Heather Erickson - VP of Communications Josh Coates - CEO Steve Kaminsky - CFO.

John DiFucci - Jefferies Corey Greendale - First Analysis Brian Schwartz - Oppenheimer Andre Benjamin - Goldman Sachs Terry Tillman - Raymond James.

Good day, everyone and welcome to the Instructure's Q1 2016 Earnings Conference Call. Today's conference is being recorded. At this time I'd like to turn the conference over to Ms. Heather Erickson. Please go ahead..

Thank you operator. Good afternoon, everyone, and thank you for joining us on today's earnings conference call to discuss Instructure's Q1 2016 results. Today's call is being hosted by Josh Coates, CEO, and Steve Kaminsky, CFO.

Before we begin I'd like to remind you that today's conference call will include forward-looking statements based on the Company's current expectations. These forward-looking statements are subject to a number of significant risks and uncertainties and our actual results may differ materially.

For a discussion of factors that could affect our future financial results and business, please refer to the disclosure in today's earnings release and other reports and filings, we may file from time-to-time with the Securities and Exchange Commission.

All our statements are made as of today based on information available to us as of today and except by required as law, we assume no obligation to update any such statements. The content of today's conference call is Instructure's property and cannot be reproduced or transcribed without prior written consent.

During the call, we will also refer to both GAAP and non-GAAP financial measures. You can find a reconciliation of our GAAP to non-GAAP measures included in our press release, which is posted on the investor section of our website.

All of the non-revenue financial measures we discuss today are non-GAAP unless we state that the measure is a GAAP measure. Now I'd like to turn the call over to Instructure's CEO, Josh Coates..

Thanks, Heather and welcome everyone to Instructure's first quarter 2016 earnings call. And for all you Star Wars fans, May the Force be with you. Today I'll provide highlights from Q1, 2016 then I'll turn it over to our CFO, Steve Kaminsky, who will give you a rundown of our financial performance and then we'll open the call for questions.

This is a refresher at Instructure we creative innovative cloud-based learning software for academic institutions and companies worldwide, that enable our customers to easily develop, deliver and manage engaging face-to-face and online learning experiences. We have over 2,000 customers in 40 countries.

Canvas LMS launched in 2011 is used around the world by top universities like Harvard, Stanford, Dartmouth, Berkeley and London Business School. It's also used by K-12 schools in 49 states and continues to gain traction worldwide.

Our corporate learning solution, Bridge launched one year ago and continues to gain momentum in the US, in a moment I'll get into more details of some of the great customers that shows Bridge in the first quarter.

And Arc, our video platform is currently in Phase 2 of Beta and continues to receive positive feedback from our customers as we build out the product to be ready for general release.

Overall, our products combine powerful, elegant and easy-to-use functionality with a reliability, security, scalability and support required by our customers, our software makes people smarter.

We also have a very clear and focused growth strategy to expand our customer base with both Canvas and Bridge extend our relationships with existing customers, expand internationally and continue to enhance our product offerings. Now onto the quarterly results; Q1 revenue was $23.3 million, that's up 59% year-over-year.

We also brought on our 2,000th customer during this quarter. Overall demand for our software remains strong; a big driver of our strong growth is the fundamental change in how people want to learn. Traditional approaches use legacy systems that are overly complicated, unreliable and are unable to deliver integration.

Whereas Instructure delivers an always-on engaging experience that is highly intuitive, collaborative and provides a compelling user experience. This quarter we had a lot of great customer chose Canvas as their LMS.

Some of the Canvas customer we added in Q1 include the University of Nevada, Reno for their 17,000 students and the University of California, Davis which chose our software as the primary platform for course management by the colleges, student body of about 30,000 students.

For K-12, Canvas was selected by school districts in Illinois, Connecticut and Pennsylvania. Internationally, we've continued to grow our customers around the world with the University of Copenhagen in Denmark which has 40,000 students and was dissatisfied with their LMSs lack of focus or customer support.

They chose Canvas based on our customer service, ease-of-integration and ease-of-use. Eindhoven University of Technology in the Netherlands, which is the research university specializing in engineering, science technology and both [ph] 10,000 student. And the University of Adelaide, which is one of Australia's oldest and most prestigious universities.

Canvas will be their primary learning management system for it's more than 20,000 students. Analysts estimate the global academic market of $1.5 billion of $2 billion and we are just a single-digit market share and we're growing fast, but there's lots of headroom ahead of us. Our Bridge team has had an impressive start for 2016.

We've continued to gain momentum and seeing a multiplying effect with our Bridge customer base. In Q1, we've had some well-known companies join us customers including Lockheed Martin, who's implementing Bridge to support safety training for seasonal employees.

American Kennel Club, a registry of pure breed dog pedigrees is using Bridge to provide training for their 30,000 kennel club judges.

1-800 Contacts the world's largest Contact lens store is using Bridge for their comprehensive L&D program targeted towards leadership development and Shopify, an e-commerce company that develops software for online stores is using Bridge for on boarding and ongoing self-directed learning for employees.

Our clients continually tell us they choose Bridge because of its ease-of-use, simplicity for learners, global learning and customer service. This gives us confidence in continued growth in the large and growing corporate space.

The corporate LMS market today is over $3.7 billion is very fragmented and we're competing at mid-market which is corporation's from 1,000 to 10,000 employees rather than head-to-head with some of the established players that are targeting very large enterprises.

This presents a great market opportunity for Bridge as there is lots of opportunity for multiple players to be successful. Before I hand it over to Steve, I wanted to remind you that we're also getting ready to host our Sixth Annual User Conference InstructureCon, this year in Keystone, Colorado in July.

Last year we had 1,700 people from 560 institutions and 120 business partners attend the four-day event. It's a great time for our customers to connect with us face-to-face and with each other and I hope you'll be able to join us for it. All in, it was a great start to the year.

We've built the company with a strong culture and we believe Instructure is uniquely positioned to capture a sizable portion of this large and growing market opportunity overtime. We are excited about the momentum in our business. So now I'll turn the call over to our CFO, Steve Kaminsky to discuss our results in more detail.

Steve?.

Thank you, Josh and thanks again to everyone for joining us today. Q1, 2016 was another solid quarter for Instructure with strong year-over-year top-line growth as well as substantial improvements in margins. As Josh mentioned, total revenues for the first quarter of 2016 were $23.3 million representing a year-over-year increase of more than 59%.

Subscription in support fees, which are built in advance of service and we view as recurring revenue contributed $20.6 million, an increase of 63% from the prior year's first quarter.

Professional services revenue which is composed of implementation, training and other consulting services and it's considered non-recurring was $2.7 million, an increase of 34% from the first quarter of 2015.

As we've highlighted before, the mix between recurring revenue and non-recurring revenue fluctuates from quarter-to-quarter and is not necessarily strong indicator of our performance.

We believe growth in subscription and support revenue or recurring revenues we like to think of it, over prior periods provides a better indication of our performance and as previously mentioned, we delivered strong year-over-year growth in subscription support revenue at 63% for Q1, 2016.

This meaningful growth in revenue is supported by our strong net revenue retention rate which continues to be greater than 100%. Billings on a rolling 12-month basis as of 3/31/16 was $97.5 million up 62% from the prior year's billing, also calculated on a rolling 12-month basis.

As you know, our business is highly seasonal which results in wide variances for billings from quarter-to-quarter. Therefore, we calculate billings growth on a rolling 12-month basis, which provides a more consistent perspective for growth and I'd encourage all of you to view billings growth in this manner as well.

For the remainder of my commentary, unless otherwise noted I will discuss non-GAAP results. Moving down to P&L, gross margin was 69.3% for Q1 of 2016 compared to 66.7% in Q1 of 2015 representing a 260 basis point improvement as we continue to realize cost savings related to AWS.

Total operating expense was $27.7 million compared to $19.2 million in Q1 of last year. Operating loss in Q1 of 2016 was $11.5 million compared to a loss of $9.4 million in Q1 of last year. We delivered meaningful improvements in operating margins year-over-year as we continue to gain greater scale and focus on realizing operational efficiencies.

Operating margin for the first quarter of 2016 was negative 49% compared to 64% from the same quarter last year representing a 1,500 basis point improvement.

Net loss for non-GAAP EPS for the first quarter of 2016 was $11.6 million or loss of $0.42 on a per common share basis, compared to a net loss of $9.6 million or loss per share of $0.45 for the first quarter of 2015. GAAP net loss for the first quarter of 2016 was $13.7 million or a loss of $0.50 on a per common share basis.

This compares to a net loss of $17.3 million or a loss of $2.79 for the first quarter of 2015. Weighted average shares outstanding for the first quarter of 2016 were $27.3 million as compared to $6.2 million for the first quarter of 2015. Turning to the balance sheet, we ended Q1 with $69.7 million in cash and cash equivalents.

While we're talking about cash, I'd like to remind everyone that there is significant seasonality to our free cash flow as a result of our cash collection. As a reminder in 2014 and 2015, the negative free cash flow was essentially from Q1 to Q2 and in Q3 Instructure generated meaningful positive free cash flow.

Let me close today's prepared remarks with a brief discussion on our expectations for the second quarter and full year of 2016. For the second quarter of 2016, we expect revenue in the range of $24 million to $24.6 million, non-GAAP net loss of $14.6 million to $14.2 million and non-GAAP net loss per common share of negative $0.53 to negative $0.51.

We are raising full year 2016 guidance. We now expect revenue in the range of $108 million to $110 million up from our prior guidance of $106 million to $109 million, non-GAAP net loss of $52 million to $50 million up from $54 million to $52 million and non-GAAP net loss per common share of $1.87 to $1.81 up from $1.96 to $1.88.

We're calculating EPS, we expect our shares to be $27.6 million for the second quarter and $27.8 million for the full year of 2016. In summary, our results for the first quarter of 2016 was strong across the business and we are excited about the traction we're seeing and we look forward to taking any questions you may have.

Operator, please go ahead with our first question..

Thank you. [Operator Instructions] we'll take our first question from John DiFucci with Jefferies..

First I'd like to say, I want to commend you guys on a very solid quarter, so I have a couple.

My first is, your customer additions have certainly been very impressive, you added about 800 customers last year which is 75% growth year-over-year and if your new customer additions are any indication of the pace for the rest of the year, you'll add another 800 this year, but thing is that because you count customers like contract, in any given quarter it could under represent or over represent new business momentum, particularly on the K-12 segment because in K-12 your customer could be, it could be one school or an entire school district and I understand you highlight some large notable customers as you just did, in each quarter or could you comment if, customer size and particularly in K-12 with a variance could be the highest, if customer size is generally trending up or down..

So we talked about this historically, we're very cautious about providing customer counts and being specific about that and the main reason is for the point that you make and that is there's wide variability not just in K-12 but also in higher Ed and Bridge, it's still early days for Bridge but we're seeing it, we're seeing signs of it there as well.

We have High Ed customers that are in the four to low five digit range, we have customers that annually do over $1 million, we have the same thing in K-12 and again it looks like we're going to trend in a similar direction for Bridge and so we caution everybody about to focusing too heavily on our customer account than our growing in customer account.

We think generally speaking it's a good indication that we're making progress and that customers are adopting Canvas or Bridge, but in terms of being very specific about where the variability is, it's really throughout the business and all our products and which is why we don't get very specific about the actual customer numbers..

Okay, all right great and I have a follow-up and this one is either for Josh or Steve. You said in the past that, I think on the last quarter call that half of New Bridge customers is from Greenfield and that's company that have never used a corporate LMS in the past and that the other half are from wins or competing corporate LMS vendor.

Could you describe the characteristics of the customers in these two buckets, in terms of both employee size and types of used cases across the organization? So for example, if are replacement win customers are those generally larger organization with a larger number of employees that need an LMS and versus our Greenfield customers generally smaller companies or is it really mixed and then do you find that Greenfield customers are using Bridge more on a departmental level, so for say sales or for sales or for services versus companies who are more familiar with using LMS in the past.

So do you mention your target 1,000 to 10,000 employee customers and then mid-market, so are those customers, if using Bridge for the entire organization at the very start versus customers who have never used LMS in the past? Thanks..

John, that was like a seven part question. I lost track at like question number four, but that's okay I'm going to try address..

Sorry about that. [Indiscernible] but sorry about that..

Yes, it's okay.

So let's see where should I start, I'll tell you something interesting that we're seeing with Bridge, we still are seeing kind of half and half on Greenfield versus replacement with Bridge that's we're continuing to see that trend and I just want to caveat that by saying that it's entirely possible that two quarters from now that trend will have changed dramatically but for the last two quarters, we've started to see that it's something that at least it's starting to be a little consistent and a 50-50 sort of split between Greenfield and replacement.

Something interesting, we've been doing we have enough customers that we are starting to really dig in and do something data analysis on Bridge and how are customers are using them and starting to do a little bit of segmentation analysis.

We found, something interesting what we found is for larger customers and you cited our target size is 1,000 and 10,000 employees that's exactly right, those are the, that's what we call the mid-market that we're going after.

The larger end of that scale, we find that our win rate is higher with companies that are already familiar with corporate LMS and where we're replacing them.

And that's exciting to us of course because these are very experienced corporations that no competitive products and they're sophisticated buyers and so we're very pleased to see a very strong data difference between the larger corporations choosing us and so we're excited about that.

So that's a little bit of data insight that I can offer you on that.

What else can I tell you, can you pick a couple other little questions in there about Bridget that I can share with you?.

Sure. Our Greenfield customers using it more for their sales and services departments within the organization versus rather and also and how much land and expand because I know land and expand is bigger part of your strategy.

So does land and expand really apply those customers where first starting off, say in small cohorts and then adding on departments later on..

Yes, I mean again it's very early, it's very early but some of the preliminary data seems to show that some of the customers that are Greenfield customers are tending to use the corporate elements across their organization rather than land and expand.

Again on the smaller end of the scale, the larger customers we do have several large customers that are deploying completely across their enterprise but as you would guess many of the larger customers are at departmental level where there is a land and expand opportunity and we're just starting to get accustomed to the cadence of the expand the part of those deals, we're really focusing on landing first and then over the next several quarters year or two, we'll be able to say hey, this is how expansion tends to work whereas right now, we don't have enough of a track record to really talk about how expansion moves forward, but that's about how that's looking..

Great, thanks. I'm sure, we'd all love to hear more about your internal analysis and those results going forward..

Yes, that's great. Okay, thanks..

Thank you. We'll take our next question from Corey Greendale with First Analysis..

Good afternoon.

It's a first question, can you hear me?.

Yes..

Great thanks because there might be a little slight pause on the call. First question I had was, can you anecdotally talk about how much of the growth or how much of the bookings are coming from Bridge. I think Josh at a conference I don't know if it was Josh or Steve.

You talked about the Bridge was on track for kind of Q1 bookings ahead of full year in 2015, did that end up happening?.

So we don't comment specifically on the numbers around Bridge. I can tell you that, we had our largest quarter in Q1 with Bridge and we're very pleased with how things are looking for 2016..

And to your broader question Corey about, how much did they contribute again we don't get into those that level of detail but generally speaking, we think of our world in four markets, higher domestic, K-12 domestic, international which includes High Ed and K-12 and Bridge is our newest market.

Every market is growing very, very rapidly by your definitions but Higher Ed domestic which is our most mature market is growing the least fastest if you will and if the other end of spectrum Bridge being our newest is growing incredibly fast. So we're really satisfied across the board..

Bridge would be like the Millennium Falcon for example, going off to Star Wars thing..

Exactly..

And whereas Higher Ed would be like, I don't know like a Star Destroyer..

Yes..

Is that fair?.

Yes. Everything is fair. Yes, so we're really pleased across the board with how everything is performing..

But Josh, would you say the Arc is that more like X-Wing Fire or is it?.

Yes, that's you know Arc is still in the rebel base being like perfected and so, yes we just hope that they don't find us on Hoff and okay, we should stop, we should stop now. This is going to get ugly..

If you're not a Star Wars nerd, you're totally lost..

Exactly, yes I know so as you know, we're in Phase II of Beta for Arc and we're excited about GA this year and it's going great..

Awesome. A couple of other things on the, primarily on the Higher Ed space but I guess on education space, there's a whole lot of couple questions about the competitive environment.

When you're and I don't know if you will ever get into this level of granularity but when you got competitive wins against the Blackboard, are those predominantly from legacy ANGEL, are you getting those wins as much from Learn as well..

A lot of them are from Learn. Most, you know I don't have the stats right off the top of my head. A lot of the ANGEL and WebCT stuff is been mopped up in the previous years and so, what's left the majority of what's left is Learn and our win rate against Blackboard it continues to be incredibly high, not just domestically but internationally as well.

In fact, I think most of three out of the four international schools that we announced in this earnings where Blackboard Learn replacements, so yes Learn's getting it..

Also, do you have any thoughts you can share on Barnes & Noble Education as the competitor and with their acquisition of LoudCloud is that changing anything?.

Yes, we noticed that just in the news but it's not really, it's kind of a non-event for us..

Okay and then two quick ones for Steve, if I could. So I know the cash flow is seasonal, the cash flow was obviously more negative this year than it was in last year's Q1, is that's just working capital timing or anything you point to..

Well, so what we typically do Corey is that, we ramp up early in the year there's a lot of early year hiring as we're preparing to deal with the influx of new business that we expect and so, if you look at the pattern from 2014 to 2015, you'll see a similar pattern where the Q1 number 2014 is smaller than the Q1 number 2015 and there's so, it's pretty typical of how we operate, I don't think there's anything unusual going on..

Okay and then the billing side. I understand why you're encouraging us to look at it on a trailing 12-month basis and I understand it's very seasonal.

Is there any reason why, it would be particularly volatile, if we were to look at it year-over in the quarter I know it's a small number in Q1 but is there some reasons the year-over-year growth of that number isn't relevant?.

Well it's somewhat relevant, I think if you look at like for last year for example, you'll see that in Q2, 2014 over Q2, 2015 it grew 39% and then, when you look at the Q3 it grew 101%, so this is just an example of how much that moves around and a lot of it, it has to do with people renewing early or how an anniversary [ph] billing happens to work out and so because there is that kind of volatility, we really will hope that you guys will look at in on rolling 12-month because it smooth's everything out and it just becomes a much better indicator of how we're growing.

But when you look of history, you'll see it and it becomes very, very difficult to get precise quarter-to-quarter..

Okay, understand very helpful. Thank you..

Corey, this is Josh. Really quick, I just want to make a minor correction. It was two out of the four international schools where Blackboard replacements at Adelaide and the Danish Institute, I misspoke..

Okay, thank you..

Thanks..

Thank you. We'll take our next question from Brian Schwartz with Oppenheimer..

Thanks for taking my question this afternoon and real nice start to the year, over there guys..

Thanks, Brian..

First question, I have for Josh.

I'm wondering if you can provide any color or any characterization how the deal pipeline in aggregate is shaping up here as you enter Q2, just thinking given the strong business trends that you've reported and you're describing your commentary this afternoon, I'm wondering how the pipeline is measuring up versus your expectations coming into the year maybe in terms of overall visibility, coverage ratios, etc.

and so forth..

Well, I'll give you a very qualitative sort of response rather than quantitative because as you would expect as you know we pay careful attention to the pipeline and multiples and budgets and I can just say that, we're feeling very good and very confident about the current pipeline, we feel really good about it like, everything is awesome..

Okay, well building upon that question and again I don't know if this is for you Josh or for Steve. If I look at your trailing 12-month subscription billings growth here accelerated slightly in the quarter but it's already at top-tier industry levels here for the SaaS industry, you're showing about 1,500 points of margin improvement year-over-year.

So the business is in sort of rare air in terms of the growth and the leverage combination. I'm just wondering do you have any inclination to hire incrementally any more aggressively or invest any differently on that basis moving forward..

I don't think so Brian, I think the plan we set out at the end of the year for 2016 was pretty well thought out and well, we do and we think we've struck really good balance of making a lot of incremental investments to help support the growth but also to start looking at some leverage.

It's interesting, we get asked the question especially last quarter, we got asked a lot about what are you doing accelerate your path to profitability and the answer that I gave was probably not overly satisfying to anybody, but it was truthful, which is we're not doing anything because we think we have a good plan and we're going to stick with it and so that goes both ways, right? So we're not going to do any like major cutting back because we believe we're investing at the right level and we want to support the growth and we think we can do high growth and achieve our path to profitability at the same time and likewise, unless something really interesting shows up in front of us, which we're unaware of today.

I don't think we'll be making any major incremental growth either because we always want to be careful. So let's pick on Bridge for just one second.

We can throw 100 more sales people at Bridge and we get a bigger number for sure, but it will be not a sensible way to spend money and so, we're always trying to balance that and we think we've got a good balance in place right now..

And then last question I have it's for you again, Steve.

In regards to the new revenue guidance here for 2016, you know if I look at the number the implied growth for the back half of the year is, it looks to about mid-40% growth, that's certainly top-tier guidance in the SaaS industry but it's about 1,000 basis points lower than the implied guidance for the first half and I'm just curious what's driving that because the business has been generating 60% plus growth trends what I think of as leading indicator for a SaaS business you're trailing 12 months billing and subscription billings your backlog and your drift for growth trends.

Thanks again for taking my questions..

Sure, so just one clarification was that 605, 606 question or was that guidance question? I just want to make sure I answer your question..

I'm just trying to reconcile that the leading indicators of the business just looking at the trailing 12-month billings your backlog from last quarter, the deferred growth trends for several quarters now, the business is producing 60% plus growth trends, looks like the guidance in the first half for revenue is mid-50% growth and then I guess the implied guidance in the back half on the new revenue guidance is about mid-40%.

So just trying to kind of understand what would it be driving that, maybe it’s some tougher comparisons or some implementations are going to take longer and that's that, maybe it's just conservatism out there..

Yes, so I think the best answer that we're really comfortable with the guidance, we did raise our guidance for full year. And it's important to us, as a young public company that what we tell you guys, is what we do and that we deliver and so that's really the most important thing for us and that's probably all I can say about it.

I mean, where we feel good about how the year's shaping up..

That's helpful. Thanks Steve..

[Operator Instructions] we'll go next to Andre Benjamin with Goldman Sachs..

Good morning or good evening sorry about that, long day..

Yes, we get it Andre, its earnings season..

Yes, so I was - we went to an industry conference recently and talked to a number of players in the Higher Ed space and a lot of them were talking about, the potential to look outside of the pure play education LMS players and think about other big tech players like IBM, Google etc.

and there you could provide some of the similar services to what you do.

Have you encountered that in any of your conversations and how are you thinking about that as more of a threat from outside of your immediate industry?.

Well, so we launched about five years ago in the market and even five years ago people were having these conversations, it's something in the fast moving world of tech especially Ed tech, there are always active conversations about how to do things better? How to do things differently and which vendors are out there and what services and experiments and research and it can be done to improve education.

So it's not surprising that you heard that kind of chatter at a recent conference, we hear them every conference.

Big companies like IBM or Google great companies provide great value in their specific core competency learning management systems that software is what we do and in Higher Ed that's a mission critical piece of software that is unlikely to change for, I would speculate it in the next decade or two.

Lots of different technologies and tools will be plugged into these platforms, these LMS platforms but it works really well for Higher Ed. Now K-12 that's a little more like the Wild West, there's a lot of movement in K-12.

The LMS is a force in K-12 and that started to be a widely adopted especially by very large school districts but there's a lot of technologies in K-12 and people are experimenting and trying things out and a lot of big vendors would love to mind share with the K-12 market because it's kind of big picture strategic advantage to have young students get accustomed to a particular vendors technology stack, so that makes sense, but the LMS business is a very specific business and it's a very tough business and a lot of these big companies honestly that's more than they want to chew on, but we've been hearing the same thing for many, many years.

I think it's just, I think it’s idle chatter and interesting speculation. We're partners with all these different large vendors.

They're part of the ecosystem but where Instructure has really been successful and providing value for its customers is in being that platform to tie that ecosystem together and that's where our core is and that's where we've been really, really successful with these schools.

Does that make sense?.

Yes, it does and I know a lot of conversations been had around Blackboard given they're the largest and incumbent but are you seeing any additional competition from Schoology. I know they've been a stronger competitor in K-12 and I know they've been looking to make a stronger push in the Higher Ed although they're little bit earlier on that push..

Yes in Higher Ed we haven't seen any new competition in the last five years.

We've seen several vendors attempt to compete but then usually they break their picks and pack up and go home and Schoology has been trying to get into Higher Ed for the last year and half, maybe almost two years and there's been largely unsuccessful, that's not to say that they won't eventually maybe get some traction but for the last couple of years it has not happened.

So it's really just the usual suspects and if you look at the most recent Casey Green [ph] report you'll see the number speaks for themselves, we continue to dominate in growth in the Higher Ed market, like I said K-12 market that's a little more complicated.

We continue to win the lion share of deals in K-12 but it's I think far from the level of maturity of Higher Ed as far as predictability goes. So it's a much more exciting dynamic marketplace to be at..

Thanks..

Thank you. We'll go next to Terry Tillman with Raymond James and Associate..

Good afternoon, can you all hear me okay?.

Yes..

Hi, Terry..

Thanks for taking my questions. Josh, it's a big picture question in terms of, our research has seen in some states where and there is more maybe than ever a really push for a common platform in some cases, even from like grade school, K-12 up into Higher Ed almost like a state-wide kind of vision for a common platform.

We in our research saw the University System of Florida select you guys, so congrats on that..

Thank you..

One of the things they talked about was the idea of a common platform.

How often are you seeing maybe instead of sporadic piecemeal buying across different states or regions by institutions that just talk to each other in network as opposed to something that's a lot more formal and they go big in terms of doing something in a more kind of methodical collaborative approach. Thank you..

You know in the K-12 space, you do see occasionally state initiatives maybe one or two of those come up every year.

I think last earnings call if I remember correctly, we talked about how we won the public school districts North Carolina that state wide deal and so they do come up, they're very competitive, but day in and day out, the blocking and tackling, the bread and butter of the K-12 business is really in at the district level still.

So we continue to win the lion's share of districts that come up. The idea of creating an ecosystem across districts and across regions is something everyone is excited about and wants to eventually participate in that vision.

They see examples like the Internet2 consortium for Higher Ed and that's been a very successful consortium that we're part of and we have many, many schools that we won through that Internet2 partnership and so they look to the higher education consortiums as an example and I think eventually they'll get there, but it's a little more complicated in K-12 especially the legislation and they're just, they're larger systems, there is more students in these students.

And so, yes we're plugged into these discussions that these districts are having, these states are having and when they do come up, we are very competitive for those large consortiums and I think, eventually that's where many of these states will end up.

The advantage of being in a cloud platform is that, once you have districts on your platform, in the cloud you can start to correlate their data and offer that back to superintendents and supervisors of the school districts and really offer, really intelligent analytics based on that information whereas an on premise solution or an isolated hosting solution they're really on an island and it's very difficult to offer really valuable insights to these consortiums and I think that's why we've done so well at the consortium level across K-12 and higher education is because that cloud technology is what we really brought to the market that hasn't really been there before and it's really open the doors for people to start doing really innovative analytics..

Thank you..

Thank you and there's no further question in the queue. I'd like to turn the program back over to management for additional or closing comments..

All right, thanks operator. Yes, so it was a great quarter, Q1 was a great quarter.

We kicked off 2016 and we're very pleased with our - the numbers we achieved and we've got a lot of work in front of us and we're excited to be in the position, we're in as a company and we appreciate your supports, your questions, your inquiries and look forward to talking further with the analyst through this quarter and look forward to speaking to all of you next quarter..