Erin Kasenchak - Investor Relations Josh Coates - Chief Executive Officer Steven Kaminsky - Chief Financial Officer.

Brian Essex - Morgan Stanley Terry Tillman - SunTrust Robinson Humphrey Justin Furby - William Blair & Company Scott Berg - Needham & Company Brian Peterson - Raymond James & Associates, Inc. Corey Greendale - First Analysis Securities Corporation Brian Schwartz - Oppenheimer & Co. Inc..

Good day, and welcome to the Instructure Q2 2018 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Erin Kasenchak. Please go ahead..

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

Before we begin, I would 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 the 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 as required by 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 our prior written consent.

During the call, we may 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 to the Investor Relations section of our website.

All of the non-revenue financial measures we will 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..

Thank you, Erin, and thank you everyone for joining us on our Q2 2018 earnings call. I am thrilled to have Dan join us today on the call. It's been a short eight weeks since he came on Board, but in that time he's met with teams across multiple locations made customer visits and dug into our product capabilities. We're glad to have him with us.

We had a solid Q2 with revenue were up 30% year-over-year and we surpassed 4000 customers across 70 countries. As usual the second quarter was a busy quarter for our Canvas Group. Let me share some of our great wins in both Higher Ed and the K-12 market for the quarter.

Collier County Public Schools in Florida chose Canvas and Arc for their 48,000 learners to replace Blackboard. Hamilton County, one of the largest school districts in Tennessee with almost 45,000 students selected Canvas to serve not only as their LMS, but also to help support their STEM initiatives.

Arizona State University, one of the largest public universities in the country, selected Canvas for their over 90,000 students and faculty to replace Blackboard. ASU is highly recognized and is ranked number one by U.S. News and World Report as the most innovative school in America for the third year in a row.

Virginia Community College system of 23 schools and 100,000 students chose Canvas and Arc to replace Blackboard. Sharon Morrissey, the Vice Chancellor for Academic Services and Research at BCCS remarked.

With this new platform the role of in LMS ships from simply managing course content to the foundation of our digital learning environment the maximizes student success. Cornell University switched to Canvas due to our strong focus on student centered learning and ease of use, incidentally Cornell was Blackboard's first customer.

And finally, although our Gauge product is directed at serving the K-12 market we had our first Higher Ed at Gauge deal with the Western Michigan University Cooley Law School; WMU-Cooley would be using Gauge to help prepare students for the Bar Exam a great use case for Gauge product in Higher Ed.

Moving to International, during the second quarter we had another solid performance with our international markets. Let me share with you a few of the wins for Canvas. After a successful pilot conducted in 2017, The University of Toronto, Canada's top ranked university with 80,000 students selected Canvas to replace Blackboard.

We also had our first higher education win in Ireland with the Cork Institute of Technology with over 10,000 learners. As we mentioned last year we have over 100,000 students in almost all Higher Ed universities in Norway using Canvas. And this quarter we continued to make inroads in the K-12 market in Norway.

Two different municipalities which are the equivalent of school districts representing over 29,000 faculty and students selected Canvas to replace its learning as their LMS. Turning to our domestic corporate market, the State of Missouri will use Bridge Learn for their 40,000 learners for cyber security awareness training.

Holiday Retirement, the second largest provider of senior living in the U.S. selected our full Bridge suite of Learn, Perform and Practice, as well as Arc to replace Oracles Taleo for their 10,000 employees. Qualtrics also selected our full Bridge suite of Learn, Perform and Practice, as well as Arc.

They will utilize Bridge and Arc for the sales enablement and partner training for their global sales team. As mentioned last quarter we continue to see increased penetration in the extended enterprise market.

During the second quarter Cox Automotive, the owner of Autotrader.com and Kelley Blue Book, selected Bridge Learn to help increase customer loyalty by offering training, including new orientation training and a manager bootcamp and Snider Fleet Solutions like to Bridge Learn and Perform, as well as Arc for the comprehensive employee training and development program.

Bridge was chosen because of our ability to offer a robust suite of products focused on employee development. Bridge is also starting to make some traction internationally. Let me share with you some of our international bridge wins.

Global Radio Europe's largest radio company with 25 million listeners will use Bridge Learn and Arc for employee training and onboarding.

The Bacardi MARTINI chose Bridge Learn to replace SumTotal for employee engagement and development of their distributed global workforce of over 5,000 employees, with a particular emphasis on sales and customer service. And HelloFresh, a leading global meal kit company selected Bridge Learn and Arc to replace Litmos as the LMS for their UK employees.

Last week, we held our annual user conference in InstructureCon, in Colorado. It was an exciting week with almost 2,800 attendees. The event is always a great opportunity for us to connect with our customers.

This year, we were pleased to add a two day conference dedicated to Bridge users as well as a half-day session for analysts and investors to do a deeper dive into our products and long-term strategy. If you weren't able to attend the analyst session in person, you still have an opportunity to view the presentations on our Investor website.

Our second quarter of 2018 was a strong quarter for Instructure and we're pleased with our performance in the first half of the year. Now I'll turn it over to Steve to take you through the numbers..

Thanks, Josh. In Q2, revenue grew 30% year-over-year to $50.1 million. And subscription revenue was $45.1 million, up 34% from last year.

As you've heard me remark on the last several earnings calls, our revenue outperformance versus our guidance for the quarter has been primarily driven by strong net revenue retention, which continues to be greater than 100% and early starts for new contracts.

12-month rolling billings at the end of Q2 were $214.3 million, up 31% from the second quarter of last year, also calculated on a rolling 12-month basis.

As you heard me highlight before, giving the seasonality of our business, we calculate billings 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 and all EPS numbers are in a per common share basis. Gross margin was just shy of 73% for Q2.

As I mentioned on the last several calls, we expect improvements in gross margin will continue to moderate going forward as we get closer to our long-term target of 75%.

Turning to our operating expenses, total operating expenses in Q2 were $44.4 million, up 29% from the same quarter in the prior year, and operating loss for the quarter was $8.1 million. GAAP net loss for the second quarter was $12.5 million or $0.36 per share. Net loss for non-GAAP EPS calculations was $8.2 million or $0.24 per share.

Turning to the balance sheet, our ending balance for cash and cash equivalents of marketable securities for June 30 was $116.5 million and free cash flow was negative $24.6 million. As a reminder, we are heading into our busy season and Q3 is historically a large cash generating quarter.

As we look out towards the full-year, due to increased investments in new products as we alluded to in our Investor Day last week. We anticipate our total cash flow will likely dip slightly negative and for clarity, total cash flow includes cash from financing activities.

Let me conclude with a discussion around our expectations for the third quarter and full-year 2018. For the third quarter, we expect revenue in the range of $53.6 million to $54.2 million, non-GAAP net loss of $8.6 million to $8 million and non-GAAP net loss per common share of $0.25 to $0.23.

For the full-year 2018, we expect revenue in the range of $205.1 million to $209.5 million, included within this guidance is our expectation around revenue generated from newer products like Gauge, Perform and Practice.

On that note, I'd like to remind everyone that it takes time to introduce new products into these markets as pipelines take time to build and sales cycles are multiple months long, where we are excited about the term expansion opportunities these products represent, we are taking a judicious approach as we think about the near-term contributions to the topline.

I encourage all of you to do the same. We expect non-GAAP net loss of $31.8 million to $29.8 million and non-GAAP net loss per common share of $0.93 to $0.87. For calculating EPS, we expect our shares to be $34.8 million for the third quarter and $34.2 million for the full-year.

In conclusion, we're pleased with our second quarter performance and I look forward to updating you on our progress next quarter. And with that, Josh and I are happy to take your questions..

[Operator Instructions] We go first to Brian Essex with Morgan Stanley..

Hi. Good afternoon and congrats on the results. Thank you for taking the question..

Thanks Brian..

Josh maybe if you could talk about efforts that you're seeing within Bridge. It's nice to see that 10,000 seat deal win.

What kind of traction are you getting in that market? Where is your sweet spot? Is that migrating? And what initiatives are getting traction if any?.

Well I think the - if you're going to talk about one thing that's really making a difference in Bridge, it's just the addition of the modules in the offering.

Going just from warrant that adding Practice and Perform, and also we disclosed kind of our roadmap to these larger customers, and it's really starting to allow them to see the overall vision of where we're going with Bridge. And I think that enabling us to have more weight, especially with those larger enterprises.

So we're starting to see traction, I think primarily because of that. Secondarily, we're just getting a little better at sales in general around Bridge. We've been in the market a relatively short amount of time, of course, and it does take time to learn the ropes. So I think those are - that's what's really contributing to that..

Great.

And do you think it has follow-up on the academic side? How much visibility do you have into the pipeline and how might you characterize your guidance? Is that more or less conservative than it has been in the past? And particularly given that the - I guess the seasonality in 3Q, how should we think about that as we fine-tune our models in the context to your guidance?.

Hi Brian. This is Steve. So first of all, visibility of the pipeline, it's pretty typical. Obviously, we have pretty clear visibility in the 3Q pipe, Q4 starts getting a little foggy. By the time we get into 2019, its starts getting pretty hazy, but we're starting to see a little bit of stuff show up there.

With respect to guidance, it's pretty business as usual at Instructure. We give guidance based on our confidence level by achieving those numbers. This obviously is a big cash quarter. And I think it's other than that there is nothing really too unusual from our perspective on our Q3 guidance..

Is there anything taking the context in terms of relative particularly around deals getting pulled into one quarter versus the next as we look at the growth rates year-over-year?.

I mean, we're not behaving unusual in terms of where deals are showing up. So I don't think there's anything strange going on there..

Got it. Thank you very much..

And we'll go next to Terry Tillman with SunTrust..

Hey gentlemen. Thanks for taking my question. Can you hear me okay..

Yes, fine..

We sure can..

Okay.

Steve just first question for you in terms of - you're talking about maybe dipping a little bit now for the year or could you provide a little bit more commentary, what is the debt mean like, could you give us a range? And could you talk about where a couple of the more notable investments are earmarked that make the cash flow dynamic a little different than earlier in the year?.

Sure. So yes, we're talking about a relatively low number. We have an operating expense plan of something like $230 million or so. So it's - and relative to that it's going to be a pretty small number. The investments are going to exactly what we talked about on Wednesday at the Analyst Meeting on our Analyst Day.

They're going into further investments in Bridge, but we also are doing some interesting things on the Canvas side. What became interesting over the last three or four months, is that there's still a lot of entrepreneurial spirit here and we've had people from the product and engineering side come up with ideas that they would like us to think about.

We've seen a lot more of that activity lately. And some of those ideas we think are very worth pursuing, and so we are pushing the envelope in those areas. But it's along the lines of things we talked about on Wednesday..

Could that mean though the idea of the entrepreneurial spirit, I appreciate that.

But could that potentially mean a greater volume of new products more regularly?.

Well, I think - I don't know, I mean we talk about new revenue generating products every 12 to 18 months, and you'll see probably more than we have historically released the first half of next year. So there's a little bit of clustering going on. But yes, I'd say just I can tell you qualitatively over the last 12 months.

It just seems like there's been a compounding sort of innovative energy and we'll see sort of the fruits of that first half of next year. So yes, you might be able to say more than usual..

Okay. And one of the things we picked up it's a conference was the interest in Practice. What I'm curious about is, what can you garner from costumers in terms of like - similarly ideas on deal sizes and is it more important there was a wedge to get them to buy Perform and Learn? Thank you..

Yes, Terry, it's really like the sharp tip of the spear for these larger enterprises. Practice is an intriguing product, it's very innovative people immediately understand how they can dramatically improve. The human capital that they've invested in. And so yes, I get this in a lot of doors, especially these larger enterprises.

Now that the deals that we're selling with Practice because their larger enterprise of the sales cycle is longer. And actually been numbers as far as deal size goes with just Practice alone isn't something we're really pushing hard on it's what we're really getting out of it is the Bridge follow on.

Because what's Practice get us in the door, they see the rest the Bridge, they see our Roadmap, they start to see the whole vision. But that's really the value of Practice that we're seeing in the near-term.

In the long-term of course it will contribute to the bottom line, but near-term we're definitely seeing us get us into doors we normally would not be able to get into..

Thank you..

And we'll go next to Justin Furby with William Blair & Company..

Thanks guys.

And maybe a couple first on the Education business you guys called out a number of really nice wins both domestic and international? Can you just give a sense, the billings number doesn't necessarily tell what's going on? So can you just give a sense of how you're tracking on the just broader education new business side of things to the first half of the year and maybe this quarter versus sort of what you'd hoped? And then can you give an update on the 15% to 20% from a Bridge standpoint and how you're trending there and whether that's still the full target? Thanks..

Sure. Yes, I mean I can tell you qualitatively things seem to be on track with the academic side of business with Canvas as far as new deals goes. Our win rates are very steady and we're not seeing an unusual increase in deal wins as opposed to normal which is very high in this market especially domestically. So yes, steady as she goes.

On the Bridge side we are tracking to that 15% to 20% of new bookings that we told you about last time. So yes, any other questions..

Thank you. Foreign exchange Steve is there any impact for your guide for the back half of the year. Can you just remind us what the exposure is? Thanks..

No. So we don't forecast or give guidance to any foreign exchange impact, so we don't, but I can tell you we are not estimating anything unusual..

Okay. Got it. Thank you..

Next up is Scott Berg, Needham..

Hi, guys. Thanks for taking my questions. I guess the first one I have, then follow-up, the first one, Josh as Gauge you've mentioned you deal with in Higher Ed.

That's not a target market for that product, I've have really heard it before? Can you help tell us maybe what the exact use case is there actually is probably different than K-12? And then how do you look at that from a TAM opportunity perspective..

Yes, the Higher Ed win for Gauge is unusual we're not specifically targeting that market. Of course this Law School is using it for the Bar Exam you know practicing for the Bar Exam. So that's certainly a use case.

I think generally in Higher Ed you're going to have to use case for Gauge be around professional schools, nursing programs, think things like that. And it's not I mean we'll know more as we mature in the market, but I can tell you we're not specifically - we're still not specifically targeting Higher Ed for Gauge.

It's more of an opportunistic type of sale. We're still very much focused on the core of K-12. But we're not going to say no, especially when the use cases is a really clear match like it was with WMU Cooley..

Okay, got it. That's helpful. And then my follow-up question Steve is around professional services. That revenues were actually down year-over-year and at least by my model 8%.

How should we think about services for the rest of the year? I don't know if that's kind of anomaly or maybe some shifting in just the completion of work from one period to the next?.

Yes, so we didn't see anything usual on our earning Scott. And we do not forecast non-recurring revenue. We don't break it out in particular. So I think we've always talked about that if it's in the range of 10% give or take of total, that's about typical and normal. This is a little bit less, but it's not meaningful.

Last year, we did have a significant amount of K-12 professional services and this year was more normalized, but I would say that there's not anything unusual going on and we talked about that for the year in the 10% to 11% range. So I think going forward that's the best way to think about it..

That's helpful. Thanks for taking my questions..

Yes, thanks Scott..

We'll have from Brian Peterson, Raymond James..

Hi, thanks for taking the question. So I wanted to hit on the extended enterprise use case for Bridge Learn.

Is there any commonality in how these opportunities are coming into the pipeline? And if I think about competitive dynamics, are there any differences versus more traditional LMS use cases?.

Yes, that's good question. I mean we have a mix of extended enterprise customers with Bridge. This recent big win with the State of Missouri with a particularly large one and it's a great use case for educating state employees on security awareness. But it's something that that works really well for the Learn.

It works less is - less well for the other modules in the Bridge suite, but we're - it's a great use case for Learn. And so we're going to continue to target extended enterprise opportunities..

Got it, and maybe one for Steve, just - as we think back to two thousand and 2017, you really called out early implementation activity as a driver of the upside. Has anything changed in terms of implementation schedules across the customer base or how you guys have incorporated that into the outlook for two thousand and 2018? Thanks guys..

Again it's a variable. We don't forecast it. So this quarter, we had a beat and it was largely driven by early implementation, implementations happening faster than the two to three-month typical timeframe. But no, so we're not seeing anything unusual when they happen. That's good news when they don't.

It's not bad news, and we're totally okay with that..

We'll go next to Corey Greendale with First Analysis..

Hi, good afternoon. Thanks for taking my question. Good to talk to you at lower altitude. Quick question, on the change in the cash and it's really dumb question, but I want to verified, Steve when you say that you expect cash to be down including finance activities.

You're not including the proceeds of the secondary and that correct?.

No. Yes, I think we'd be hard pressed to bring through $110 million of incremental cash Corey. So, as if that had happened on December 31. That's correct..

Yes. That's why it's a dumb question, but I have heard other companies..

No, I'm glad you asked. That is to make sure there was no confusion..

You never know. We know..

Got it, good. So related to that, it sounds like the change is pretty incremental, but.

since you did make the decision to invest more in product based on some feedback, I know that you are getting requests from the sales groups for incremental and from international I've heard from our sales people, just - are you thinking about that if you're investing in incremental dollar why product versus sales..

Hey, why don't we - is a great opportunity we have Dan jump in.

Do you want to hear from Dan on that question?.

Yes. Hey Dan..

Hey, to go on things good question. Yes, in terms of investments, there's always sort of cycles on the things as we introduce new products and working on our launch programs and announcements. Obviously, picking our markets and investing in products is an important start to that.

I've been doing a lot of observations in the field and working with our sales teams that's both on search strategy and organization investment and more sales people.

Right now when you look at the Bridge suite for example, our current sales team can continue to extend and sort of sell that both upsell and new logos and sort of a model, and we'll scale the sales people as we sort of predict the launch of the products to grow as needed. That's the same case for both domestic and for international teams..

Great. And actually Dan, can I ask you one more as long as I have you [indiscernible] jump in..

Josh and I are filtering all that..

Yes..

All right. So if someone needs to muzzle, but that's up to you.

The question is just, as you look - I realize you haven't given sort of guidance on longer term growth rates, but as you look kind of earlier in the pipeline particularly on Bridge, are you seeing the kind of growth in the pipeline that would support the sort of rapid growth rates that are needed to maintain similar overall growth rates going forward?.

Should we let Dan answer that?.

That's a pretty tough question..

Yes. I mean as you mentioned, it's still relatively early to tell and sort of I've been here eight weeks and coming up to speed, drinking from a fire hose.

Bridge obviously has a different sales cycle then we've experienced in Canvas, and that growth goes from a sales cycle perspective as well as just sort of an overall sort of implementation and cadence of how companies absorb Bridge.

At the end of the day, what we're seeing which is very positive is more and more organizations existing in customers and new customers are buying into the vision of where we're going with Bridge, and Practice is a great example of that. Some organizations are sort of buying into that Bridge suite story and the extended journey with Bridge.

At the outset others are sort of taking more of an incremental approach product by product. So I think over the next couple quarters, we will continue to sort of storm and then we'll normalize into sort of what that sales methodology looks like.

I don't think there's an indicator one way or another with regards to serve accelerated sales, cycles are slowing things down..

Excellent answer for only a week. Thanks so much..

Thank you..

[Operator Instructions] We'll go next to Brian Schwartz with Oppenheimer..

Yes. Hi, thanks for taking my questions this afternoon, and I got one question and one follow-up. My first question is on the products investment cycle in the second half. So we have the understanding. So just wondering how long you expect that this investment cycle for the products to take hold.

I'm just trying to understand with my model when I think about the linearity of the operating improvements in the business for next year.

Is it going to look - is your expectation that it would look similar to this year the linearity or do you think maybe it will be the opposite of how those improvements trended this year? It's kind along the lines of the duration of the expectation of how long this investment cycle for products will last? And then I have a follow-up..

Yes. Brian, we'll give you. I'll answer that question - the first half of that question and then I'll let Steve kind of give his sense on some of the quantitative implications.

It's difficult to say if we'll continue making the level of product investments that we are currently making, because we kind of sit back, we see opportunity, we see demand and we get excited about it. And we know just strategically that developing new products and putting them into the market is critical to our overall corporate strategy.

So we're not shy about jumping in. I think over the last several quarters, we've just seen more opportunity than we have historically. And I think it builds on itself.

The more we're closing deals with customers across the more broader market, international and now expanding into the higher end of the corporate market, we just see more opportunity and it kind of feeds on itself. And so I can't tell you that oh, hey, the expenditure this year on new products is going to mellow out next year, I can't tell you that.

I can tell you that we'll continue to try and balance these opportunities with internal costs and be judicious about those decisions. But we love the growth. We love the high growth and we love building products, and so we have a little bit of a bias towards that.

And so I think we'll continue to have a little bit of a bias towards that, but it's just a tough. It's a tough position to be in. I mean it's a good problem to have. It's a good problem to have, but it's - yes, I don't know, there's a whole bunch of - there's little brain dump for you on the topic.

And Steve can tell you a little bit more about kind of the numbers..

Yes. So Brian, it's obviously way too early to start talking about 2019 and any kind of detail. But as Josh said is very consistent with what we've been saying all along. As we look down the P&L and we look at sales and marketing and R&D and G&A, R&D will lever the most slowly. And it's for that very reason right.

We believe we have very big markets in front of us. We also are true believers, although not completely binary on this, but that growing TAM organically is smart. It's a good investment and so that's always going to be our bias. Again, it doesn't completely rollout in organic.

We will be very careful about that and we don't rule it out as a possibility, but we always have the bias towards. Hey if we can build it, we'll probably get it to market faster and we'll probably be much closer to exactly what we want.

So as you think about 2019, 2020, 2021, R&D is going to leverage more slowly as sales and marketing and G&A we'll lever more quickly, G&A's fastest of the three. And so I think just from a color perspective, that's probably the way to think about it. Obviously, by the time you get to Q4, we'll have a lot more to about for 2019 in detail.

But for now, that's probably the best way to think about it..

Thank you. And then the one follow-up question that I had, Justin was kind of alluding to that earlier, he kind of asked if there was any color on the off balance sheet, either deferred a backlog on the ed tech.

I was wondering if you guys wanted to make any comments at all just looking at the business in general in that quarter on stuff that we can see the bookings in the backlog. And the reason is, there's kind of mixed thought here on it because your commentary sounds really good.

But if you look at the revenue beat in the quarter, it's a lowest beat that you've had since the 3Q of 2016 and you're saying that it can from early starts and then the guidance in the trailing 12 billings growth numbers, those are for much lower growth that you had.

So can you share any commentary maybe on some of the stuff that we don't see the bookings or the backlog, because your overall commentary on the business, I think sounds very positive today? Thanks..

Yes. So the short answer is not really. We have a couple of components that can drive beats. One is early starts, which did occur, and then the other one is outsized performance of non-recurring, which we did not have quarter. In fact, it was a little bit lower than what it was last quarter, and last quarter was 10%, this quarter 8%.

And so had that been a 11% or 12% this quarter, and again, that's catch it as catch can, and last year we had a lot of K-12 non-recurring, then the beat arguably could have been larger. We're very happy with the results for the quarter and so we feel very comfortable with where the business is that and how it's doing.

I think the commentary is the way I would think about the commentary and that it's favorable is more about the long range prospects of - in Instructure especially when you talk about Bridge, right.

We are starting to see the kind of traction in the combo deals, selling multiple products into one client, that we expect to see much more of 2019 and 2020 and 2021 as we move forward and more deeply penetrate this market.

So that's probably the way I would think about it, if I was hearing what you're hearing and that's probably about as much detail as we can provide regarding current quarter results..

Yes, I think we're just open to - we anticipate the tailwinds that I guess you guys aren't privy to you know with respect to the pipeline and the product development and sometimes those things are out six or 12 months or 18 months. We're just generally optimistic of course in the long-term position of the business.

And so yes, I think that comes across in the commentary. But you guys got to build your models and do your numbers. But when we sit back and we look at three to five years out in the strategy - overall strategy of the company, things are working well. Some things are working a little slower than we'd like some things are a little ahead of ourselves.

But generally speaking we're following the plan and it's working and so we're pretty happy about things..

Thank you very much..

Thanks Brian..

We'll go next to Rishi Jaluria with D. A. Davidson..

Hi, guys. This is Hannah on for Rishi.

I was wondering maybe you could talk about the timeline you have planned for Gauge? And when you think you'll be expanding into the international market with the product and when you help, it will meaningfully contribute to revenue?.

Yes, so on Gauge, we've had a good start with Gauge. In K-12 domestic, we still have a few features to hit, have it really be able to hit 100% of the domestic market, but so far so good. International with Gauge is not something that we have any plans for in the near future.

There may be some opportunistic deals that might come up, but there's going to be additional work that needs to be done to have Gauge fit with most opportunities internationally. And when we feel like we've really hit our stride domestically, we'll take steps internationally for Gauge. And I think….

Yes, I mean it was really a product design for the domestic testing market and understanding the analog for International is going to be another step that we will have to take, but Josh's point….

Yes, we will get there..

But first thing is first..

Yes..

Okay. Perfect.

And then just a follow-up, just more generally speaking, I wondering if there are any specific regions you're currently targeting and how they differ between the education versus the corporate product?.

I mean not really, and we've been pretty open about this. Obviously for all of our products, we are focused on the U.S. market, and so we don't like - let's sell this in the Northeast instead of the Southwest to start with. We roll it out nationally. We're pretty judicious about how we roll things out internationally.

The first effort is to push campus out into a new region. Spain is one of our newer regions, Iberia, just as an example.

And then with Bridge, we're doing a lot of some more tactics as we did with Canvas where we start with the English-speaking countries and then we will slowly roll them out to the non-English speaking countries, likely based on available market.

So it's a pretty thoughtful process, where you should probably spend more time talking to you offline about, how we think about international expansion, but that's generally how we approach it..

Okay, perfect. Thanks for taking my question, and congrats on the quarter..

Thanks..

At this time, I would like to hand the call back over to Josh Coates for any additional or closing remarks..

All right. Well, that concludes our earnings call for Q2 of 2018. We appreciate the listeners at home and those that called in with their questions, and we will talk to you guys next quarter. Thanks..

That does conclude today's conference. We thank you for your participation..