Ladies and gentlemen, thank you for standing by, and welcome to Instructure's Second Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. Please be advised that this conference is being recorded. I would now like to turn the conference over to your first speaker, David Banks, Vice President, Investor Relations. David, please go ahead. Thank you, Josh. Good afternoon, and welcome to Instructure's Q2 2023 Earnings Conference Call. We will discuss results announced in our press release, issued after market close 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. Our 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 other reports and filings we make from time to time with the Securities and Exchange Commission. All of our statements are made as of today, July 31st, 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 the reconciliation of our GAAP to non-GAAP measures included in our press release, which is posted in the Investor Relations section of our website. With that, let me turn the call over to Steve. Thanks, David. I'm delighted to welcome everyone to Instructure's Q2 2023 Earnings Call. During today's call, Dale and I will share the details of our Q2 results and provide guidance for Q3 and the full year 2023. Q2 results exceeded our previously committed guidance rate range for our revenue and adjusted EBITDA, fueled by our efficient go-to-market organization and unyielding dedication to customer satisfaction. Q2 revenue was $131.1 million, up 14.4% year-over-year, impacted by a constant currency headwind of 160 basis points. Q2 adjusted EBITDA grew 29% year-over-year to $51.3 million, driving a 39.1% margin. We believe the strength of our Q2 performance demonstrates the effectiveness of our business model. Before we delve into highlights from the second quarter, I want to provide some takeaways from our InstructureCon conference that took place in Denver a few days ago, the first such event we've held in person since 2019. We had nearly 2,000 customers, over 100 partners, and more than 2,300 attendees at this sold-out event. It was gratifying to find the Instructure community is as vibrant as ever. We unveiled enhanced and expanded Instructure Learning Platform innovations centered around core teaching and learning, advanced analytics, lifelong learning, and platform integration. We believe these new solutions will save educators time, personalize learning experiences for students, and simplify complex tasks for administrators. We also previewed some of our AI strategies and are excited by the feedback from our customers as we move forward with them. Now, I will share highlights from the quarter, including four key drivers: strong new logo sales, cross-sell uplift, the power of our platform strategy, and how we are leveraging our business model. First, our new logo win rates remain strong across all of our markets. Success there is driven by our ability to solve real-world challenges across the teaching and learning landscape. Our focus on lifelong learning and vocational training resulted in a win with Duke University. Duke made a significant investment in the entire Instructure Learning Platform with the implementations of Canvas LMS, Impact, Canvas Studio, and Canvas Credentials. Duke's Office of Teaching and Learning spearheaded this transition to bolster their ambition of being a front runner in lifelong, non-traditional education. We now serve all of the top 10 universities in the United States with Canvas. In North American higher ed, we had a significant win with Ohio University. After 20-plus years on a legacy provider, OU chose Canvas for a 10-year contract. We won because of the strength of the Canvas community, our presence in other flagship institutions in Ohio, our overall market leadership, and our ability to deliver a value-based, comprehensive solution. In North American K-12, our platform continues to support our market-leading position. The green shoots we mentioned during our last quarterly call resulted in strong bookings in Q2, as K-12 decision makers continued to recognize our product as mission-critical. Cincinnati Public Schools joined the Canvas universe in the quarter. A longtime user of a competitive solution, Cincinnati ran a lengthy process, seeking feedback from parents, teachers, and students. Their strategy was to implement a new LMS that would deliver best-in-breed results. Canvas was far and away the winner, as our LMS clearly matched the district's innovative approach to education. Our reputation for consistent uptime, steady feature releases, unmatched service and support, and unrivaled student experience allowed them to confidently displace the incumbent provider with Canvas. Among the new international deals in Q2, we secured a direct win with the University for Continuing Education Krems in Austria, the leading public university for continuing education in Europe. Krems serves a changing demographic with an increasing average retirement age and a skills gap between the workforce and graduates. They saw Canvas as a way to address the needs of their student population, allowing them to serve both traditional and non-traditional students. Similar to other institutions in Europe, France has strict privacy standards that must be met by their partners. Our global privacy strategy, which centers on safeguarding student data and reducing our customers' regulatory burden, allows clients to quote, to comply with rigorous privacy standards in the region. It's gratifying to see our customers responding positively to our unwavering dedication to privacy. We continue to drive growth with existing customers, both through cross-sell and up-sell, where we see a billion-dollar-plus opportunity. Internationally, we secured a meaningful up-sell with Go1 Pro, one of the largest registered training organizations, or RTOs, in Europe, making them our largest customer by user number in Europe. This also demonstrates our ability to serve the needs of non-traditional learning institutions. Cross-sell was fueled by deals such as Charlotte-Mecklenburg Schools, a long-time Canvas and Mastery Connect customer. After a multi-vendor evaluation, the district chose our assessment content because of the rigor and accuracy of the solution that gives better insight into student growth. This further validates our platform strategy and the strength of our suite of products. This platform strategy, our third key driver, thrives on innovation and partnerships. During InstructureCon, Shiren Vijiasingam, our Chief Product Officer, provided a glimpse into many new product initiatives designed to shift the education paradigm, enhance teacher efficiency, and foster student success. Among the most important partner-driven deals in the quarter, we won a contract with one of the preeminent technology companies in the world that wanted to conduct research to prove the efficacy of handheld devices. We created a proposal that examined the impact of math intervention on both student outcomes and teacher outcomes. In addition to expanding a great partnership with a large technology business, the win also has garnered the attention of large districts that are looking to participate in the research. We are thinking big about partnerships. Also, at InstructureCon, we announced that we are teaming with Khan Academy, bringing together our structured learning platform with Khan's AI-powered student tutor and teaching assistant, Khanmigo. Through this partnership, we are offering world-class content from the Khan Academy with the industry's most widely used commercial LMS, leveraging generative AI to empower educators to meet students where they are in their educational journey. We are committed to bringing AI to the teaching and learning process with intent, safety, and equity. To that end, we also announced the Emerging AI Marketplace last week, which gives educators visibility and access to the AI solutions that are integrated into the Instructure Learning Platform. We have worked with our customers to define privacy and stand, and security standards to ensure AI solutions are safe, and each partner in the marketplace is committed to these standards. In just the last two years, we have nearly doubled our partner base. Truly, our an investment in the Instructure Learning Platform gives our customers access to innovation across the EdTech landscape. Finally, our results are indicative of our ability to drive leverage in the business. Because of our disciplined investments, we've been able to deliver best-in-class margins that, in turn, allow us to invest in our platform and drive long-term durable growth. Our business model permits us to continue to drive, driving strong top-line results without sacrificing margins and profitability. As evidence of this, we saw record renewals in Q2 as customers that came on during the COVID-19 pandemic continued to see value in a more normalized environment. With adjusted gross margins approaching 80% and adjusted EBITDA margins nearly 40%, we expect to continue to produce free cash flow that will allow us to reinvest, both organically and through M&A, to drive long-term, durable growth. In conclusion, we believe our impressive Q2 results and expanding impact on education position us as the clear leader in the education technology space, and we look forward to the opportunity to continue to drive value for our customers and shareholders in the months and years ahead. Now I will turn it over to Dale to provide further details on our Q2 financial performance and guidance for Q3 and the full year 2023. Dale, please go ahead. Thank you, Steve. Thanks again to everyone for joining us today. Before discussing our 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. In Q2, we continued to show a combination of strong top-line growth and best-in-class adjusted EBITDA margins. As Steve mentioned, we generated total GAAP revenue of $131.1 million. Subscription and support accounted for 90% of our Q2 revenue at $118.6 million, up 15% year-over-year, driven by healthy growth across all of our key markets, with particular emphasis in K-12 and with cross-sell. Professional services and other revenue accounted for 10% of our Q2 revenue at $12.5 million, up 7% year-over-year. Deferred revenue at the end of Q2 was $330.7 million, up 17% year-over-year. We ended Q2 with remaining performance obligations, or RPO, of $853.6 million, up 9% year-over-year. We expect to recognize revenue on approximately 73% 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 count are on a non-GAAP basis. Our strong gross profit margin profile was supported by our optimized cloud architecture and flexible support model that scales to meet seasonal customer demand. In Q2, gross profit was $104.1 million, representing a 79.5% gross margin, up from 77.6% in Q2 of last year. Turning now to operating expenses. Sales and marketing expenses for Q2 were $27.6 million, or 21% of revenue, down slightly from 21.5% of revenue in Q2 of 2022. Research and development expenses for Q2 were $16.6 million, or 13% of revenue, compared to 14% in Q2 of 2022. General and administrative expenses for Q2 were $9.8 million or 8% of revenue, down from 9% in Q2 of last year. Non-GAAP operating income for Q2 was $50.2 million, representing a 38.3% operating margin, up from 33.7% in Q2 of 2022. Q2 adjusted EBITDA margin was $51.3 million, representing a 39.1% Adjusted EBITDA margin, up from 34.6% in Q2 of last year. Non-GAAP net income was $28 million in Q2, or $0.19 per share, compared with $23.8 million, or $0.17 per share a year ago. Turning to the balance sheet cash flow statement. We ended Q2 with $129.8 million in cash, cash equivalents, and restricted cash, and $488.4 million of long-term debt, net of discount, resulting in a 1.83 times net debt to trailing twelve-month adjusted EBITDA ratio. Free cash flow for the quarter was $23.5 million, compared to $6.6 million in the prior year, up more than 250%. Adjusted unlevered free cash flow, which adjusts for the impact of transaction costs, sponsor costs, impaired leases, and other non-recurring costs paid in cash, was $37.1 million, a 129% year-over-year increase from $16.2 million in the year ago quarter. Note that our free cash flow was quite strong this quarter, due chiefly to accelerated collections. We expect that these will normalize as we move through the balance of the year. I will now conclude the call by providing guidance for Q3 and the full year of 2023 for revenue and adjusted EBITDA. We have provided additional guidance details in our earnings press release. For the third quarter of fiscal 2023, we expect revenue in the range of $132 million-$133 million. For the full year, we expect revenue to be in the range of $524 million-$528 million, up $2.9 million at the midpoint compared with the annual guidance that we provided in May. We expect Q3 adjusted EBITDA in the range of $52.5 million-$53.5 million, representing an adjusted EBITDA margin of 38.8% at the midpoint. For the full year, we expect adjusted EBITDA in the range of $203.5 million-$207.5 million, representing an adjusted EBITDA margin of 39% at the midpoint. For the full year, we expect adjusted unlevered free cash flow to be in the range of $207 million-$211 million, for an adjusted unlevered free cash flow margin of 39.7% at the midpoint. In summary, we believe that our first half results put us in great position to drive an even better 2023 than originally expected. We executed at a very high level, exceeding our guidance and continuing to deliver a rare combination of double-digit growth and best-in-class margin. We couldn't be more pleased about our momentum in the marketplace and look forward to updating you on our progress throughout 2023. With that, Steve and I are happy to take any of your questions. At this time, if you would like to ask a question, please press star followed by the number one on your telephone keypad. Your first question comes from the line of Josh Baer with Morgan Stanley. Your line is open. Great, thanks for the question and congrats on a strong quarter. Was hoping to get an updated view on growth expectations across K-12, higher ed, and international. Sometimes you give kinda, kinda ranges there. Wanted to ask, just to get also a sense for the gross margins or EBITDA margins or contribution margins across those segments, thinking about how to assess the impacts from mix, mix shift, presumably to faster-growing international, maybe to K-12, how that could impact margins, too? Thanks. Yeah. Thanks, Josh. Appreciate the question. We've provided some growth expectations in general terms for North America, K-12, and North America higher ed group to be in the high single digits and international to be in the low double digits. That's how we look at the business moving forward. Now, in terms of margins, we've not broken out margins by any of those different segments that we've talked about. However, I will say that we're very confident in our operating model, that we can get very good and positive contribution margins in each of the areas where we participate. Josh, as we've, you know, we've made investments, for instance, in our channel program, you know, that were negative margins, frankly, as we began making those investments, and we've still been able to improve our margins in the process. That's the, the model that we're taking, is that we'll continue to see those improvements even as we see the mix, the mix shift between those. Okay, that's helpful. Thanks. Any, any change in the competitive landscape across those end markets, or is it the same story? Thank you. Yeah, we're we're seeing, you know, similar competitive dynamics, across, yeah, across K-12 higher ed and international. No change there, Josh. Your next question comes from the line of Steve Enders with Citi. Your line is open. Okay, great. Thanks for, thanks for taking the question here. I, I guess I did want to start on, you know, asking about takeaways from, from, from the conference, and I know there are a lot of product announcements, but I guess what's kind of been the early feedback on, on some of the AI initiatives from, from, you know, the, the customers that you've talked to? I guess, how should we be thinking about, you know, the potential for that to, to layer into the model here, over the next few years? Yeah, it was good to see you there, Steve. We, we, you know, the feedback was, was generally very positive. You know, we had taken time before, for basically the last 18 months, we've worked with some customer user groups. We were very, you know, pragmatic and really spent time with them understanding where were areas that they'd like us to make investments. You know, investments like our, you know, using artificial intelligence to help create pages within, you know, within Canvas, that, that create, that creator experience using AI to use language, you know, regular language to do that was very, you know, was very well received. Some of the stuff that we showed in the labs, in the educational moments of the future room, they were very, very excited about global search being one of those, some of the, some of the things we did, recognizing, you know, sentiment within a remote environment, as well as some of the other pieces that we, we highlighted. We had, you know, we had a lot of signups, if you will, for customers that want to be part of the early adopter program as we work through some of the details on these. In general, very positive. Yeah, I'd say, you know, it's still early days as far as what impact this is going to have on the business model long term, and we're working through those with our customers as we, we work to understand, you know, which, which of this functionality, you know, the value that it's bringing results in changes in pricing or, you know, what the cost structure looks like. It's a little early to, to be building anything into the models, Steven. Okay. No, perfect. No, that's that's helpful there. I guess to, to follow up, it's good good renewal activity and good, good bookings here in the quarter. How are you feeling about the current budget environment, and kind of what's the, the view into, you know, pipeline opportunity going into, going into 3 Q? Yeah, the, you know, we feel good about where our pipeline sits, going into the second half. I would say, you know, you've read all the headlines about, you know, the, the, some of the challenges that higher ed is facing. You know, what we're finding is, you know, in general, those are good, we help them deal with a lot of those challenges, so we feel it's a good long-term backdrop for us. So things like vendor consolidation that we're starting to see happen, you know, customers have told us that, you know, they wanna, they wanna standardize around a few strategic platforms, ours being one of those. The work that we've been investing in over the last two years to really ensure that, we give, you know, solutions to address non-traditional students, the work that we've done to really go after those non-traditional education institutions, you know, all, all are, are good backdrops for us for long-term, durable growth. We feel good about where we're sitting, going into the second half, as well as really long term from a growth perspective. Okay, perfect. Thanks for taking the question. Thanks, Steven. Your next question comes from the line of Frederick Havemeyer with Macquarie. Your line is open. Hey, thank you very much, and congratulations on the quarter. I think I would like to just begin by asking a little bit about international as well, too. Just generally, certainly we saw, and you highlighted the Austria win. Just how do you think about that opportunity going throughout the balance of this year, of course, into next year? Just how, how far along do you feel you are with your international partner go-to-market program, and just how confident are you in the international opportunities? Yeah, it's a, it's a good question, Fred. you know, we, we, you know, we feel really good about our positioning for international. As we highlighted in the script, the wins with Krems was in, was in Austria. Part of, you know, part of the value proposition that we bring to, particularly our European customers, but even across the board, is, is the work that we've done really to put in a, a very robust privacy and security framework. We feel good that, that, that demonstrates the value of those, particularly when you're dealing with some of the regulatory environments that each of the regions is, is dealing with. Feel good about there. You know, Moodle is still 70% of the market there. We, you know, we, we, we believe in the opportunity to continue to grow. It's still our fastest grower. That we, you know, it can drive, we can drive a big business over, over time. You know, still feel similar to as we've talked about in the past, Fred, about the opportunity there, and particularly about our position to be able to, to win. Channel investment is still continuing, and we're starting to see some, some progress in, in the channel. Again, that's, that's probably something that occurs a little bit later in time as far as having a meaningful impact on the top line. Thank you there. I, I think there's another one. Just we've seen, you know, Canvas is performing well, your, your product is absolutely solid, but of course, you've been building a broader portfolio of solutions too. You know, I'm curious if you can add a little more context also on just where you're seeing adoption of outside of core Canvas solutions and how that's trending throughout this year? Yeah, you know, we, we saw particular success in K-12 with assessments. The Mastery brand of products, whether it's the Mastery Connect, the Assessment Management System or the content that rides along with that. Good quarter from that perspective. We're seeing a lot of a lot of pickup with our Canvas Catalog and Canvas Credentials, you know, as, as we, as we help either higher ed institutions address the nontraditional or as we go, you know, we go after some of those nontraditional, those RPO organizations like we talked about in Script. Those, those two have been particularly successful from a cross-selling perspective, those two areas. You know, we're seeing a good good success with our LearnPlatform acquisition. From a, you know, the ability to sell to both, both sides of the network, either the, the educational institution as well as selling services to the partners and providers, has been, it's met our expectations, and the pipeline has grown and nearly doubled since we did the acquisition. We're feeling good. Thank you very much. Thanks, Fred. Your next question comes from the line of Stephen Sheldon with William Blair. Your line is open. Hey, guys. Thanks for taking my questions. The first one here, just great to see renewal trends supporting the step up in RPO. So as you went through this heavy renewal period, did anything surprise you, either positively or negatively, in terms of things like renewal rates, deal lengths, pricing, upselling, et cetera? Are there any trends that you saw consistently, such as maybe longer term, you know, or longer duration contract renewals? Just any detail on the renewal activity. Yeah. Thanks for pointing out the RPO, Steven. We're really pleased with it. What we didn't call out is this is a historic number for us on RPO. I'm really pleased with the renewal team. This, I would say that the one constant thing that we're seeing out of this group is that we had a lot of customers come on board three years ago in the beginning stages of the pandemic, and they're finding value still today with Learning Platform, and they're building around Learning Platform. Very, very high retention rate. We are seeing some deal length, contract length extending mainly in the high-end space. The other thing that I would say, those renewals are now coming with additional products that we have out of our portfolio. Really good, really good things coming out of this strong renewal, quarter that we just closed. Good to hear. Appreciate that. As a follow-up, it seemed like there was a lot of focus at the user conference last week on credentialing in higher ed. Looks like that was included in the Duke win. How frequently are you seeing that being included in conversations with new and existing higher ed customers? Is this gonna be something that practically every university will need to be thinking about to be relevant over the medium term, in your view? What could that mean for your financial opportunity with these types of solutions? Yeah, this is, this is a conversation that we're having with almost every institution, right? They're, they're looking at how do they meet the needs of the, you know, of the workforce of the future, how do they demonstrate, skills along the way, rather than just, you know, just, just pointing to a diploma, at the end of their educational journey. It is absolutely a, a point of conversation. It's in, in almost every conversation that we're having from a selling, perspective. It, it is my belief that over time, every institution will have to, have to figure out how to deal with this. You know, and the customer panels, not just the one that we had together, but also, others are kind of confirming that this really is an opportunity for higher education to really ensure that, you know, enrollment students go up as they're addressing the skills-based economy going forward. Great. Thank you. Nice quarter. Thanks. Your next question comes from the line of Joe Vruwink with Baird. Your line is open. Great. Hi, everyone. Maybe I'll go back quickly to the last discussion on RPO. Is it possible to translate what you just saw in terms of financial metric, like net retention rates and maybe how the recent renewal cohorts are evolving relative to, you know, I, I think you've talked about 105%-110% in the past. Is that changing for better or worse, just in terms of your recent activity? I, I would say, Joe Vruwink, that that RPO number is really noisy. And the main driver for that is the multi-year engagements that we sign with our customers. I don't know that I would overindex on that particular number as it translates to any of the metrics. I, I would say this, though: we have, this quarter, we saw really good growth in per resident. We saw good growth in our RPO, and we had a really good bookings growth. On NRR, there's, there's a couple things that we would also point to, which would be some of the growth that we saw with renewals, adding other products to it, and some, some price increases. Some of that does come through in the NRR number. I, I think, Joe Vruwink, I would-- I don't. I think it'd be tough to read through on the RPO number to, to extrapolate what NRR is going to be. You know, we're still, we're still holding to our, our guidance on, on NRR, where we think that's going to end the year. Okay. That, that's helpful. Then, I wanted to ask about guidance. It looks like the forecast for the second half of the year entails revenue growth dipping into the high single-digit range. How, how much of that is just reflecting some of the bookings trends you were discussing in the latter part of last year? Then on the flip side, you know, as I just look at this quarter's RPO number and, and think about maybe RPO billings, it does seem like there's been an improvement in growth rates, kind of back to the low double-digit range. Is this all maybe just a matter of, you know, the timing of when RPO gets deployed and, you know, low double digits is feasibly a, a, a better expectation, but maybe the earlier part of next year? Joe, the second-half growth really follows the, the guidance that we provided for that. It It really follows the normal seasonal pattern that we see. It aligns to North America's fall start of school systems, where we have most of the reservoir built into our plan. We always provide guidance that we're confident in delivering, and the stable customer base gives us that confidence that we can hit those numbers that we set. We'll guide to 2024 numbers in our Q4 call, Joe. Okay, fair enough. Thank you. Your next question comes from the line of Brian Peterson with Raymond James. Your line is open. Hey, gentlemen. Congrats on the quarter. It, it was great to see you, see you last week. Two on the cross-sell that you guys referenced this quarter. Just on the cadence, you know, I'd, I'd love to understand if that's more of a renewal dynamic, and you're seeing that as part of contracts coming up, or, or is that actually happening kind of outside of that traditional negotiation cycle, maybe with that outside of the RFPs? I, I'd love to maybe unpack that a little bit. Yeah, you know, Brian, I mean, it's a little bit tough to kind of break it out because we, you know, this is our, you know, the kind of June, July, August time frames are our biggest renewal months. We did see good cross-sell motion in this quarter. Yes, that helps. It's always good to intercept a renewal when it comes to cross-sell. We don't, you know, we still do cross-sell outside of renewal cycles. It is, it isn't tied necessarily to the renewal, but absolutely, the renewal helps when it comes to being able to intercept budgets and things like that. Understood. Maybe just a follow-up. No, it does, but I guess maybe for Dale. As we're thinking about cross-sell in, in, in some of the newer products, how do we think about, like, a dollar booked to a dollar going live for revenue? Is, is that much shorter than the LMS or, you know, does it matter by product? I'd love to just understand, as we think about that diversification of, of the booking stream, how does that flow into revenue? Thanks, guys. Yeah, there's it's a good question. What we're finding is that if, if we're able to capture what a solution for a customer that has an issue and show them value in our product, they will buy it prior to a contract renewal. We see that with some of the products we have, like, the LP products are a good example of that. Impact is another good example of that. Then what happens, Brian, is that usually we see, like an upsell at the time of renewal, where they expand that to a larger part of their student base. So it happens all the time, and so it's hard for me to tell you after a booking when that's going to start, because it, it just happens all the time, and it's based upon the customer's needs. Understood. Thanks, guys. Your next question comes from the line of Terry Tillman with Truist Securities. Your line is open. Hey, Steve, Dale, and David. Not to worry, I still have some questions left, so you're not getting out of this that simple. The, I know Canvas Credentials and Canvas Catalog's been asked, like, four times, but I thought I'd ask a fifth time. When I was talking to customers just on an ad hoc basis at InstructureCon, it actually was coming up regularly, and I've attended y'all's conferences for many years, whether virtually or in person. I'm curious, though, Canvas Credentials and Canvas Catalog, how do they stack up now in terms of kind of the, the mix of new bookings coming from those add-on products versus maybe some of the other products? It's basically just kind of related to that. Where are we in the adoption cycle for those two modules? 'Cause it was coming up on a pervasive way. Thank you, and then I follow up. Yeah, you know, Terry, we don't, we don't break out between the different products as far as percentage of bookings, that kind of thing. To your point, it is, it is top of mind for most institutions. We are still early days, so a lot of conversations, a lot of strategies, some pilot, you know, pilots or customers rolling out pilots. Some, like Duke, that are committing to it right up front. You know, from a revenue contribution perspective, it's still, it's still a pretty small contribution, and we're still kinda early innings. Okay. Got it. Understood. I guess this is the follow-up question is, you know, it was striking in terms of the commentary and the narrative around lifelong learning. You, you all talked about now over two quarters, you know, some of these non-traditional kind of educational institutions and, and where it's kind of like reskilling opportunities. What, what I'm curious about is, you know, where are we in terms of how much that's starting to kinda shake out in the pipeline of, of some of this kind of more emerging kind of business? Because I'm not, I'm not suggesting we're gonna have a new segmentation, another segment. Dale doesn't, you know, wanna have to deal with that, but how much is this starting to proliferate the, the new deal activity, these deals that are outside of the, you know, the traditional four-year academic institutions? Yeah, I, you know, we don't break that out again, Terry, well, as far as that level of detail. I would, you know, I would, we've been intentional as we've included these deals in our, in our transcripts for the last, you know, several quarters because we are seeing a lot more activity in this RTO further education, you know, those non-traditional education institutions. We do believe that's a, it'll be a long-term driver for growth for us, right? It'll be an important offset for existing customers as far as enrollments go. You know, it will be a driver for our upsell and our cross-sell over the long term. Again, on both, both, on both sides of those, whether it's existing institutions, you know, traditional institutions or non-traditional, we're still early innings as far as its contribution to, you know, to our overall results. Got it. I guess, though, on, on that kind of emerging part of the business, does Chris Ball need to do anything different with go-to-market, or do existing sales reps kind of get opportunistically on those deals? Anything you can share about, like, the go-to-market, if it, if it needs to be any different? Yeah, that's a great question. We do believe that we, we, we can go faster if we, if we put, you know, dedicated reps on, on that non-traditional learner group. It does require a little bit different messaging, you know, positioning, packaging, those types of things. Historically, we have, we have addressed those with our existing higher ed sales team. Over time, I think that'll, you know, that'll, that'll segment out from a selling perspective. Thanks for taking my questions. Thanks, Terry. That was only three questions this time. Your next question comes from the line of Matt Van Vliet with BTIG. Your line is open. All right. Thanks for taking the question, guys. Nice job on the quarter. I guess when you, when you look at, some of the conversations with prospective customers, you know, how, how much, especially in higher ed, is starting maybe to be driven by some of these credentialing or non-traditional components as they're looking at, using technology to, to really kinda jump into that environment, and then you're gonna follow up on, on more, maybe the more traditional, Canvas LMS deals? Is it still almost all driven by, at least LMS being a, a major part of it? Yeah, it's, you know, it's, it's interesting, Matt, because there's a, the non-traditional is, is definitely an interest point within the selling process, in most institutions that we're talking to. The other big trend that's kind of related to this is that institutions are recognizing that historically, the way they've tried to go after these is, you know, with a, you know, maybe it's a continuing education team, which is separate from the team that's worried about, you know, how, how does the on-campus experience look? What they're recognizing is they want one platform to drive across all modalities, right? We call that omnichannel, right? They want one, one experience, whether you come on campus full time, whether you're fully remote, whether you're doing this to reskill, or you're coming for a degree, or you're just for a credential. That's the bigger driver of the discussions. You know, the use of Catalog, you know, which is organically built into the Canvas platform, the, the addition of Credentialing, those things are, are, you know, are the, the, the natural, you know, progression of the, the sales call is, okay, you need these in order to address that part of the- of your overall platform strategy. Does that make sense? Okay, very helpful. Yeah, no, that's great. Then maybe one more on this topic. Obviously, it was very, very front and center at the conference and has been for a little while in your your commentary. Have you done much work internally or that you'd be willing to share in terms of how much sort of addressable market expansion all of this provides? Is some of this maybe offsetting potential other declining factors in particularly higher ed, and, you know, it's, it's a good backfill, but maybe not as additive as, as it seems at the moment? Yeah, you know, we think, we think this is a big opportunity for us, as far as the number of addressable students, and the revenue driver. We've sized the non-traditional space as about a $5 billion market opportunity. You know, some of that is included in our calculation of the, you know, existing $1 billion cross-sell that we've, you know, we've shared with you, in the past. But, but a lot of that is incremental, and, you know, and, and much bigger than the kind of traditional LMS market. We believe it will be a grower of, you know, our long-term durable growth versus a, you know, a replacement for declining revenues in other places. All right, great. Thank you for taking my questions. Thanks, Matt. Your next question comes from the line of Devin Au with KeyBanc Capital Markets. Your line is open. Great. Thanks for taking my question. The first one I have is, you know, congrats, the new, new lands of Duke and Ohio. I'm definitely encouraged to see you landing larger with multiple products attached. Also, I don't think you've highlighted multiple new wins in U.S. higher ed in your prepared remarks for quite some time. Just want to maybe double-click on the strength in that market specifically, do you attribute kind of the strength there just from overall increasing priority from these institutions looking to add more solutions? Or would you attribute the strength to just, you know, overall better execution from your side? Yeah, I think, I think, you know, we, we tend to do very well, in North American higher ed, particularly in the enterprise segment of that market. You know, we have had some good, big wins over the last several quarters. You know, it's been it's a part of the market that we started in. It's a part of the market where, you know, we have 44% market share now in terms of enrollments. What we're seeing is in those discussions is, you know, our position in the market, our, you know, our lighthouse accounts and, and references that we can bring to the table. The fact that, you know, we have a scalable platform that has scaled up rapidly during the pandemic, and that they can rely on it to scale to their needs. Those are all coming into decision factors in addition to, you know, just around a, you know, a typical feature and function sort of discussion. You know, the other thing that we are seeing is that many of these institutions are either, as I talked about earlier, trying to, you know, want a single platform for across all, all of the different opportunities that they have to reach students, but also that they're trying, really trying to, you know, now that they've gone through that explosion that happened during the pandemic, trying to consolidate around a few, you know, strategic vendors. That's, that's tending in our favor, particularly as we are able to not only offer the, you know, the LMS, but also as, as was noted in the Duke, the Duke win credentialing, and catalog and those other pieces across the board. It really is a continuation of the strength that we've seen, you know, with our position within North American higher ed. No, that's great to hear, thanks for the details. One quick follow-up I have is just on the gross margin in the quarter, you know, really impressive, 79.5%. Any additional color you can offer on, you know, what drove the higher margin there? Could we, you know, expect gross margin to grind higher later the year? Yeah. Devin, we're really pleased with the gross margin figures that we had in Q2. This is part of just our regular model of expanding margins over time. However, I would say that Q2, we did see some higher margins driven license, largely by timing of some revenue. However, we expect that that future quarters will normalize back to that steady, consistent expansion that you've seen over the last eight quarters. And to be clear, we have set long-term targets to have our gross margins in the upper 70s, and we're making progress. Your next question comes from the line of Ryan MacDonald with Needham & Company. Your line is open. Hi, thanks for taking my questions. I wanted to start on the K-12 space. You know, last week at the conference, there was quite a bit of interest and demand for the LearnPlatform functionality, now that you're rolling that in and integrating that in for, for customers. Just curious, as you think about how you think about the cross-sell opportunity there, and then, you know, given the demand in the K-12, your funding for more analytical solutions, is there an opportunity to, to lead with those types of assets and then sort of put your, get your foot in the door and then sort of cross-sell in LMS over time? Thanks. Yeah, yes. Let me start with the first question about cross-selling of LearnPlatform. LearnPlatform, you know, as we, as we did when we did the acquisition earlier this year, right, what we recognized was that, you know, K-12 is dealing with a massive ecosystem of EdTech providers. They're looking for help in rationalizing what, you know, what's working, what's not working in those environments. We really have two sides of the network with LearnPlatform. One are the, the, the schools, the districts, the state education authorities that are looking at it as a tool to really drive questions of what's being used, how often it's being used, as well as, is what, is what's being used in the environment doing, you know, doing what, what they claim it can do. Likewise, on the other side of the network is the providers, and they're, you know, they're also wanting to, to understand it and demonstrate that what they're, what they're providing is, is working, right? Getting the outcomes that they, that they're, they're trying for. We do think that this is going to be a great cross-sell opportunities on both sides of those networks, right, which on the, the district and, and state level, you know, we're seeing good pipeline build, we're seeing good integration points with Canvas. You know, we, we announced that we, the, you know, the overall usage reports will be integrated in Canvas for free so that you can start to see some of that data. We expect that to drive a lot of interest and continued generate, you know, lead gen for us to, to go sell, cross-sell the full-blown product. We're seeing a really rapid pipeline build and great success selling to the providers as well. That Evidence-as-a-Service is growing, the pipeline's growing pretty dramatically. To your first question, yes, it absolutely is a key driver for us, and we believe it's going to. You know, we're reaching a point where it's going to be very, really important for districts, and we think it'll be a big growth driver for us in the future. On the analytics side, you know, we drive with a platform strategy when we have these conversations with our customers and our prospects. Yes, you know, this is a key part of that landing strategy for us. We think that it's a key differentiator against our competitors in this space, and we'll continue to use it as that. Again, with the idea that this is about a, you know, a platform and a platform for, you know, teaching and learning, that, that, they're, they're working to. So, so I think, I think to answer your second part of your question, yes, it, it can be a, a good part of our, our land strategy in addition to the expand part of our cross-sell. Excellent. Maybe just one follow-up, just on the international partner channel. Obviously, you started to see some success with that, with some deals in Asia Pac last quarter. Just curious as how that is progressing as sort of the pipeline builds for the international solutions there. Thanks. Yeah, we are, we are seeing, you know, we're seeing, we're seeing, we're seeing good pipeline build. We're, you know, we're focused on the channel partners that we believe are going to, you know, be our best bet in those space. We-we're training them up, we are helping them with lead generation, we're helping them with deployments. We're, we're very optimistic about the progress we're making there. You know, again, we'll probably see that the benefits start to really accrue next year, as those investments pay off, you know, and as we ramp those channel partners. Good progress, particularly in some of the Asian geographies and Latin Americas, where we've seen the most success so far. Excellent. Thanks for taking my questions. Thanks, Ryan. Your next question comes from the line of Noah Herman with J.P. Morgan. Your line is open. Hey, hey, guys. Thanks for taking our questions. For the first one, you know, have you seen any change in the pace of consolidation compared to what maybe you've seen before in the last year or so at the higher ed or K through 12 level? Thanks. Yeah, I would say, I would say in the last year or year or so, more of the conversations have been about how do I, how do I get a common platform across each of the modalities, you know, whether it's the continuing education department versus the in-person, you know, traditional campus experience? Yes, those conversations have been more common. You know, I would say, the, the bigger, the bigger conversations around vendor consolidation and what, you know, how do we reduce the number of suppliers? Those are, those are fairly new for us. Those are in the last quarter or two is, is where those have started to happen more and more. Got it. Then just a quick follow-up. You know, as some of these new features are, are being layered more into the platform, do, do you see any reason to, you know, change the sales compensation structure going forward as, as part of the go-to-market strategy? You know, no, we've changed the comp model. You know, each year, things get tweaked on it. I don't know that we'll see any major comp changes that happen in the coming, you know, coming years as far as how we compensate for, for instance, new, new features or you're really talking about cross-sell and, and some of the products that layer on top of Canvas, I think, in that question. So we do have, you know, in the existing structure, we do have tiered, tiered comp models, depending on which products you sell. We, we, we move those around occasionally based on what we want to incent, but the fundamental structure, there won't be a massive change in our comp strategy in the future. Got it. Thank you. Our final question comes from the line of Brent Thill with Jefferies. Your line is open. Hey, thanks for taking me in, guys. It's David Lesperance for Brent. I wanted to ask, or rather, drill in on assessments. Appreciate some of the commentary earlier, but I think last quarter, you guys said it was the fastest growing product within K-12. I was just curious if you could provide an update on, on maybe if that held true in Q2. More broadly, you know, how should we be thinking about the durability of growth in this, in this offering? Is it more so, you know, everyone catching up and assessing where, you know, learning loss from the pandemic is. Is that, is that why, you know, maybe it's harder now, and maybe it's not as durable? On top of that, can you just remind us of the ARPU there? I, I think in the past you said it's maybe two to three times larger than LMS, but appreciate any color you could add there. Sorry, I know that's a lot. Yeah. No, it's, and great to hear from you, David. The, the, this weather, it was continuing to be our fastest growing, segment in K-12. From a durability of growth perspective, this is, you know, this is a, you know, this is a kind of digital transformation that, that will happen, and it's not- it's, you know, some of the catalyst is learning loss, but the idea of being able to provide a teacher with, you know, real-time feedback in the classroom of, of how, how a student is doing against those, you know, the standards that they'll be tested against at the end of the year, that's, you know, that's something that's going to endure. Having a solution in place to be able to address that, is, is going to be just as important as, as it is to have a learning management system in place, for, for a digital transformation strategy. Absolutely believe it's going to be, you know, it is going to drive durable growth for us. It's not going to be a, a, a, a flash in the pan, and it's gonna be an important part of anybody's digital transformation strategy and the platform that supports it. You know, you're, you're right. If they buy the whole stack from us in the assessment space, including the content as well as the Assessment Management System, then, it can be two to three times the, the average selling price of a Canvas implementation. It does, it does create for us a, you know, a long-term growth opportunity. We're still, low penetration, low double-digit penetration into the existing base, with our assessment solution. There's still a lot of room to grow from a growth perspective there. Super helpful. Maybe one brief follow-up, before we- I'll let you guys wrap it up. On the LMS in K-12, obviously 50% of the market is still unvended, right? Using free lightweight solutions. I wanted to get your view on what's the catalyst that gets that, you know, these districts to really start paying for, for a premium LMS. Is it, is it maybe that some of these, you know, are just gonna continue to, can always use these free lightweight solutions, or maybe is it some, as some of these ESSER dollars start to get towards, you know, back half of 2024, use it or lose it? Is that, is that maybe a good driver there? And, and, and maybe again, is there any percentage that you think just will forever remain unpaid? Yeah. There's an interesting dynamic and a lit, you know, a little bit of everything that you talked about, right? I do think the ESSER funding is, you know, creates a good backdrop as far as making decisions about when to, when to start through a true digital transformation. That's really the driver for a district that wants to make an investment in a commercial LMS like ours, or, you know, it really takes time for, and it takes maturity within the district to be ready for something like that. So they tend to be very planful, take time. What will drive them is they want a more enterprise features, right? They want more integrations with the ecosystem. They want better visibility across the entire district, not just in a classroom or, or in a school. They'll want better analytics, for instance, integrated into those solutions. All of those will be kind of the drivers where they, they really are, you know, wanna take that step in their digital transformation. I do think, again, as I said earlier, ESSER is a good, you know, good backdrop for this. And, you know, and we feel, you know, we feel good about that, that pace of, you know, that pace of conversion from, from free to paid. Whether or not there's a portion that, you know, that does ever moves to an enterprise, you know, eventually everybody's going to need to at some level. You know, you know, maybe if it was a school with, you know, 30 or 40 kids in it, maybe that, that might not be, but, everybody at some point is gonna, is going to need to digitally transform that experience, in the classroom. There are no further questions. I'd like to turn the call back to CEO Steve Daly for closing remarks. Great. Thank you. Thank you again, and for the insightful questions as always. As you've heard today, we believe our commitment to innovation, customer success, and disciplined investments in our platform will continue to unlock new opportunities and to drive value for our customers and shareholders in the dynamic education technology landscape. We're excited about the future. We look forward to continuing to drive that combination of top-line growth, as well as profitability in the months and years ahead. Thank you for your time and participation, and I look forward to speaking with you again. This concludes today's conference call. You may now disconnect.