA margins of 33%. We saw great execution from the team and continue to show that we can invest for strong growth and expect to continue to deliver impressive adjusted EBITDA margins and unlevered free cash flow conversion as a more efficient and highly focused company. As Steve mentioned, we generated second quarter 2021 total GAAP revenue of $93.6 million, up 52% year-over-year, and ACR of $95.9 million, up 28% year-over-year. Let's dive into our financial model a bit more in detail, starting with the components of revenue. Subscription and support revenue consists of Software as a Service fees from customers accessing our learning platform and from customers purchasing additional support beyond the standard support included in the basic SaaS fees. We sell multiyear contracts, which typically range between one and five years. Subscriptions and support are generally non-cancelable and are billed in advance on an annual basis. This gives us high visibility into future revenue performance and also creates very favorable cash flow dynamics, which I will talk about shortly. Subscription and support revenue accounted for 90% of our second quarter revenue at $84.3 million, up 50% year-over-year, primarily as a result of continued momentum with our core Canvas LMS product, both domestically and internationally. In addition to strong upsell and cross-sell of our other products, especially assessments. Professional services and other revenue consist of training, implementation services, and other types of professional services. Professional services and other revenue accounted for 10% of our second quarter revenue at $9.3 million, up 78% year-over-year, primarily as a result of strong implementation and training services delivery across both our K-12 and higher ed businesses. As we mentioned, ACR was $95.9 million in the second quarter, up 28% year-over-year. ACR reverses the fair value adjustment to acquired unearned revenue related to the take-private transaction in March of 2020 and the Certica acquisition in December 2020. When accounting for both the pro forma Certica acquisition at the end of 2020 and the Bridge divestiture in February of this year, ACR grew 30% year-over-year. Deferred revenue at the end of the second quarter was $250.7 million, up 40% from the second quarter of 2020. Remaining performance obligations, or RPO, were $667 million in the second quarter, up 29% year-over-year, and we expect to recognize revenue on approximately 78% of our RPO over the next 24 months. In discussing the remainder of the income statement, please note that unless otherwise stated, all references to our expenses, operating results, and share counts are on a non-GAAP basis. Please note that when we refer to margins, we calcula te our margins based upon ACR. Our group margin profile is very strong, and we maintain healthy margins through our optimized cloud architecture that is designed to scale to meet customer demands. In the second quarter, our gross profit was $70.7 million, representing a gross margin of 74%. This compares to a gross margin of 72% in the second quarter of 2020. Turning now to operating expenses. In 2020, we were able to make targeted adjustments to our cost structure to make our business more profitable, more efficient, and more resilient without sacrificing any of our growth momentum. By spending smarter, we have improved margins while increasing our capabilities in sales and marketing to expand our market reach, and in research and development to extend our technology platform. In evaluating our operating expenses, please note that the year-ago period includes expenses for Bridge, the corporate LMS business unit we divested during Q1 of this year. Sales and marketing expenses for the second quarter were $19.8 million, or 21% of ACR, down from 27% in the second quarter of 2020, as we continue to better leverage our sales organization and increase the efficiency of our go-to-market efforts. As a reminder, in 2020, we optimized our sales organization under one sales and marketing leader and discontinued investments in non-core products and low ROI international regions. In Q2, we continue to see improved bookings per rep, increased sales tenure, and reduced sales cycles. Research development expenses for the second quarter were $13.2 million, or 14% of ACR, down from 19% in the second quarter of 2020, even though we have more engineers focusing on the development of our product roadmap than before the take private by Thoma Bravo. As a reminder, in 2020, we took a close look at our engineering base and found that we would be better served by offshoring a portion of our R&D talent to lower-cost international engineering hubs. This continues to drive meaningful efficiency and incremental capacity. General and administrative expenses for the second quarter were $7.2 million, or 7% of ACR, down from 10% in the second quarter of 2020. As a reminder, in 2020, we examined our global office footprint and removed high-cost office locations that were not additive to our revenue growth and profitability goals. Non-GAAP operating income for the second quarter was $30.4 million, representing a 32% operating margin, up from 16% margin in the second quarter of 2020. In the second quarter, adjusted EBITDA was $31.2 million, representing a 33% adjusted EBITDA margin, up from 18% in the second quarter of 2020. This result was better than our expectations and reflective of both our strong top-line growth and efficiencies across all departments. We are pleased with the over 1,500 and over 1,400 basis point improvement, respectively, in operating margins and adjusted EBITDA margins, demonstrating the power and efficiency of our model. Non-GAAP net income for the second quarter was $20.7 million, or net income of $0.16 per share, compared to $13.9 million or $0.11 per share a year ago. Turning to the balance sheet and cash flow statement. We ended the second quarter with $70.2 million in cash and cash equivalents. This is down $12.8 million from the end of the first quarter, driven largely by the cash payment related to our acquisition of EesySoft. We raised net proceeds of $233.1 million in our July IPO, which are not reflected in our second quarter balance sheet. Operating cash flow in the second quarter was $6.4 million, compared to negative $58.3 million in the second quarter of 2020. Free cash flow was $5.2 million in the second quarter, compared to negative $58.3 million in the second quarter of 2020, while unlevered free cash flow was $21.8 million in the second quarter, compared to negative $7.6 million in the second quarter of 2020. Worth noting that we have very strong free cash flow conversion. Driven by our favorable billing terms, low capital expenditures, and our accumulated tax assets, which we expect to shield us from meaningful cash taxes for the next several years. I will now conclude the call by providing guidance for Q3 and for the full year of 2021 for both ACR and adjusted EBITDA. We have provided additional guidance details in our earnings press release. For the third quarter of fiscal 2021, we expect ACR in the ran ge of $101.3 million-$102.3 million, or a growth rate of 15%-16%. We expect adjusted EBITDA in the range of $32 million-$33 million, representing an adjusted EBITDA margin of 32% at the midpoint of the range. For the full fiscal year 2021, we expect ACR in the range of $400.4 million-$402.4 million, or a growth rate of 23%-24%. We expect adjusted EBITDA in the range of $130.3 million-$132.3 million, representing an adjusted EBITDA margin of 32% at the midpoint of the range. We don't provide quarterly guidance for unlevered free cash flow, but since this is our first earnings call, we would like to share that we anticipate unlevered free cash flow to be roughly $140 million for the year. Based upon our adjusted EBITDA guidance of $131.3 million at the midpoint, this represents an adjusted EBITDA to unlevered free cash flow conversion of 107%. Please note that our unlevered free cash flow definition does not include adjustments for restructuring, transaction, and sponsor costs paid in cash. Had we adjusted for those costs. Our adjusted unlevered free cash flow guidance would be roughly $152 million for the year, which represents an adjusted EBITDA to adjusted unlevered free cash flow conversion of 116%. With that, Steve and I are happy to take any of your questions. Thank you. If you would like to ask a question at this time, please press star then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Your first question comes from the line of Fred Havemeyer with Macquarie. Your line is open. Hi. Thank you for taking my question. I think firstly, we'd like to just welcome you back to the public markets, and certainly really want to also just call out that the progress that you've made in expanding Instructure's adjusted EBITDA margins, but also balancing growth and especially ACR growth is really quite notable for those of us who have also known your company during its prior iteration. What I wanted to begin with here in terms of just high-level backdrop and question is also like to ask, how are you thinking about the about $122 billion of American Rescue Plan ESSER funds that are coming online, or that came online in March 2021 that will be available through, I believe, September 2023, in terms of your growth prospects and what that means also for just generally the K-12 market and in particular for those schools that may not have had access to, let's say, education technology, more robust technology or budget to afford that? Well, first of all, thank you. We're excited about the results. We're excited about the momentum in the business. It was a lot of work that's gone into this over the last 18 months from our employees and everybody involved. It's good to see the fruits of our labor, if you would. When we think about the K-12 market, first of all, K-12 did astoundingly well for us this last quarter. We were up just over 50% year-over-year. We attribute a lot of this to, with COVID, it forced K-12 districts to really think about what was their strategy when it came to digital transformation. They've started to make that investment and recognized that when they do get our technology deployed, it really is integral to the entire workflows, whether it's remote or in-person or hybrid. We're still in the early innings of that digital transformation. When we look at where the growth is coming from, we see a pretty strong growth in our LMS business. We see strong growth in our assessment business as teachers are coming back into the classroom trying to assess where are students on their learning paths, what kind of learning losses there've been. It's really hard to pin down where's that money exactly coming from, because of the way the ESSER funds are allocated. What we do believe is that those funds are being used for digital transformation projects, and we're the beneficiary of that spend. We do see this as a multi-year trend for us. We do see it in a backdrop that really drives us for durable growth in that K-12 segment of our business. Thank you there. As a quick follow-up question here. Certainly, what we're seeing with your initial platform expansion here into assessments is, seems like it's indicative of what you're calling the entire Instructure Learning Platform at this point. Just generally, how do you think about the opportunities to be adding more products into the portfolio? Do you think about these as individually items that bolster your value proposition or as more of a total addressable market or pricing expansive opportunities? Thank you. Yeah. It's an area of our business, our growth plan, that will be a key growth driver into the future. The way we look at it, Fred, is that we have come into the education, teaching and learning process, and our core technology, the LMS, touches 90% of all instructional workflows. There's a lot more around us for us to be able to automate those workflows, and our customers are asking us for that. We see this as an opportunity for us to do two things. One is increase the share of wallet, the average revenue per student that we're getting in our existing accounts, as well as increase the stickiness of our solutions and the importance of our solutions for our customers in delivering on those teaching and learning goals. It serves those two functions, and it really is a key growth driver for us long-term in this business. Great. Thank you, Steve, Dale. Thank you. Appreciate it. Your next question comes from the line of Sterling Auty with JP Morgan. Your line is open. Yeah, thanks. Hi, guys. Let me echo welcome back to the public markets. It seems like just yesterday that you were here. Let's start with, I do apologize if this was part of the last question. I had some connection issues, you talked about the statewide wins, which you did so well last year. Can you give us an update in terms of what the pipeline of statewide deals looks like here for 2021? Sure. Yeah, and we were really pleased with the wins that we had. Our win rate was obviously very high. As we look at going into 2022 and forward, our strategy is to focus on winning key districts within key states, and then we develop advocates for us within the state. We can drive and have those conversations at the state level. The reality is those state deals, we're starting to see upsell and cross-sell into those deals. We're feeling really good about the momentum that we're seeing from a state deal perspective this year and going into next year in particular. All right. That sounds good. Then one follow-up, and I don't know if this is going to be something you can quantify, but I just dropped my daughter off to college for freshman year, and what's notable is the number of students that took a gap year last year and are entering college is, it almost feels like we're getting two years of student entry versus 1. Is there any sense what kind of tailwind that gives you to your higher education business? Yeah. That's an astute observation, I think. I noticed that too when my daughter was telling me she just started school as well, and that the amount of students that are there or engaged in their classes seems to be higher. The research would tell us that they expect growth in enrollments. I don't have a good way, Sterling, to quantify it as far as tailwind to our business. Like I said before, K-12 was growing above 50% this last year, but higher ed grew in the mid-teens. International was growing in the high 20%. We do believe there, as people are coming back into school, both K-12 as higher ed, that it is a tailwind for us for several years to come. That makes sense. Thank you, guys. Thanks, Sterling. Your next question comes from Josh Baer with Morgan Stanley. Your line is open. Great. Thanks for the question and congrats on a really strong first quarter. In the last few years, we've seen Portfolium, MasteryConnect, Certica added to the portfolio, really helping to contribute to the cross-sell opportunity. Questions on M&A strategy as you look to continue leveraging your leading LMS market share. How do you think about building products yourself versus buying looking forward? Just wondering about your framework for assessing potential acquisitions. Yeah. No, I'm glad you asked that because M&A is a key part of our growth strategy. The way that we approach it, Josh, is we look first at what our customers are using, what their use cases, where they're asking us for help, and then we look at our platform. Because we have 500+ partners on our platform, we've got visibility into what people are using, how often they're using it, when they're using it, that kind of telemetry. It gives us a good kind of heat map, if you will, of areas that we want to go after. Then from there, we will look at it and basically ask two questions. One is this something that should be part of the core platform, or is this something that we would sell on top of the platform? That informs a make versus buy for us. We also look at what technology is in the market, how long would it take us to develop it internally versus bring it in-house. Are there people that have proved product market fit in this area that would accelerate our go-to-market? Those are the criteria that we use when we're looking at whether we should build or buy into a new market. Thanks. If I could sneak one more, just wondering on some of your mega cap tech partnerships and integrations, thinking about Google and Microsoft, if you could expand on those relationships. How are those partnerships trending? If you think about the strategy from their perspective, where is their focus within the education market? Thank you. Yeah. Would love to talk about that. Our partner program, particularly with Google, some of the key strategics, Google, Microsoft, Apple. Google and Microsoft both came to us over the last 18 months and offered to do some work to integrate more tightly into our platform. You'd have to ask them about their strategy, but what they really care about is eyeballs on their technology and to get people using their technology as early as they can. They came to us and said, "We see you as a great way for us to get more eyeballs on our G Suite or Office." Google came in, asked to do some integrations that are deeper than the traditional LTI integrations that everybody does through standards. Microsoft came in and said, "Hey, let us integrate Microsoft Teams and some of the Teams technology." You can use that as default viewer for some of your institutions. Really what we're seeing is that their motivation is to get eyeballs on their technology, and they see us as a great way for them to do that. 4,000 of our 6,000 customers are using Google Workspace, and that's what they ultimately care about. Apple, on the other hand, sees us as, with the momentum in the market and the share that it's a way for them to get their content into more people's hands. We're the exclusive provider of all their Develop in Swift content on the Canvas LMS. Different reasons, but again, all coming back to the momentum that they see us having in the market and the share, and the eyeballs that we have. Perfect. Thank you. Thanks, Josh. Your next question comes from Brent Thill with Jefferies. Your line is open. Hi. Sorry. This is Avi on for Brent. Thanks for the question, and congrats on your first quarter. Was hoping you could talk a little bit about sales and marketing capacity more broadly. You talked about improving efficiency, retention. Just given the mass opportunity in K-12, given the relatively low penetration rate, do you feel like you have the resources to execute on the wide-open market? Thank you. It's an area that we're really proud of the work that we've done over the last 18 months. We really have focused on our go-to market and streamlining it. We were able to reduce a lot of overlay. We really have great talent in our sales organization, and we've focused them on winning new business. We spend a lot of time asking the question that you just asked about quota capacity and where is it deployed. Our models have all been built to fund that capacity. We feel good about our quota-bearing reps. A lot of the restructuring that we did over the last 18 months were to areas outside of quota bearers. We've been able to maintain that quota capacity. We expect to be able to hire another 10% quota carriers before the end of the year, and we have quota capacity increases over the model horizon. We are looking at capacity internationally as we go into new markets, as areas where we're hiring. We feel like we've got really good coverage in the K-12 space and the reputation in K-12 as well. Got it. Thanks for the color. Maybe just as a quick follow-up, any updates on that K-12 paid penetration number? You've pointed to that 41% metric throughout the process. Any updates there? Have you seen the pace of adoption accelerate at all, or it's been relatively steady? We don't have any official data that says what that penetration is. Anecdotally, I would say we're seeing good growth as our K-12 business grew pretty dramatically over the last Q2. Anecdotally, I would say we're seeing good uptake of districts moving from free tools to an enterprise-grade LMS. Got it. Thank you. Your next question comes from Joe Vruwink with Baird. Your line is open. Great. Hi, everyone. I maybe wanted to start with higher ed and just a discussion on the current RFP environment. Was there any indication that maybe potential new implementations were put on hold in 2020, and so now you have not only a 2020 backlog, but just the incremental organic activity as institutions want to be competitive and lean on an LMS, so the RFP activity in higher ed should actually pick up going forward? Yes. The short answer is yes. When we talked to customers, there were a number that just said during the pandemic, "Look, we're just going to hunker down with what we've got. It may not be what we need long term, but it doesn't make sense for us to change horses right now." We're starting to see those RFPs come to market now and really into 2022 is where we're seeing those pick up. I will add that a big portion of our business is not driven by those RFPs. Just over half of our business is upsell and cross-sell, which typically don't have to go to RFP. We also have a number of deals in place with consortia or key partners that already have agreements in place with institutions where we wouldn't have to go through an RFP process in that case. Short answer is yes, but there's also a lot of business that happens outside of that RFP that we're seeing good traction in. Okay. Great. Just another question on the K-12 funding backdrop, particularly with the stimulus coming online. I appreciate it's hard to kind of figure out and pinpoint stimulus funding translates to this for Instructure. In terms of just the magnitude of funding earmarked around the topic of learning loss and the fact that you've been investing in AMS, now you have Certica, are you seeing demand for the assessment portfolio ultimately track above maybe what your expectation would have been, I don't know, 12, 18 months ago, and you think that stimulus is behind it? Are there other initiatives or drivers which would lead you to a conclusion that this has greater longevity, likelier to stick around above and beyond what funding may bring? Yeah. It's an area where, frankly, when we made the Certica acquisition, we thought that this would happen. We thought that once we got through the pandemic, there would be a real need to understand learning loss, there'd be a real need to understand where students are in their personal learning journeys. The answer is yes. As you pointed out, stimulus funds call out specific funds that are targeted for learning loss. We're seeing really nice pipeline generation. I would say yes, it's ahead of where we expected a year ago. It's even a little bit ahead of where we expected six months ago when we did the Certica acquisition. Whether or not that's driven by stimulus funds, the challenge with the stimulus funds is they're allocated at a state level and then districts are given their budgets, and they don't really know how much of that was due to stimulus or how much was due to just normal state funding. It really is hard to tease that out. What we do see is there's multi-years of that funding available. What we're finding is when they implement our technologies. What they recognize is, okay, if I'm going to put an AMS in, and let's say I'm doing it, I'm trying to assess learning loss coming out of the pandemic. What they recognize is, why would I ever go back to going to my four-drawer file cabinet, pulling out a quiz, making copies, handing it out, collecting it, and grading it? Why wouldn't I do that online? Once that technology gets installed into their environment, it becomes embedded in the way that they do teaching and learning. Frankly, it's a godsend for teachers, right? It automates a lot of those manual processes that teachers have to do, it is not the reason they went into education, right? They want to be with the students, they want to be mentoring. We firmly believe that whether stimulus funding plays a role in the initial purchase of our technology. It is an enduring technology that is part of the fabric of how teaching and learning is done long-term. We expect that to endure, just like we're seeing with the LMS today. That's great. Thank you very much. Thanks, Joe. Your next question comes from Matt VanVliet with BTIG. Your line is open. Thanks for taking the question. Nice job on the quarter. Wanted to maybe dig in a little bit in terms of how COVID has potentially impacted the overall K-12 buying process and maybe how the stimulus has impacted that. To the last point you made, Steve, that some of the budgets just sort of trickle down to the district level. Thinking about that differently, what has been the trend over the last couple of years, and maybe has that accelerated at all in terms of states taking over a little bit more control in a centralized buying process? Through that, how those statewide deals might ultimately impact your growth rate, just sort of longer term as you look at that trend? Sure. Yeah. The stimulus funds, COVID forcing everybody to have to do remote teaching, it all really accelerated a digital transformation process that was already happening, just albeit at a little slower pace. What happened is we got to the point where teachers that had 20 years of lesson plans in four-drawer file cabinets in the back of their classroom, they had to put those online, and they had to do something for remote teaching. Now that it's there, they recognize that there's a lot of benefit to our technology, not just in remote learning, but also in-person and hybrid learning. From that perspective, what I think COVID did was it did two things. It accelerated how districts were thinking about their digital strategies. It kind of brought it to the forefront. It also gave some funds to kickstart that process, there's going to be multi-years of that stimulus funding to help kickstart that process. To your second question about at the state level, what we're seeing at the state level is what drove some of these state deals was the need to provide equitable access. If everybody was going remote, the rural district that couldn't afford an enterprise-grade LMS was going to not have as great access as the more wealthy districts that could afford it. A lot of it was driven by some of those desires from an equitable access perspective. We're seeing that the states are continuing to drive that. They're continuing to drive adoption. In many of the state deals, they bought to start with a subset of the districts in the state. We do see upsell opportunity in those accounts, and then we're also seeing cross-sell, particularly assessm ent solutions, where they also want to provide equitable access to those assessment solutions. We think there's an enduring growth here, and it hasn't tapped out the mine, if you will. There's still a lot more room for us to grow in those state deals. Very helpful. When you look at the international opportunities, I think a big portion of the last year-plus has been sort of narrowing and focusing on where you have the most near-term opportunity. As you look, the success you've had, what'll be the incremental driver to try to enter new markets in new regions over the next couple of years? Yeah. We created a rubric that we use in evaluating all the markets around the world that looks at, what is the cloud infrastructure? What is the student-to-device ratio? How much dollars per student is being spent? What's the cultural acceptance of cloud solutions? What really drives it for us is, there were more countries on the list that we could have gone after that we chose not to, just from a focus perspective and not spreading ourselves too thin. We have a roadmap that has those countries that meet that criteria, that we'll just continue to expand in over time as we see success in the countries that we're in. Great. Thank you. Thanks, Matt. Your next question comes from Brian Peterson with Raymond James. Your line is open. Good evening, and thanks for taking the question. I wanted to follow up to Joe's question on what's going on in the higher ed space, or at least for LMS. Steve, you mentioned in your prepared remarks, I think about the opportunity to accelerate some sales cycles, maybe away from the RFP process in the higher ed space. Is that a dynamic that we're seeing, or are we still seeing that traditional RFP process where decision-making might go into 2022? Yeah. It's a good question. There's still an RFP. Whenever it's a public university and the deal's of a certain size, then we will usually see an RFP. There's still that dynamic when we're winning new, for instance, LMS deals. The way that we go into a deal, we structure the deals in a way that when we need to upsell, sell more seats to an existing customer, we don't have to go through an RFP process. When we cross-sell into those existing customers, we don't have to go through an RFP process. What we're seeing is that there's a portion of the business, which cross-sell, upsell was over half of our business this last quarter, that we don't have to go through that RFP process. I think over time, you'll see us rely less and less on that RFP flow for overall business momentum. Got it. Thanks, Steve. Dale, maybe one for you. Just the RPO, it looks like it was up $98 million sequentially. I know it's a seasonally strong quarter, but that's much better than we've seen the last few years. If you had to rank what really drove that, as we're thinking about the 2021 selling season, any highlights that you'd shed light on? Thanks, guys. Sure. Great question, Brian. The main driver of that was the massive amount of billings we had in Q2. We billed over more than $180 million in that quarter alone, and I think as you know, that's our highest seasonal quarter of bookings, but it's also the highest we've had in terms of our history. That's the main driver for this. You're right, it's super strong RPO growth that gives us the visibility into the future in terms of what our revenue's going to be for years to come. Thanks, Dale. Your next question comes from Terry Tillman with Truist. Your line is open. Hey, good afternoon. Hi, Steve, Dale, and April. Congrats on going public. A lot of interest in the story. Sometimes the calls will be 30 minutes or so. We've got a one-hour long call today. Congrats on the strong results. Maybe sinc e you've fit me in, I'm going to ask two quick questions. The one thing is about realigning the sales and marketing side. I'd be curious about benefits you're seeing in terms of the installed base sales side. In terms of the non-LMS products, what seems to be popping more right now in terms of selling and propensity to buy? I had a follow-up. Yeah. I'd love to talk about the realignment of the sales and marketing organization. I'm really proud of that organization. A lot of change over the last 18 months. A lot of that work was around making sure that we got really clear on rules of engagement. We defined territories very tightly. We de-layered. We took out overlay across the sales team so that there was clear ownership. The way that we approach the selling is twofold. One is, there's a set of the products that everybody can sell, and then we focus our selling efforts based on territories and size of customer. With our assessment tools, we have a dedicated sales team for selling assessment into the K-12 space, because it's such a big opportunity, and we thought it was worth the dedication there. That's how we're approaching going after those non-LMS markets or products. We also did a number of things just operationally around being able to provide white space reports for the reps so that they know what's in an account and what's available still to go after, got them some competitive intelligence, those types of tactical things to improve our cross-sell capability. Great. Thanks for that. I guess on EesySoft, another non-LMS opportunity, but it really can fortify usage, I guess, of LMS. I'd like to learn a little bit more about, is this like a product analytics angle or a digital experience platform angle? What kind of signals did you get from customers that they're willing to add this to the mix in terms of what they're using from you all? Thank you. Yeah, no, I'm excited to talk about it because that is a product that our sales teams are really excited about, that we're very excited about. Like I said earlier, we know what customers are using based on the integrations into our platform, and we saw some good uptake of the EesySoft product, albeit small. This is a classically synergistic acquisition for us. They have really good technology that they've proven market fit, and they had three salespeople based out of Amsterdam. We're seeing early pipeline build. The way to think about it is what this product does is, 1, it gives the institution really good visibility into what's being used in their environment, what tools and how often and by who. It also gives them a channel to communicate directly with those users of the products. They can go in, and if they want to do flash surveys for customer satisfaction, or they want to target training messages to try to improve usage of those tools, this gives them the infrastructure to do that. It's a key part of the overall LMS experience, but it's different enough that they expect to pay for it in addition to the platform. That's how we're targeting it with our customer base. All right, thanks. Your last question comes from Stephen Sheldon with William Blair. Your line is open. Hey, guys. Thanks. It sounds like you're seeing really strong demand trends for assessment solutions in K-12 for Certica, MasteryConnect. Can you remind us of what the adjusted gross margin implications there are as you continue to see increased adoption of your assessment offerings? Sure, Stephen. As we had Certica acquired at the end of 2020, we built that into our models. I think at the time we did this, we knew that Certica had some higher gross margins in the area that we're moving towards the higher 70%. That works its way down through the P&L. That's part of the forecast that we've put together, and we have a high amount of confidence that six months into this, that it is providing those same level of margins that we had expected from the outset. We're really pleased with it. It continues to be something that our customers really want and is really accretive to our P&L. Got it. That's good to hear. Just wanted to see if you had any updated thoughts on the international K-12 market. At what point would you consider putting more resources to work in on that opportunity, or is that not on the roadmap at this point? It's a question that we ask ourselves all the time. The reality, Stephen, is that we are selling into some areas like Australia, for instance. We're starting to see some traction in K-12. We're treating it opportunistically right now. If we see that the trends favor, again, cloud-based and they're willing to accept that, there's good connectivity, and we're seeing purchasing behaviors like we're used to in K-12 in North America, we're adding those to the list as we move forward. No coordinated strategy as of yet. Does that make sense? Got it. Yep, makes sense. Congrats. Thank you. Thanks, Stephen. There are no further questions at this time. I will now turn the call back to CEO Steve Daly for closing remarks. Well, thank you everybody for joining us today. I'd just like to say on a personal note that this has been fun and a rewarding IPO process as well as this call. It's good to catch up with everybody. I want to thank all of our employees, our customers, and partners for helping us to get here. We've been a mission-driven company from the beginning, which means we only succeed when we help our customers improve educational outcomes for students all over the world. We are built to scale profitably, we're built to last, and we're confident in our long-term ability to drive durable growth and have a positive impact on education. Thank you for your interest in Instructure. We're looking forward to taking this journey with you, and we look forward to talking with you on our next call. This concludes this conference call. You may now disconnect.