All right, great. Think we'll get started here. Thanks everyone so much for coming. My name is Noah Herman. I'm a software research analyst here at J.P. Morgan. Delighted to have with us Steve Daly, CEO of Instructure, as well as Peter Walker, CFO of Instructure. Thanks so much for coming, guys. Appreciate it. Yeah, our pleasure. Yeah, so, welcome to the conference. Maybe you could just, you know, briefly introduce yourselves, maybe just explain a little bit of the Instructure story to those not familiar with the company. Okay, you wanna start introductions? Yeah, sure. So, Peter Walker, CFO of Instructure. I've been with the company for a little over six months now. And I'm Steve Daly, I'm the CEO. I've been with the company for about four years. Instructure, if you've recently graduated from college in the last kind of 10 years, you've probably used Canvas Learning Management System, which is our main product. And that's how we got started, was really with a cloud-native learning management system that sits kind of at right at the nexus of teaching and learning. It connects students with teachers, with parents, with those that are involved in the education process. Since then, we've been on a journey to expand. First of all, you know, we're number one market share in North America higher ed, where about half of all U.S. higher ed students are using Canvas, and about a third of all U.S. school districts use Canvas. And since then, we've embarked on a growth strategy that involves not only expanding outside of the borders of North America, but also in creating a much more robust platform and cross-selling into our existing base, and into a number of areas that are driving growth for us. This next phase of our growth is all about that platform play and being able to bring more technology to bear on with our customer base. Yeah, no, that's a great overview. And maybe just within that context, you know, what are some of the top priorities that you're focused on more tactically in the short term, and also over the next few years? Yeah. So for us, over the last three or four years, we really have gone both organically and inorganically to expand our portfolio past just a one-product company. And so we have a portfolio of about 11 products now. And so a lot of our focus right now, near-term growth that's available to us, is being able to cross-sell into our existing base. We've made some changes to our go-to-market, in the way that we take products into our existing customer base. We've created teams that are focused on, you know, expanding within an existing customer base, in addition to landing new logos. And we've really brought together our entire customer-facing organizations, in a way that allows us to much more effectively monetize those existing relationships. So that's some near-term growth. We see a huge opportunity in particularly in higher ed, where more and more students have a lot more choice about how they receive education. And a lot of them are choosing not to just jump right in from high school, go right into a four-year degree, but choosing other paths, whether it's going to work and doing this part-time, or whether it's getting a certificate or a credential, and working, and maybe they'll get a degree over time. And there's a huge opportunity to address those learners that historically have been underserved. And so we have a set of solutions that allows higher ed institutions to go reach those students, as well as we just created a go-to-market team that's really targeted at what we call professional learning organizations. And think of those as those organizations that are involved in certifications or trainings, but not necessarily degree-granting. So AWS Academy is a huge customer of ours. The CFA Institute is another customer. Those types of organizations, which for us is a new market, we've hit it opportunistically, but this year really put a focus on driving growth. So those are kind of the two big near-term growth opportunities for us. Great. Yeah, I mean, there's many different LMS systems in the market, but it's very impressive just to see the market share that you have, especially within North America. So what is it that, you know, customers are choosing with Canvas and differentiates yourself versus the others? Yeah, you know, it kind of evolved, it's evolved, right? And the moat's gotten bigger and bigger as we've gotten, as we've gotten bigger and bigger. This is a highly referential sale. In education, they buy—they want to buy from the leaders, they want to buy from their peers, they don't want to be the outlier, if you will. And so initially, we came in with a product that was designed with the teacher and the student in mind. Historically, LMS vendors had focused on administrators. And so when you know, when you talk to any of our customers, it's about the user experience has just been superior from a product perspective. Now, over time, we now have every Ivy League is standardized on, on Canvas, the entire California higher education system, whether it's community colleges or the UC or the CSUs, are all standardized on Canvas. Sweden and Norway, their whole systems are, you know, countrywide systems are standardized. So we've got this fantastic reference base that now becomes a competitive differentiator when we get into a sales process. Layer on top of that, we've got the largest community, over two million, active users on our community site. So again, prospects can feel really confident when they come into the, the Canvas ecosystem, that they're going to be well-supported, that they've got peers that they can turn to. And then we also have the largest partner base that's integrated into our platform. And so with that, over 900 partners now that have integrated on Canvas to help solve some of the problems that maybe we're not going to go tackle. And so you marry all those together, those are really hard, right? Those are decades-long efforts to gain a moat. When we get into a selling process, it becomes about, you know, you're buying into a company, you're buying into a product, you're buying into an ecosystem, you're buying into peers when you buy into our solution. It just is kind of a flywheel that just keeps accelerating for us. Yeah, I mean, one of the interesting slides you had at your Analyst Day this year was that at least 90% of instructional workflows are actually flowing through the LMS system, which I thought was really interesting. Can you unpack maybe what you're seeing from both the cross-sell and upsell perspective, and how you're sort of layering in those additional products into the LMS itself or into those teacher administration workflows? Yeah. No, it is. So the LMS sits right at the middle of teaching and learning. And so the opportunity, and the longer-term opportunity, we talked about kinda short-term growth opportunities. The longer-term opportunity is that no, no, no company has really emerged as the platform for education, a la what ServiceNow has done in service management and enterprise management, or Salesforce has done in CRM and Salesforce automation, those types of tools. And nobody is better positioned. It's we're sitting inside of the ecosystem become that platform. And so, from that perspective, it's not just about the technology that resides in the LMS, but there's so many adjacent technologies that, as we bring them together, as we modernize those workflows and tie those together, it creates a massive opportunity, a huge TAM expansion for us, as well as an opportunity to really become that platform within the industry. And so a lot of our strategy has been looking at, you know, how do we make it easier for teachers to understand where a student sits in their educational journey? So, there's products around assessment that are all about how does a teacher assess real time, is a student progressing like we think they should be progressing? In K-12, that's against the standard that the state has set. So we have products that not only integrate tightly, but also then give a heat map, and a teacher can look really quickly and say, "Oh, Johnny's struggling with long division. Susie can't multiply fractions. I need to start focusing on how do I help them in their educational journey." We've done a lot of organic development around reaching that student that's not coming for a four-year degree, so that non-traditional learner, and how do we get to them? And then this year, we really organized our selling motion, our value proposition, how we communicate around how do we better cross-sell into that base? So we're encouraged by the progress we've seen with the assessments. We're encouraged by what we're seeing with our non-traditional suite of solutions, and all early indications are great. But again, I think this is a, you know, multiyear tailwind for us as we become much more robust platform. Great, and I'll get the AI question out of the way. Get it out right now. So- Just do it. You know, sort of, you know, what is your AI strategy, and how is that sort of, you know, being layered into the workflows you just mentioned? Yeah. You know, so from an AI strategy perspective, education is a very... I mean, everybody's privacy conscious, but it's like order of magnitude more important in education, right? Particularly as you're looking, as you've got information about how a, you know, under-18 student is doing, you've got to be very careful, and you've got to be very thoughtful about how you roll out your AI strategy. So about a year, a little over a year ago, we convened a number of user groups. Again, we've got this world-class customer base, right? That's very forward-thinking. We were able to kind of bring together, you know, their input into what our strategy looks like. And really, what this is about for us is making sure, one, that the data is well-protected, that anybody or any other entity that wants to use that data, that we have built a platform that allows us to kind of ring-fence that data, make it available, make sure it's not used in an untoward way. And as well as really trying to understand where our customers will see value, as well as pay for value, right? Because it's not, you know, in a lot of cases, there are features that feel like they should be part of the LMS. And so we've spent a lot of time really trying to understand the cost profiles, what's, you know, some of these things can get really expensive really quickly. And so our strategy has been, let's first focus on teachers, and let's help make teachers much more efficient and effective, right? This isn't about, you know, robot tutors in the sky or the, you know, or robot teachers in the sky, right? What it is, it's about helping teachers be better at what they do, and taking some of the manual work off of a teacher so that they can focus on mentoring and leading students on their journey. And then we've decided that in the short term, we're gonna partner with, you know, we announced a partnership with Khanmigo, with the Khan Academy, on some of the student-facing technologies. Because, again, that one is a little more fraught with risk, frankly, right? So if you're tutoring a student with some technology, and yeah, they get it, it's right 99% of the time, but it hallucinates 1% of the time, that could be really, you know, really detrimental to a student in their educational journey. And so we're sussing that piece out before we jump in full foot, and we decided to partner from that perspective. But there's a lot of really cool things that we'll be rolling out that help teachers, whether it's things like auto-translating, so that if a teacher has, you know, international students in higher education, that maybe their native language, they can see the content in their native language, even though the teacher is an English speaker, for instance. We have some technology that will allow them to much more simply create content for their classes, and do some of the heavy lifting, some that will allow students and teachers to search much easier with context. They don't have to, you know, figure out exactly what they're looking for. They can, they can ask questions. We've got some analytics technology that we'll be rolling out that allows teachers and administrators to query the data in natural language. So tell me, all the students that have, you know, have missed, are below 50% on the last test and hadn't turned in three assignments, right? Rather than having to figure out how to query the database, they can just ask in natural language using generative AI. And so there's some really cool stuff that I think is gonna be valuable. Some of it, as we've gone out and market test, that are incremental add-ons that we'll be able to sell. Some of it we think will justify price increases, and we think we can actually get a little better in our price increase, higher in our price increases. So again, it's evolving really rapidly, and we're taking a pretty thoughtful approach to how we're going after AI. Yeah, really interesting. I think the one thing, you know, I would say is, this is one of those areas where, he who has the data has the power, right? And that's unique to some of the other kind of transitions we've seen from a technology perspective. You know, when it came to the transition to the cloud, the incumbent really was at a little bit of a disadvantage when it came to cloud, right? 'Cause they had an installed base of all the software. Migrating them up was tough, right? Because you didn't have a cloud solution that was as feature-rich as the on-prem solution. In this case, with this technology transition, you know, it's all about what data can you feed to the models, right? What, what data can you do? How can you do it in a way that's safe and secure? And that's where the incumbent actually has an advantage in this transition. And so we feel really good about where we're positioned, and we, you know, again, we don't wanna jeopardize any of the trust that we have with our existing customers, so we're very thoughtful about how we do that. Really interesting. So, I mean, you kinda touched on it earlier, but in terms of the multi-product adoption, I think you had mentioned before that about 80% of your customers use less than 2% of your... or less than two products. Two products, yeah. So how are you now positioning the go-to-market? I know you made a few changes to that playbook this year, and you're about to, you know, execute on that. How should, you know, we think about, you know, your confidence in being able to execute on that model, and what are some of the products that we could see, you know, being rolled out to your existing customers as sort of like the low-hanging fruit? Yeah. Yeah. So what we recognize is, again, we've spent the last couple of years putting the portfolio together. And so this year, we rolled out a new go-to-market model, where we have hunters and farmers. In the farmer camp, also, we've brought together our customer success managers, our renewal managers, our sales teams. We've changed the comp plan so that they're all incented to expand the footprint that we have within a customer, solve more problems for our customer, increase our net retention rate within a customer, as well as we rolled out a number of product suites, and so that it made it much easier from a purchasing process perspective, within the existing, so that again, several products make up, you know, are required in order to address that non-traditional student. And now you can buy those as a bundle, as a suite of products, and the pricing and modify the pricing to make it much easier from that perspective. And then from a new logo perspective, the... A big emphasis and an incentive for the salespeople to land bigger with more products in the portfolio, not just land with Canvas, but with that broader portfolio. And again, we've made some adjustments to our pricing and licensing models to make that much easier in the initial sale as well. Got it. And maybe, I know we're sort of heading into the busy buying season- Yeah ... for the year. It would be great to maybe get some color on what the pipeline looks like going into this year. Maybe how does that compare to last year as well? Yeah. So, yes, we are typically our business is very seasonal, so most of the purchasing happens in Q2, Q3. You know, so we were encouraged with our results in Q1, although, you know, again, Q1 is not necessarily predictive just because it's a small quarter for us. But the early indications are that, you know, the model is working. It's taken foothold within the sales teams, which we're really pleased about. You know, the pipeline is building nicely. We've had a lot of RFP activity. You know, we've talked in our earnings calls. We're seeing in higher ed an elongation of sales cycles. Part of that is just the macro, you know, as institutions are looking at, you know, "What is my, what is my path forward? How am I gonna continue to increase revenue," right? Historically, our higher education institutions here in the U.S., at least, have dealt with, you know, growth by raising tuition costs, right? It's kinda hit the limit. So now they're looking at, "How do I attract more students?" And so that's changing the conversation for us. And, you know, we're really well-positioned because of the investments we've made over the last 2-3 years to be able to answer that question. Here's how you go reach those non-traditional students. We recently made the acquisition of Parchment, which is a credentialing solution that not only... Does it allow you to see what your transcript or your diploma are, but what are your other certificates that you've had, you create your own wallet to carry around those certificates with? But again, it does two things. One is it makes the deal bigger. It also brings in more buyers in the process. So not only is the macro, they're trying to figure out their strategies, but also there's more people involved. There's more irons in the fire, if you will, during the sales process. So that's extending our sales cycles quite a bit. But the RFP activity was higher. It is the highest that we've seen since 2020, when we were in the middle of the pandemic, and everybody was kind of scrambling to try to figure out what they do. So RFP activity is really good, again, but with elongated sales cycles. Yeah, and sort of the stimulus funding has sort of been this nice macro- Yeah backdrop for the business That's right ... and the broader market. So, you know, with, you know, and maybe you can do a quick brief recap of where we're at with the stimulus funding today, but how is that sort of, you know, incentivizing certain customers on how they're gonna allocate their budgets for the remainder of this year and early next? Yeah. So that, the stimulus funding has impacted primarily K-12. That's where a lot of the stimulus funds have gone. You know, well, there's still quite a bit to be spent between now and the end of September, which is when the funds expire. You know, historically, they've spent these on kind of non-recurring expenses, and so we don't feel like there's a big challenge with our business. You know, in the sales process, we've always been very deliberate, working with our buyers and with the legislators that are involved with, to make sure that there's state appropriations. So from that perspective, we feel, you know, it's not gonna be a lot of change. Where we have seen is, there's been a lot of activity around, you know, maybe some of the, the one-time things like services, training, professional development, those types of things. We expect that we'll probably see some of that, going into, you know, going into this buying season. But again, it, it shouldn't have a huge impact on our, our overall business and the flow of business for us, on the product side, where, where again, it's a, it's a recurring, it's core infrastructure. They're not gonna rely on one-time funds to, to fund those types of things. Got it. Maybe we can loop in Peter as well for some, for some questions. Sure. You know, within Instructure, you know, you provided the medium-term outlook at the Analyst Day, essentially calling for a Rule of 55, from what I remember, 10% organic revenue growth, mid-40s% adjusted EBITDA margin. You know, so how should investors think about the revenue growth versus profitability equation in the short term, depending on how the demand environment shakes out? Yeah, sure. So, the other thing we introduced at Investor Day was breaking the business between our core business, which is North America, LMS, K-12, and Higher Ed, and that growing at a 5%-10% growth rate, and then our growth businesses, which are, you know, five different products, one of them being non-traditional, Parchment and things we've talked about today, and that growing at 10%-15%. So our thought in terms of the top line is that 2024 is the trough for organic revenue growth, and that we're back into call it that 9%-11% range into 2025. And then in terms of bottom line, you know, we already have really strong margin performance, right? North of 40% for the year, based on the guide that we've given. So we see incremental improvement in that over the five-year period, getting us to the mid-forties. We've got several levers to pull in order to get there. One of those levers has been globalizing our workforce, so taking more of our associates closer to where our business is as we continue to expand international. And then we've got a kind of host of other operational excellence-type initiatives that help with that margin expansion. But I think what's critical is, within that margin expansion, we are also providing for the care and nurturing that we need to invest back in the business in order to hit those 9%-11% targets on the top line. Got it. Yeah, and I think when I look at the international business, you get very low penetration across many regions, and that's always been an area where, you know, you can sort of replicate what you've done in the U.S. internationally. So how are you sort of thinking about, you know, allocating, you know, incremental investments to really drive or accelerate the international growth as you, you know, grow into that 2028 outlook? Yeah. So a focus of ours is channel partnerships, and we're kind of, let's say, on version 2.0 of that. Version one, I think we got a lot, a lot of lessons learned out of it and got some footholds in some of the growth countries. We hired a new head of channel at the beginning of this year and have done a reset just to be more focused about what are the best countries for us to go into and what is the right partnership model. So I think that's what we're pretty enthusiastic about in terms of the more long-term growth we see in international. ... You know, what I would add is, you're right. There is an opportunity. The number one market share holder outside of the U.S. is a product called Moodle. It's an open source on-prem product that you know you can host, but again, it was designed as an on-prem product. And the way that we've approached it is we've tried to be very targeted about which markets we'll go after. And so the markets that we've been in, you know, for a while, for you know six-eight years, we actually have seen similar sort of market share penetration. So in Australia, we have over 30% market share. And again, you know, just, a footnote there is we really focus on higher education outside of the U.S. because the buying is very similar to what we do, you know, how, how higher ed buys, in North America. But we have over 30% market share in Australia and New Zealand. We have about 20% market share in the UK and Ireland. We have 80% market share in the Nordics. And so we've been thoughtful about establishing some beachheads, proving out that we can execute the same sort of playbook that we did in the US for replacing on-prem software, and now we're expanding those markets. And so we have a number of targeted direct markets that we're going after, still early days, as well as what Peter mentioned, with the channel program to go after kinda that second-tier markets where we need a local presence. We wanna do it in more of a variable model, and, you know, so it's more cost-effective for us to enter those markets. With that, you mentioned open source. So what are really the trade-offs between an LMS system that you provide versus some of these other open-source versions? Like, what do you hear from customers as the reason why they're switching and willing to pay that premium? Yeah. So there's a couple things. One is everybody thinks open source is free, right? But you know, a free puppy is not really free, right? And so there's a lot of costs that come in. In fact, we just about, I guess it's almost been a year now, we won the University of Louisiana System. They were all Moodle, on Moodle. And a couple things that came into the selling process: one is we were able to do a total cost of ownership and show that actually it was cheaper to go with us than it was to continue to support that. But then also, one of the other things that they had a big challenge with in their system was that because it's a bunch of on-prem technology, they didn't have a good way to coordinate across the entire system. So the State of Louisiana was rolling out some kind of core, probably personal skills, you know, personal finance. There's some leader, you know, leadership and communication courses that they wanted the entire population within the system to get access to, and they didn't have a good way to do that centrally. They also couldn't get reporting back centrally, and then they didn't have anybody to really call for support, right? Because it's an open source model. And so those are really end up being the kinda core drivers about why somebody would wanna come off of a, you know, prem that they're managing themselves. I will say, since we are focused primarily on higher ed outside of the U.S. with Moodle, you know, most people hunkered down during the pandemic, right? They said, "I'm not gonna switch horses. I've got, I've got this in place." But it really, those implementations really did fall down, right? They. It was really tough to scale them. They had to throw hardware at it. They had people, and it really pointed out the limitations of those implementations. So we're seeing as we're kinda getting out to the back to normal or the new normal, people are now starting to, you know, have these conversations about, "Okay, what is my right—what am I gonna have for the next couple decades," right? Because, again, they don't make these decisions. We've, you know, we've got, you know, in our higher ed business, our retention's, you know, high 90s, gross retention. And so, they're really starting to think: How do I re-platform for the next couple decades? Maybe quickly on the K through twelve side of things, who are you typically running into? Well, I guess it's not as much of a focus internationally, but domestically, who are you typically running? Yeah. Yeah. Typically, the process, when we go in, it's a district has decided they want an enterprise LMS. They don't wanna go with free tools anymore. They need some of these same benefits, right? They need the centralization. They need the integration with the 900 partners that we have out there. And usually, we'll run up against a product that PowerSchool has called Schoology. And so, you know, we compete very favorably with them. They, during the pandemic, there were 12 statewide RFPs let, and we won 11 of the 12. And so, so we feel good about how we compete with them, just, you know, just from a win rate perspective. But yeah, they would be the primary competitor. Right. Maybe talking about capital allocation a little bit. You know, you recently acquired Parchment, and that is, I think, fully acquired at this point. So, I mean, what is your capital allocation philosophy going forward and your appetite for potentially incremental M&A to sort of bolster your product portfolio? Yeah. So our capital allocation philosophy has remained consistent since the IPO. It's invest in organic growth, opportunistically invest in or inorganic growth, and maintain a net leverage ratio of 2-3x, which we've, you know, really marched that down. Prior to Parchment, we were at 0.7x, in terms of leverage. Parchment is the largest acquisition we've done in our history. We, you know, said we'd pierce that two-three x for a unicorn, and we viewed Parchment as that unicorn, the idea of, marrying, right, the experience of learning with the evidence of learning and really giving us that, those capabilities to support the lifelong learner. So we are now, on target. By the end of the year, we'll be at a 3.4x leverage ratio, so we kinda continue to march that down. That being said, you know, if some smaller M&A opportunities come our way, they're really innovative type technologies, we're not gonna say no to those, but I don't expect us, you know, to make any significant acquisitions in the near term until we get the leverage ratio more in line with the long-term target. ... Yeah, yeah, it makes sense. I wanna take a quick pause here just to see if anyone in the audience has any questions. There's a microphone that will go around. Nope. Thanks. So if you think about your traditional markets, in the U.S., for instance, I guess green space and Canvas market share has pretty much been absorbed, right? But are there still home-built or purpose-built point solutions you can displace? How much of that market do you think it really is left in terms of a revenue or TAM? Yeah. So in higher education, most people have something in place. You know, there's still about 30% of the market that has either Blackboard or Moodle in the U.S. You know, outside of the U.S., 70% of the market is Moodle, so it's still the predominant player. You know, I mentioned that we created a new sales team to go after that professional learning space. In that space, they tend to have a lot of homegrown technology, so that one's pretty greenfield for us. Then in K-12, about 30% of the market is still using, kind of cobbling together a number of free tools in the space, and so there's still about 30% of the market that we consider greenfield in K-12. Any other questions? I guess, sort of to, to wrap it up, just at a, at a high level, but, you know, in, in your conversations with investors, what, what do you think is really underappreciated about the community, about the Instructure story? What do you think everyone's really missing? You know, I think, I don't know that what's missing, per se, but I would say probably underappreciated is the opportunity that we have to continue to increase the ARPU, right? So we've—we spent the first 10 years of our existence really was, "Let's go, let's go land the LMS, become the world-leading LMS," right? And basically plowing the ground. And again, that was a displacement sale, right, against incumbents. We did it with a cloud technology. We did a bunch of innovative things to do that. The real opportunity in phase two, and we've, you know, we've already started to execute on this, and you can see some of the graphs in our, in our Investor Day presentation, is about then how do we, how do we gain more share of wallet within those, within those companies and or those institutions? And, again, I, I don't, I don't, if you're not super familiar with the education space, you cannot underestimate the relationship value and the power when you have a tight relationship with, with those institutions. They want you to win. They want you to be the, the winner because they don't wanna have to change. And so when I started four years ago, I went on a listening tour. I talked about, to about 200 of our customers, and every single one of them said, "Whatever you do to change coming in, Steve, do not change the way you work with us." Because, you know, Zoom was in here yesterday, and they asked, "How can we work better?" And I said, "Go talk to Instructure, 'cause they've got it figured out." And so that relationship, I think, and the power of that relationship to be a differentiator and a growth driver for us, I think, may be underappreciated a little bit. I'm sure it speaks also to your pricing power as well, with those relationships- There's a lot of reasons why that can be a great growth driver, whether it's, you know, selling more stuff, whether it's the, you know, the willingness to, you know, to pay, that, those types of things. Definitely. Yeah. Well, I think, it's a great time to wrap up. Thanks so much for-