All right, everyone, we're gonna get started. My name is Brian Peterson. I'm the application software analyst here at Raymond James. Very happy to have the team from Instructure back here again. Good to see you, Brian. Yeah, good to see you, too. Yeah. So, Steve, maybe we'll, we'll start with you. Just kind of a high-level overview on Instructure, Instructure, to get us started. Yeah. So, Instructure is a vertical software company. Our focus is on education, and so we sell the Canvas learning management system to universities and K-12 programs, both domestically as well as internationally. That's where we started. We recently announced an acquisition, a company called Parchment, which does transcripting, does credentialing. And so our strategy has been to become the platform for a learner as they go through their learning journey, whether it's starting in the K-12 system, going through a traditional degree program, or even through lifelong learning and non-traditional degrees. We will be both there in the delivery of the education as well as the evidencing of the education through the credentialing. Peter, I, I want to talk to you. Obviously, just joined as CFO. I'd love to understand, you know, what attracted you to Instructure, and any early takeaways so far? Yeah. So I think first and foremost, the mission-based nature of the organization is just incredibly attractive, right? And so I think once that kind of grabs you, I go through, you know, a very structured process when I look at a job opportunity, right? So the first thing I look at is: How big is the TAM? Is it global, and how fast it's growing? Really exciting- Mm-hmm. When I look at Instructure's opportunity there. Then I next look at the business, right? Are they differentiated? Are they lead, market leader? Check. You know, that happened as well. Then I got to meet the management team, and it was just a great fit with my, you know, style and culture. And then, as you know, you know, Instructure did an IPO back in 2021. Mm-hmm. We've got follow-ons in front of us. You know, I love the capital markets side of the business, so all that just came together, and so really excited. Day number 17 today, so pretty early into this career, but so far, I think it's going well. No, that's great, and I look forward to working with you. So maybe on the core business, kind of looking at North America, it's, you know, it's great to see 40%+ market share. Mm-hmm. You know, curious what you're seeing in terms of deal activity and how that pipeline looks for kind of North American Higher Ed as we think ahead into 2024? Yeah. North American Higher Ed for us is where we started. It's where we have a lot of strength, as you mentioned, the number one market share leader, in North American Higher Ed. What we're seeing is that I mean, there are some macro headwinds in Higher Ed. One being, enrollments for traditional degree-seeking programs have been declining over the last decade, really. Mm-hmm. But what we're starting to see really is the industry is really responding to look for new revenue streams. Mm-hmm. They're recognizing that not everybody's gonna come right out of high school and go get a degree. In fact, the last data I saw said about half of all graduating youth, high school seniors don't plan to get a degree. They're really looking at ways to attract other students, whether it's the person that's coming back to get re-skilled, or maybe it's the person that when they graduate, they go get a job, and they want to do this remotely, you know, remote education, those types of things. We're seeing a lot of activity with institutions looking at: "What is my strategy for the next 10 years? Sure. What am I gonna do," right? It has changed a little bit. It used to be: "What am I gonna use for an LMS?" Now it's: "Now, what is my platform going to be for addressing this non-traditional student?" And so we have seen a lot of activity. Deals are taking a little longer to get done. Sure. ... you know, because it's a bigger strategy, so we have seen a slowdown from a, just from a deal close rate. But you know, it is a, it's a pretty actually a pretty exciting time, Yeah. -in U.S. higher education. Where would you say the customers are on the higher ed side in terms of kind of understanding that evolution and maybe not just looking at an LMS and thinking maybe more broadly about the value that they can provide the students? Yeah, I think. You know, I think we're in, you know, if I'll use a baseball analogy, I think we're probably in inning three, Okay. ... as far as that goes. It's still pretty early days. There are a number of institutions, like Arizona State University or Indiana, Georgia Tech, who have been doing this for a while, and they've kind of proven out the model. You look at their enrollment numbers have been increasing over the last, you know, four or five years, while others have been declining. And so from that perspective, I think you've got a core set that have proved the model. In our InstructureCon, you know, that we just had in July, it was the number one topic whenever we talked with institutions about how are we gonna do this, how are we gonna find other revenue streams, how are we gonna go after these different types of students out there? So it really is starting to gain momentum. Any data that you can share on some of the early ones in terms of enrollment or... You know, like obviously, it's interesting for these guys that have thought ahead, you know, three, four, five years in advance. Yeah. I mean, you can see it's public information as far as Arizona State goes, but, you know, their traditional enrollments have been kind of flattish. And you can look at their total enrollment, and it's up, I think it's almost... I'll quote a number that is not right, but you know, it's up and to the right, Yeah. ... yeah, when you look at it, so. I don't know numbers either, so. Yeah, whatever. Yeah. I'm the CEO. From a competition perspective, you know, I'd love to understand, you know, obviously, taking a lot of share from legacy players over the years. Mm-hmm. ... you know, has that changed at all in... as we're thinking about this kind of new opportunity, this new frontier, what do you see from the competition in that regard? Yeah. You know, as these conversations have switched away from, you know, "I want an LMS with these features and functions," to more of, "Okay, what's my bigger platform strategy?" Our win rate has been up. You know, the conversation has been very different, right? It's 'cause we have a portfolio of solutions, right? Whether it's badging, whether it's the ability to, you know, a catalog, whether it's now with the Parchment acquisition, whether it's around, you know, transcripting and certificates, those types of things, that the conversations have become much different. So we feel really good about where we sit competitively, because a lot of our competition doesn't have the full portfolio, the platform play that we have. I think one thing that's exciting about the Parchment acquisition, right, is now we're selling into another customer base within the university system with a different set of budgets, right? Right. As we look at this non-traditional path that's emerging, right, the connection between the provost's office or the CIO, who's the decision-maker in the LMS, and the registrar's office, who's connected to Parchment, they've got to work together further, right? Mm-hmm. We think we're really uniquely positioned, you know, to leverage that. Well, 'cause this was actually a very big theme out at the user conference, but just, Mm. ... like understanding the breadth of the portfolio beyond LMS. So can you talk about where you're seeing incremental adoption, Yep. ... whether that's, you know, Mastery Connect or different parts of the platform? Like, I'd love to understand what you're seeing in terms of kind of a cross-sell, up-sell beyond the LMS. Yeah. So there's a couple of areas that are pretty exciting. One, in U.S. higher ed... Well, in higher ed across the world, it is about a port-- We have a suite of solutions that help them either demonstrate skills as part of competencies, as part of the learning process, as well as extend their offerings to a student that didn't come through the normal registration process. So that's our badging solution, our Pathways products, our catalog product. That one is, from a higher ed perspective, where we're seeing the most traction from a cross-sell perspective. In K-12, we see there's-- We have a set of solutions around assessments that automate the process of getting feedback on how students are doing against state standards. That product is. We're seeing the most, probably the fastest-growing upsell, as well as we made the LearnPlatform acquisition. Yeah. ... about a year ago. That's a product that gives administrators a view into what's being used in their environment, but not just what's being used, but is it getting the outcomes that they'd, Mm. ... hoped, right? There's evidence of efficacy. That's going to be really important. I think that's going to be a big driver of growth, going into 2025 and 2024 and 2025, because a lot of the stimulus funds that have been allocated have riders on them that say, "Hey, look, you've got to also show that whatever you spend this money on actually is working in the environment. Right. That's where they would use our solutions to prove efficacy. And so, I do want to hit on the K-12 'cause there's a lot of debate around funding, Yeah. ... and the impact that's having. Any update on kind of the state of affairs in the K-12 space? Yeah, you know, there's about a third of the funds that still haven't been spent. Okay. They have to be committed by the 2024, by October of 2024. There has been... the Department of Ed came back and said, "You can appeal to extend that if you want," but I, you know, I think most of the funding will get spent in this next buying season, Mm-hmm. ... the remaining funding. From our perspective, when we work with a school district, we, you know, our technology is going to be enduring. It's core fundamentals, so they tend not to use ESSER funds to buy our products, and we work very closely with state legislatures to ensure that there's ongoing funding and appropriations. But what we have found is that they will use ESSER funds for doing the installation, Ah, okay ... or the training. Yep. And, you know, so it really does grease the skids for all the upfront costs that come when you make a change, Mm-hmm. ... and put in a new learning management system. You had on LearnPlatform, like, obviously, that there's a lot of value. Is there an opportunity to maybe take that up into the higher ed market? 'Cause you would think the value proposition would resonate, but I'm curious where you're thinking about the cross-sell. There's a lot of areas. Yeah, yeah. Yes, absolutely. I think probably that's a, you know, for us, that's kind of a 2025 sort of opportunity from a growth perspective. But yes, the same—I mean, every institution's also dealing with how, you know, "How do I know what's in my environment? How do I know that all the teams..." Everyone has teams that just vet privacy, security, accessibility, right? And what Learn does is, you know, present that in a way that they don't have to go do it themselves, right? Mm-hmm. That it's already been done for them. So yes, absolutely, a big opportunity in higher ed. Parchment. Yeah. Big acquisition for you guys. Yeah. Maybe kind of walk us through, you know, how that evolved and the value proposition and what you think that brings to Instructure? Yeah. We've been talking with Parchment for a couple of years, and it just, you know, the planets hadn't aligned yet. But this really, the thesis behind it is, again, we want to be that system of record throughout the learner's journey, and so, a lot of our technologies are in the classroom. They're how the teacher interacts with the student, Mm-hmm. ... right, the delivery of education. What Parchment does is demonstrate the evidence of learning, and so they have transcripts, they do digital transcripts, diplomas, you know, as well as other credentials, whether it's a certificate or things like that. And so what we now have is we now have that system of record that shows you not only what did you do, but did you get credit for it, Mm-hmm. ... right? Or are you... Did you actually do what you said you were going to do? And so the strategy here is, as we bring these two together, there's technologies that allow us to now say... You know what? I got my degree. I took Computer Science 101, and I got an A. But now we can also say: "Oh, by the way, here's my project that shows that I actually know how to program in Java," right? Mm-hmm. It's in the LMS right now, but then I can attach that to that transcript, and now it becomes a really rich record of what did I really learn in my learning process. And so there's a lot of opportunity for us to really make this a much more skills-based, competency-based, outcomes-based when it comes to education. How do you think about the overlap with some of the solutions that you already sell? Yeah. You know that there's some synergies I'm assuming you're expecting from the revenue side, Yeah. ... and maybe on the cost side. So how, how do we think about that evolving over time? Yeah. So part of the technology that Parchment has is also around: How do you manage dual enrollment? So dual enrollment is when a high school student actually takes a college class during their junior or senior year, and get credit for that. And they have a lot of technology. That's actually the one that's the fastest-growing segment of traditional education is dual enrollment. Hmm. And so we've been working with a lot of the institutions like California Community College system, right? To figure out how do we make sure that Canvas, right, that they're using in the high school, is also it syncs with the Canvas that they're using at the community college level, right? So that they have this common experience through the learning. What Parchment does is then make sure, "Okay, well, that credit that I took at California Community College, I'm going to make sure that it one, it transfers- Mm-hmm ... and two," then they also reconcile to say: "Okay, I got it at Riverside Community College, but now I just got accepted to Berkeley. How do I make sure that that equivalent class gets me transfer, you know, transfer credit?" And so that whole simplifying those transition points is where I think we're going to see the biggest synergy from a revenue perspective. Do you see that kind of coinciding with...? I think there's a lot of, you know, when you have kind of a whole state, right, Yeah. ... in terms of a higher ed LMS system, and I have everything on the K through 12 side, but, like, is that sort of driving that synergy so you can have, That is absolutely, ... this groundswell in some of these states? Is that, So this is where our, you know, our strength view. We're number one market share in K-12 from the learning management system and in higher ed. Again, we're starting to see much more synergy by having both sides of that, those networks, right? Mm-hmm. As well as we, you know, we just won, we announced in our last earnings call, we won the Montana University System, right? A big part of that was: How do we connect, you know, how do we connect take the friction out of that transfer from, Sure. ... from going from K-12 to Higher Ed? Have you seen any change in terms of K through 12, in terms of trying to consolidate, right, on one system across states? I know that's it, it's in some, but not others. Has that changed at all? Maybe more of these kind of statewide deals. Yeah. You know, we had we saw a lot of those statewide deals during the pandemic. We haven't seen them as much. And part of that was, you know, they wanted to make sure there was equitable access, right? That the rural school district that couldn't afford a LMS had access to it. They're, you know, they're still there, they're still out there. What we've seen more is there've been a lot more conversations. I met with the Board of Regents in Louisiana. There's been a lot more conversations about: How do we, how do we simplify that - How do we get students that are in high school to go get post-secondary education, right? Mm-hmm. And so a lot of it's been about how do I make sure that that transition from high school to college is as seamless as possible? You know, the legislature in Louisiana is looking at letting kids get free credit, high college credit, while they're in high school, right? So if you take a dual enrollment class, right, it's free. And so you've got this head start on education, and it makes it a lot cheaper for them and those types of things. So that's where I see a lot of impetus with state schools. Parchment is driving a lot of that in terms of the product innovation. Mm-hmm. Is that where other areas are focused? Or, so I'm curious, from an organic perspective, where are you really investing in the product? Yeah, so part of the innovation is around: How do we help with those transitions, right? So how do we make sure that a student that is in high school, they have a seamless experience when they transition to higher ed? But we're also investing in the assessment space. Yeah. So we talked about that, right? The ability to link up what was taught through the LMS, right? And what was engaged with, right? So we also know, did the student actually engage with the content that the teacher put on the LMS? And then marry that to: How are they doing against those standards? Mm-hmm. and then giving the teacher then that data in a way that she can say, "Okay, Johnny's struggling with long division. I can see that in my assessment. He did engage with the content, Mm. ... the way I presented it. Maybe I need to give him some supplemental content. Sure. Right? And so closing that loop is where we're spending a lot of our time, in making recommendations about more personalized learning paths, those types of things, from a K-12 perspective. It's all about: How do we reach that non-traditional lifelong learner, Right. ... on the Higher Ed side? And, maybe just pivoting back to M&A, obviously, Parchment is your biggest acquisition to date. Right. Appetite for additional M&A? I mean, I know you, you've got a strategic position with the LMS, Yeah. ... big cross-sell portfolio, but, you know, what's the appetite for more here? Yeah, so, you know, we're going to digest. You know, and it's time to, you know, time to digest. So, we're going to be really focused on integration with, with Parchment. But, again, we've got a pretty active, corp dev team that's out there talking, you know, we won't do another Parchment at size acquisition, but if something came along that was a little more tech tuck-in-ish, we'd, you know, we'd absolutely jump at it. I think, just on some of the numbers as regards to the size and synergies, how should we be thinking about the financial impact of Parchment? Yeah. It has not closed yet. It has not closed yet. You know, Think about it as kind of $115 million of top line. You know, it'll be accretive to our EBITDA margins. First year, probably, what did we say? $50 million of EBITDA contribution. Yeah, that's correct. Yeah. So, think of it in kind of that size, $800 million, just under $800 million purchase price. Any help on the... I don't know if you guys have shared, but just the growth rate of that business historically, like, Yeah, we, you know, until we close, Okay. We haven't shared anything. Got to take a shot. Yeah, I know. I know. You're good at that. Yeah. Take my chance. I'll open it up to the audience if there's any questions. All right, Steve, I know we're joking about travel before this, but, Yeah. ... international, and obviously, there's a big TAM there. You know, maybe talk about any of those markets that have started to develop, or where you're seeing more traction and, you know, I guess, to get an update on the international business. Yeah. So there are a couple of markets that we've been in for a while. Australia, New Zealand, we've got about 30% market share there. UK, Ireland, we're in the 20% range. Nordics, we have about, depending on the number, 60%-80% of the Nordics. So where we've been there for a while, you know, we've got good traction. Benelux is an area that we've put a lot of focus on recently. Spain, the DACH region, are kind of where we're going with direct sellers. Mm. ... in EMEA. In APAC, we're seeing good pickup in the Philippines, so a lot of traction in Southeast Asia from a direct perspective. And then from a channel perspective, we're seeing Japan is starting to really come on for us- Mm. ... with the channel partners, and then Latin America is the other place where we're starting to see good traction from a channel perspective. And as you think about the vendors that you're taking share from there, does it look a little different? I know Moodle's a little bit more common internationally. Yeah, if you just look at the entire international market, Moodle has about 70% market share. Yeah. It's primarily a displacement of Moodle. Is there anything that's accelerated that? I mean, I don't know if it's COVID or- Oh, yeah ... either security or, you know, the move to the cloud. Like, you know, there's always a debate around pricing in international. Right. So how has that sort of evolved? Yeah. So really, the pandemic is... it was kind of the catalyst, Mm. ... for people to start thinking about it because when they had to scale up their infrastructure, right, and they couldn't do it with, with, you know, fast enough with Moodle, right? They'd have to go buy servers and bring up that infrastructure. They're starting to recognize there's value in having this in the cloud. The other piece is, you know, we get to leverage all of that AWS infrastructure for privacy and for security, Mm. ... and those types of things, and so that's the other kind of selling, selling advantage, from somebody moving from Moodle. And then, you know, they also found that during the pandemic, it was tough to get support, right? I mean, you don't really have support from from Moodle as an open-source solution. So, we won the University of Louisiana System. One of the big things was they just, they just needed support. They needed the ability to distribute content across the entire system, right? And it was, you know, individual installations across each university in that system. So, there's a number of things that are really becoming forefront. What about the role of partners in some of these markets? Like, the reach and the value that they can provide in terms of getting you into areas where you don't have to invest the direct capacity. Yeah, that's, you know, that's... We would never have been able to, you know, get any traction in Japan. It would take us five years of investment there. You have to have somebody local. You have to have a presence. You have to have the purchasing vehicle. So the channel gets us into markets like Japan, which are pretty tough to break from a direct perspective. We actually use a channel in Philippines for all the public tender stuff. Mm. ... because it needs to be a local entity. Right. ... and, and they have the purchasing vehicles, same, same within Latin America. Again, what it gives us is a chance to go in, you know. We've done the analysis, and if we think we can, you know, we can ramp it pretty quickly, there's a good business there, we'll go direct and make that investment upfront. If not, we'll go the variable cost route of a channel to get into things like Latin America in particular. Yeah, I know we're talking about costs here, but it's always amazing the growth you guys have with the margins. So maybe you can just highlight how you're balancing kind of reinvesting in the business or in the margin profile, and just remind everyone where you guys kind of stand on that today. Yeah. I'll probably give that to Peter, but, Yeah. Yeah. I'll just start as, you know, the nice thing is, as a vertical software company, right, we, there's a premium paid for understanding the customer, understanding the market, right? And, and it becomes so embedded that it's super sticky, right? It's, you know, very low churn, which gives you a lot of power when you go to manage the overall business because you... it's predictable, right? It's understandable. You've got a pretty good moat, right? Mm. The large horizontal, you know, infrastructure guys aren't going to come in because, you know, it takes so much domain knowledge. But then we can just talk about the leverage in the model. Yeah, so I mean, I think from a margin perspective, I mean, overall, we're operating as a Rule of 50 company, right? So we've got, you know, top-line growth, margins, you know, north of 40%, and strong free cash flow. So feel really good about how the business is operating today. That being said, you can always improve margins, right? So we're really focused on improving those margins while continuing to invest in the organic growth rate of the business. And maybe I'll just wrap it up here. You know, as we're thinking about, I know Parchment is a big thing next year, Mm. ... but if we're thinking about the next 2-3 kind of strategic priorities for you guys into 2024, what would those be? Yeah. You know, there's the big movement in the industry that we think we're well-positioned to capitalize on, which is around student success. Mm-hmm. You know, how do you help a student through that process, not just, you know, get them enrolled if it's Higher Ed, and then, you know, let them just go? You know, but, you know, how do you help them with their mental health? How do you help them with, you know, student life, and those, connect all those pieces in addition to what happens inside the classroom? That's an area for us. I think there's going to be a number of areas opened, and we'll share it. We're going to do an investor day in March, that we just announced. We'll talk a little bit more, but, you know, to Peter's point earlier, Parchment gives us access to new budgets, right, and new relationships with admissions, with the registrar's office. So there'll be some areas where we think we can, we can continue to grow. Then we'll continue to invest in helping institutions reach that non-traditional student, from a higher ed perspective. Then K-12 assessment continues to be that growth driver for us. We'll continue to make those investments. Great. Look forward to hearing more in March. Cool. Awesome. Yeah. Thanks, guys. Appreciate the time. All right, thanks. Yeah.