Instructure Holdings, Inc.

Ladies and gentlemen, thank you for standing by and welcome to Instructure's first 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, April Fee, Investor Relations. April, please go ahead.

Good afternoon and welcome to Instructure's first quarter of our 2023 earnings conference call. We'll be discussing the results announced in our press release issued after the market closed today. With me are Instructure's Chief Executive Officer, Steve Daly, and Chief Financial Officer, Dale Bowen. Before we begin, I'd like to remind you that today's conference call will include forward-looking statements based on the company's current expectations. These forward-looking statements are subject to a number of significant risks and uncertainties, and our results may differ materially. For discussion of factors that could affect our future financial results in business, please refer to the disclosure in today's earnings release and other reports and filings we file from time to time with the Securities and Exchange Commission. All of our statements are made as of today based on information available to us today, and 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 on the investor relations section of our website. With that, let me turn the call over to Steve.

Thanks, April. I'm delighted to welcome everyone to Instructure's Q1 2023 earnings call. During today's call, Dale and I will share the details of our first quarter results and provide guidance for Q2 and the full year 2023. First quarter 2023 results exceeded our previously committed guidance ratings for revenue and adjusted EBITDA, fueled by our efficient go-to-market organization and unyielding dedication to customer satisfaction. First quarter revenue was $128.8 million, up 13.6% year-over-year, including an 80 basis point headwind from foreign exchange. First quarter adjusted EBITDA grew 10.8% year-over-year to $48.3 million, a 37.5% margin. The strength of our first quarter performance demonstrates the power of our business model. I'll next share five areas that contributed to our continued success. Strong new logo sales, the power of our platform strategy, our wins in nontraditional education, traction from acquired businesses, and continued operational efficiencies. First, our new logo win rates remain strong across all of our markets. Success is being driven by our focused go to market engine, best in class customer experience, expanded set of offerings, and our ability to solve real world challenges across the teaching and learning landscape. In one win this quarter, we scored a perfect 100% in our RFP response in categories such as vision and innovative power, completeness of the solution, and problem solving power. These are areas above and beyond our features and functions of our product, wherein structure consistently shines, and that helps us to drive our growth. In North American higher ed, we have a greater than 40% market share, and we continue to see RFP activity in line with our expectations. We win a very high percentage of new deals as customers recognize the value we offer. During the quarter, we had a significant win with the University of Massachusetts Amherst. which chose the Instructure Learning Platform based on positive feedback from students and faculty during a successful pilot engagement. UMass Amherst wanted a common experience for all their students and faculty, whether they were engaged in a traditional, in-person, online, or non-traditional education. They chose to partner with Instructure as their platform for the future. They were able to replace multiple LMS vendors with Canvas and also incorporate Studio Catalog and Impact. We're proud to partner with UMass Amherst in providing an exceptional learning experience for their students and faculty. In North American K-12, our platform and tailored services continue to drive success and continue to support our market leading position with nearly 30% share according to Wist EdTech. The green shoots we mentioned during our last quarterly call resulted in strong bookings for Q1 as K-12 decision makers continue to recognize our products as mission critical. We are particularly pleased with the traction in assessments. During Q1, we won a competitive RFP for Sioux Falls School District, which included seven products, Canvas LMS, Studio, and the full suite of Mastery products. In doing so, we displaced the LMS and AMS incumbents due to our comprehensive solution, our customization capabilities, and our ability to migrate the district's benchmark data to Mastery Connect. Looking ahead, we feel great about our prospects in K-12, as we continue to focus on multi-product suites and increasing deal sizes. International remained the fastest growing part of our business during the quarter, excluding the impact from FX, with strong performance from both our direct business and our channel partner program. We secured a direct win with CVO Gent, a continuing education school in Belgium, to replace an outdated LMS. The customer chose Instructure in part because no other vendor could meet the extensive requirements in its RFP. Underscoring their high level of satisfaction with our platform, we've already received multiple referrals as a result of our relationship. Separately, we had our largest channel deal to date in APAC, highlighting the ongoing success of our channel partner program. Second. Our success in the education technology industry continues to be driven by our platform strategy and our ability to stay ahead of the curve in terms of innovation. We estimate that our current product lineup represents over a billion-dollar cross-sell opportunity to our existing customer base, and we continue to see strong success capturing this opportunity as customers take advantage of the breadth of our solutions. Our pipeline is strong. And we are seeing positive trends in cross-selling as our customers look to expand their use of our products to improve teaching and learning outcomes. We are also proud to report a higher penetration year-over-year of our products across our customer base. Fueling the higher penetration rate are deals like Green Bay Area Public School District. This district added Mastery Connect and assessments, catalog, and credentials. Comparing our current contract with our new contract with them, we saw an increase of over eight times the contract value. In another win, we closed our largest credentials deal since the Concentric Sky acquisition, highlighting the potential for growth in this area. And the power of our platform strategy extends beyond our products. The platform allows us to elevate our partners and uniquely meet our customers' challenges together. These robust partnerships help drive our above-average win rates and demonstrate the power of our platform and ecosystem. The SUFOR wins, for example, included a partner product that helped us set us apart from our competition. We were also able to win the Dutch Institute for Public Safety, NIPV, during the quarter since the unstructured learning platform's openness allowed Dream to seamlessly integrate their software products to provide a complete solution for NIPV's educational needs. Third, our non-traditional capabilities have helped drive growth for our company, and we are committed to providing innovative solutions that meet the evolving needs of our customers. Our current focus on lifelong learning and vocational training has resulted in a number of exciting wins, including a multi-year deal with Deltion College in the Netherlands this quarter, which we completed against four other competitors in a rigorous EU tender process. With this partnership, Canvas will be made available to 18,000 students for continuing education, company training courses, and more. Additionally, a large existing K-12 customer purchased Canvas catalog to enable teachers to access professional development training on demand by self-enrolling in courses. Finally, an update on one of our large non-traditional deals, PeopleCert is now fully operational after less than two quarters. This is a significant milestone as Canvas will now be used to train and certify 250,000 PeopleCert learners worldwide. We believe that this partnership demonstrates the power of our platform to address non-traditional educational paths, and we are excited to see how it will drive growth for our company in the years to come. We are confident we will continue to unlock new opportunities and drive value for our customers in the dynamic education technology space. Fourth, we are seeing strong results from our M&A strategy, with the recent Learn Platform acquisition exceeding expectations for the quarter. The strong uptake and pipeline growth for Learn Platform has revealed significant untapped potential from both new and existing customers. K-12 decision makers are recognizing value in Learn Platform's ability to manage and evaluate their full suite of education technology tools. Learn Platform's evidence-based capabilities are top of mind with partners given the proof of efficacy required by regulators. As we further integrate Learn Platform into our go-to-market motion, we believe we can capitalize on this meaningful growth opportunity. We believe that our plan to continue to enhance our platform through organic and inorganic means will keep us at the forefront of the education technology space. Finally, I want to highlight our continued profitable growth. Our best-in-class margins have enabled us to make disciplined investments that expand our platform and drive long-term growth, including investments in embedded analytics for Canvas administrators, a new data access platform to extend the instructor learning platform, and making progress with new quizzes during the quarter. In addition to these product investments, we are also able to up-level our go-to-market engine under the leadership of Chris Ball. We believe we can maintain a healthy balance of growth and profitability while maintaining flexibility to invest in high return opportunities. In conclusion, our impressive Q1 results and expanding impact on education position us as a clear leader in the education technology space, and we look forward to continuing 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 Q1 financial performance and guidance for the Q2 and the full year 2023.