Steve Daly - Chief Executive Officer Dale Bowen - Chief Financial Officer Denise Garcia - Investor Relations.

Ladies and gentlemen, thank you for standing by, and welcome to Instructure's Second Quarter 2022 Earnings Call. At this time all participants are in a listen-only mode. After the speakers 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, Denise Garcia, Investor Relations. Denise, please go ahead..

Thank you. Good afternoon and welcome to Instructure's second quarter 2022 earnings call. We will 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 risks, 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 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 could find the reconciliation of our GAAP to non-GAAP measures included in our press release, which is posted to the Investor Relations section of our website. With that, let me turn the call over to Steve..

Canvas for Learning Management solutions, Mastery for assessment and tools and content, Elevate for data and analytics, and Impact for EdTech adoption engagement. We also highlighted product improvements that make the Instructure Learning Platform even more powerful in 2022.

We look forward to hosting the three additional InstructureCons later this year for Latin America, EMEA and the Asia Pacific regions.

Looking to the remainder of 2022 and beyond, our pipeline for North American Higher Education RFP opportunities continues to build, as many institutions which delayed major purchasing decisions during the pandemic looked to upgrade their infrastructures.

In summary, I'm encouraged by our strong second quarter financial results, which exceeded our guidance ranges in all metrics. We expect the favorable trends that drove our second quarter outperformance to continue for the balance of the year, which was reflected in our revised 2022 guidance.

I would once again like to thank our customers, partners, employees and shareholders for your ongoing support. With that, I will now turn the call over to Dale to talk about our financial results and the ongoing momentum we are seeing in the business. .

Thank you, Steve, and thanks again to everyone for joining us today. Before discussing our detailed financial results, I'd like to point out that in addition to our GAAP results, I'll be discussing certain non-GAAP results.

The GAAP financial results, along with the reconciliation between GAAP and non-GAAP results can be found in our earnings release, which is posted in the Investor Relations section of our website. In the second quarter we continue to show a combination of strong top line growth and expanding adjusted EBITDA margins.

Building on a consistent gross margin improvement, we have delivered in recent quarters, Q2 non-GAAP gross margin expanded by 390 basis points year-over-year to 77.6%. As Steve mentioned, we generated second quarter 2022 total GAAP revenue of $114.6 million, up 22% year-over-year and ACR of $114.9 million, up 20% year-over-year.

Subscription and support ACR accounted for 90% of our second quarter revenue at $103.2 million, up 19% year-over-year, primarily as a result of the continued momentum within our core Canvas LMS product, both domestically and internationally, in addition to strong upsell and cross-sell of our other products, especially assessments.

Professional services and other ACR accounted for 10% of our second quarter revenue at $11.7 million, up 24% year-over-year, driven by strong implementation and training services delivery in our High-Ed business. Deferred revenue at the end of the second quarter was $283.3 million, up 13% year-over-year.

Remaining Performance Obligations or RPO were $783.7 million at the end of the second quarter, up 17% year-over-year, and we expect to recognize revenue on approximately 74% of our RPO over the next 24 months.

In discussing the remainder of the income statement, please note that unless otherwise stated, all references to our expenses, operating results and share count are on a non-GAAP basis. Please note that when I refer to margins in the upcoming comments, I'm referring to margins calculated as a percentage of ACR.

Our strong gross margin profile is supported by our optimized cloud architecture and flexible support model that scaled to meet seasonal customer demands. In the second quarter, gross profit was $89.2 million, representing a 77.6% gross margin, up from 73.7% in the second quarter of 2021.

We couldn't be more pleased with our enhanced operating model and continue the operating leverage on this gross margin line. Turning now to operating expenses, sales and marketing expenses for the second quarter were $24.7 million or 21.5% of ACR compared to 20.7% in the second quarter of 2021.

Research and development expenses for the second quarter were $15.5 million or 13.5% of ACR, down from 13.8% in the second quarter of 2021. We continue to invest in the engineering headcount to pursue our ambitious product road map, while leveraging offshore talent to drive ongoing R&D efficiencies.

General and administrative expenses for the second quarter were $10.4 million or 9% of ACR, up from 7.5% in the second quarter of 2021, driven largely by the addition of public company costs. Non-GAAP operating income for the second quarter was $38.7 million, representing a 33.7% operating margin, up from 31.7% in the second quarter of 2021.

Second quarter adjusted-EBITDA was $39.8 million, representing a 34.6% adjusted EBITDA margin, up from 32.5% in the second quarter of 2021. Non-GAAP net income for the second quarter was $35.9 million or $0.25 per share on a fully diluted basis compared to $20.7 million or $0.16 per share a year ago.

Turning to the balance sheet and cash flow statement, we ended the second quarter with $87.6 million in cash, cash equivalents and restricted cash and $492.5 million of long-term debt, net of discount, resulting in a 2.44x net debt to trailing 12 months adjusted EBITDA ratio.

As a reminder, the timing of cash collections is highly seasonal in our business with the vast majority of annual license fees invoiced in the second and third quarters and collected during the third and fourth quarters.

As a result, our cash balances and cash flows are lower during the first half of the year and built significantly during the second half of the year. Operating cash flow was $8.6 million during the second quarter and $100.2 million over the last 12 months.

Free cash flow was $6.6 million during the second quarter and $94.2 million over the last 12 months. Adjusted unlevered free cash flow was $16.2 million during the second quarter. Over the last 12 months adjusted unlevered free cash flow was $134.2 million.

As a reminder, our strong free cash flow conversion was driven by our favorable billing terms, low capital expenditures and our accumulated tax assets, which we believe will act as a tax shield for the next several years.

I will now conclude the call by providing guidance for Q3 and revised guidance for the full year of 2022 for ACR, adjusted EBITDA and adjusted unlevered free cash flow. For the third quarter of fiscal 2022, we expect ACR in the range of $118.5 million to $119.5 million.

We are raising our fiscal 2022 ACR guidance by $4 million and we now expect ACR in the range of $465.8 million to $469.8 million. Normalizing for the Bridge divestiture, our full year ACR guidance growth rate is 14% at the midpoint. As a reminder, on February 26, 2021 we sold Bridge, our Corporate LMS business.

Bridge contributed approximately $4 million of ACR during the first quarter of 2021. We expect third quarter adjusted EBITDA in the range of $42.1 million to $43.1 million, representing an adjusted EBITDA margin of 35.8% at the midpoint of the range.

For the full year, we now expect adjusted EBITDA in the range of $167.5 million to $171.5 million, representing an adjusted EBITDA margin of 36.2% at the midpoint of the range. Our increased fiscal year 2022 adjusted-EBITDA guidance reflects higher ACR growth and stronger gross margins as we continue to optimize our third-party technology costs.

We are also increasing our full year 2022 adjusted unlevered free cash flow guidance, and we now expect adjusted unlevered free cash flow in the range of $185.5 million to $189.5 million. In summary, we are pleased to have exceeded our second quarter guidance ranges and to be raising our full year 2022 guidance ranges across all metrics.

We are executing at a high level as we continue to display legacy LMS competitors and gained wallet share with our Instructure Learning Platform solutions.

We believe that there is no other company that's better positioned than Instructure to lead the digital transformation of education, and we have only scratched the surface of this $30 billion market opportunity.

Our financial profile is compelling, with solid top line growth, best-in-class margins and superior adjusted unlevered free cash flow conversion. We look forward to updating you on our progress throughout the remainder of 2022. With that, Steve and I are happy to take any of your questions..

[Operator Instructions]. Your first question comes from the line of Josh Baer with Morgan Stanley. Your line is open..

Great! Thanks for the question and congrats on a really strong quarter. So we're now I think almost two and a half years post the onset of COVID. It really changed the landscape and the opportunity in K-12. So I was hoping to get an update on the competitive environment.

What portion of K-12 do you see as penetrated as far as a paid LMS perspective? Where do you see that going over the next several years and what's the latest on your competitive momentum versus the alternatives in K-12?.

Yes. Thanks, Josh, and I think you're right when you talked about the change that happened with pandemic and K-12 recognizing the need for a digital transformation strategy. We still see a lot of interests.

You know as we mentioned on our last call, the K-12 system has been under a lot of pressure, particularly administrators dealing with teacher shortages and you know I think they were happy to go into the summer and get a little bit of a break.

But the strategic priority remains high for digital transformation and the recognition that an enterprise class, LMS needed in order to really be a foundation for that. So we continue to see the good demand in our K-12; the pipeline continues to build. We've had some really – you know we mentioned a couple of cross-sell opportunities.

So it's not just the LMS, but also the other products that make up the Instructure Learning Platform. We don't have an update on the – you know the breakout between paid or unpaid.

Our last data says its still – there's about 40% to 45% of the market that's unpaid, and we expect that while the paid over the last year since we've come out of the pandemic in some sense is slower than it was during the pandemic, we expect it to continue to kind of march forward at that you know increased penetration of paid for LMS.

Our win rates are still you know world class. We continue to win more than our fair share of the deals in that space, and we do without having to you know drop price. We still haven't been the lowest cost in any deal that we've lost. So we feel good about our competitive position as we have in the past few quarters..

Great! Thank you. .

Your next question comes from the line of Fred Havemeyer with Macquarie. Your line is open..

Hey! Thank you, and I think I'd like to reiterate and transmit congratulations on a strong quarter here.

I wanted to ask, considering that Instructure is vertical software as a service addressing the education market, just about the macro backdrop, considering that this is something that has been top of mind with all of the – every other company and software, I really wanted to ask, how do you interpret the macro environment through the lens of your education customers.

Is this something that you tend to see the larger recessionary, potentially recessionary or just inflationary impacts pressuring your model or pressuring any of your customers or is this something you're generally deleveraged from?.

Yes, it's a good question Fred, and very effortful obviously, because of the headlines that are out there. You know the education market, particularly Higher-Ed has tended in the past to be kind of countercyclical. You know it will get laid off to go back to education.

And then K-12 is funded by probably tax receipts you know and we see the need to continue that digital transformation in K-12. You know the number of students isn't going to change, because there is a potential for a recession.

So, we tend to be insulated from some of these macro trends that we see in the market today, just from the markets that we planned, and I wouldn't - I don't want to overstate it and say we're completely immune to them, but as you can see from the results, it is much more muted. We are much more insulated and delevered as you said from those trends.

So we feel good about where we're going and our position and that digital transformation has to happen as the education system transforms in the next decade..

Thank you for that and then just a follow-up question though. We've seen certainly in the headlines of the reports coming out recently about higher education enrollment trends, showing that enrollments were declining.

I wanted to ask, has Instructure seen this showing up in any of its conversations with higher education institutions or has this been acting as any sort of a headwind for your model with institutions thinking about potentially resizing deployments or is this something that is less consequential for Instructure as a whole?.

Yes, it is you know – this trend in enrollment declines has been for a couple of years throughout the pandemic. Data would show that enrollments have been down.

You know our – the institutions that we serve are responding with moves into online, non-traditional, right, so while enrollments may be going down it doesn't necessarily translate to those students that still want to get a credential or they want to get some sort of training, maybe it's not a degree and so we're – by being in that online non-traditional with our catalog product, with our acquisition of Concentric Sky, we're a little bit, we're hedged against the enrollment declines for traditional four year degree seeking students.

Like in addition, you know our business is not completely reliant on U.S. higher education, and so less than half of our business is from U.S. higher education.

So the diverse nature of our revenue streams mutes any kind of changes in any one market, and then because we are really a B2B sort of business model dealing directly with the institutions, you know with multiyear contracts that are non-cancelable, we don't see a huge impact.

So there has been – there's been a de minimis impact in our business based on the last two years of enrollment declines for those reasons..

Thank you..

Your next question comes from the line of Joe Vruwink with Baird. Your line is open..

Great! Hi everyone! I guess I'll stay with the same topic. Steve, you brought up some enrollment data earlier. I think that shows you're still growing your student enrollment in U.S. Higher-Ed by a 10% rate give or take.

When you think about 2022 - 2023 participating in more bake-offs and Canvas is maybe one of the only vendors participating that is still growing students, are you getting some kind of positive feedback, positive reinforcement, institutions kind of looking to Instructure for tips on maybe how to course correct what could be a more challenging trend just within their institution and so it breeds success for you in these RFP processes?.

The short answer – Thanks Joe, it's good to talk with you again. Yes, the short answer is, yes.

We are – particularly as institutions look for ways to address those non-traditional students, they are asking us how – you know what should they do? How have we seen it done, and to your point, it's kind of one of those network effects that helps us in the RFP process.

In addition to a traditional strength of ours which has been our customer success relationships that we have, those combined, you know I think in the script we talked about that being one of the differentiators in the win.

So again, yes, that is a network effect that we're starting, you know that we're seeing help us to get those kind of world class win rates. .

Okay, great! And then just to go back, you know bringing up that, I think since the IPO Instructure has exceeded revenue forecast by 3% or 4% on average each quarter, where has some of the best upside been seen just over that stretch of time, and as you look forward, like you mentioned how much of the K-12 stimulus is still left remaining.

Would you maybe expect some of the sources of upside to just shift to other areas of the business, so the magnitude of potential upside maybe stays consistent, but you're getting it from different areas than you have over the past 12 months?.

Yeah, it’s – Yes, I think you're right. I think as we look at the stimulus funding, not a lot of it has really impacted our business. We're starting to see it. We talked about DeKalb using ESSER funds, but it's still in a minority of our deals where they point to ESSER funds as the source of that.

So yes, we see strength across the business lines, you know driven by the trends that we've talked about, increased RFP and Higher Ed, you know the move away from Moodle in international markets and the K-12 digital transformation that's happening.

But I do think over the next couple of years you'll see those – the contributors to those, to that overachievement shift between those three. But again, we saw strong growth in all of them this quarter and we expect that to continue..

Okay, great! Thank you very much..

Thanks Joe..

Your next question comes from the line of Alex Sklar with Raymond James. Your line is open..

Thanks. Steve, I wanted to ask about international demand. Some of the prior questions hit on the macro concerns, but they do seem to be impacting kind of international markets a bit more acutely.

Are you seeing any changes in demand broadly internationally?.

We have not.

That continues to be our fastest-growing markets and so we haven't seen any big changes in demand is the short answer, Alex, and the need for a enterprise class learning management system, you know the need for educational institutions to address changing needs in their education, the students and the student demands you know is one of those drivers that I think transcends some of the macro concerns in those markets..

Okay, helpful. And then Dale, just following up on Joe's question, maybe ask it slightly differently.

How should we be thinking about the setup into 2023 from a pipeline perspective? I know you talked about a greater number of deals coming in the pipeline that were delayed during the pandemic, but in terms of your overall ability to support double-digit growth?.

Yes, it's a good question Alex. We've got a couple of ways that we look at that. First of all we had mentioned our very high RPO that we have. It's a record RPO number that we have that helps us have visibility into revenue for the next two, three years.

So you take that and layer on top of it the visibility that we have into RFPs and that strong pipeline there. It gives us tremendous visibility into the top line growth and direction that we see with the business environment..

Okay, thanks. And nice one in Dekalb County, it’s my back yard. Good to see a good cross-sell there as well..

Thanks Alex!.

Nice! We could have used you..

Your next question comes from the line of Terry Tillman with Truist Securities. Your line is open..

Yeah, hey Steve and Dale! Congrats from me as well and I guess for Alex. I'm a Fulton County neighbor, so I guess congrats for Dekalb County. I just had a couple of questions. The first question is, I mean it's striking that there is 40% legacy, kind of that – I think you said U.S. Higher-Ed LMS out there, I think you had that right.

You know we're in an inflationary environment, there's no question about it. It gets costly to maintain these on-prem solutions or just where you're managing infrastructure.

Do you see some sort of kind of looming event or kind of potential, you know more notable uptick in activity as it just gets too costly to maintain these old systems? What I'm getting at is like, how do you think about – kind of building on prior questions about the RFP activity and the volumes of shots-on-go in U.S.

Higher-Ed over the next couple of years, maybe potentially even building more? And then I have a follow-up..

Yes, the activity as we've talked about is up, right, so this year, next year that we have visibility into a lot of our key activity. The major driver for that was the pandemic end point of that with difficulty in maintaining your own technology stack and the hardware and everything around that.

I think to your point, it's going to become much more costly for institutions to do that on their own. I think the other factor that plays in there Terry is the tight labor market and the ability to find talent to manage that.

So I think those are all – you know those are all good – it's a good fact pattern for us right, to increasingly see that move away from those legacy systems onto the Canvas learning management system. So short answer I think is, yes.

We do see those as catalysts, and I think it's already showing up in our pipeline data that shows that RFP activity is up significantly from 2021..

Okay. Got it. And Dale, I mean, you called it out, but it's worth mentioning again.

It's impressive year-over-year gross margin expansion, how much more is left in the tank in terms of in the second half, any more incremental opportunities or just even how do you think about over the next couple of years, because it seems like you're really optimizing things right now? Thank you. .

It's a great question, Terry. We are really pleased with our gross margin numbers and this really is the result of the work the team has done over the past couple of years.

It's the engineering team with a hosting environment, it is our customer support team and the variable nature of that to make sure that we are addressing customers and the questions they have, and the timing that they have. As we said in the past, we expect our gross margins to be in the upper 70s, and we maintain that.

There's still room for us to expand there, but yes, we're really pleased with where we are at this point of time..

Your next question comes from the line of Matt VanVliet with BTIG. Your line is open. .

Hey! Good afternoon guys. Thanks for taking the question, and nice job on the quarter.

I guess following on Terry's question, a little bit maybe from the opposite angle of, curious on how you're looking at assessments in K-12 or maybe Studio and Catalog and Higher Ed, potentially pulling projects forward, bringing RFPs to market that maybe were scheduled for another one or two years out, but are now sort of bigger catalysts of saying, look, we have this demand for these additional features, additional functionality, and now we need to make that LMS upgrade because we want to have those add-on modules, or are we still in the factor that the LMS is driving the bus, but the decision to choose Canvas and the structure overall is that you have these additional add-ons?.

Yes, it's interesting as I've gone out and talked to customers Matt, because when we're in a new logo opportunity, the entire platform is a definite benefit in the selling process. The fact that the LMS which tends to be foundational, core technology, have these other parts that differentiate it and the market is a contributor to our high win rate.

But we're still very low penetration as far as you know about, I think just over a third of our customers have more than one product from us.

So that opportunity to cross-sell into the existing base is going to be a growth driver for quite some time for us as we kind of optimize ourselves and go-to-market motions around cross-selling into existing accounts. So it really contributes in both areas for us, Matt..

Alright, very helpful! And then I guess digging on the international side a little bit. Obviously the partner program seems to be off to a great start and you announced another great partner in the Indian market.

Is it changing what you're thinking about or maybe the road map for various markets being direct versus partner, maybe leaning even more into the partner program? Are you still pretty confident in sort of the identified markets as direct being large enough and economically viable enough to do that, and just lean on the partners where it's maybe less so..

Yes, I think I would characterize it as, we've got a tremendous opportunity in the international markets. Some of them we’re going to go after direct and that list hasn't changed, and we still believe, as we look at the market share potential in each of those, many of those markets were still very lowly penetrated.

I think the most penetrated we are is 20% in one of our markets that we've been in for a while. So still a lot of growth to come out of our direct efforts.

The channel is incremental opportunity for us to grow the business, and it opens up markets that we would not do business in immediately, just because of the investment that's required, but channel partners that have existing relationships, existing contracts. We do business with government entities.

It’s just for us incremental opportunity on top of what we're doing from a direct perspective. So I don't think it's an either/or and I don't – and channel definitely is not catch all for those opportunities that happen to come by, you know that are already in our direct markets..

Alright, great! Thank you. .

[Operator Instructions]. Your next question comes from the line of Stephen Sheldon with William Blair. Your line is open. .

Hi team! This is Pat McIlwee on for Stephen tonight. So, I know you had mentioned that the use of stimulus was clear in a minority of your deals, but I just still wanted to ask it.

As you work through the peak selling season, can you provide an update on how you've seen that support used? If there have been any specific products that seem to have benefited from that, and if you've seen that spend pick up at all as we work through the allocation window for those funds?.

Yes. You know there aren’t a lot of deals that you can point to yet, where the district knows that those funds came from ESSER fund, so it's a function of two things.

One is, a lot of them just haven't spent the funds, and the other is that a district will get funds from a state, and it's not – they're not always clear to the district where those funds came from. It's just here's a bucket for you to spend.

So there is a little – it is a little cloudy in figuring you know an accurate kind of detailed response to your question, Pat. But what I would say is the funds are available, that they are looking at them.

The digital transformation of education in K-12 space is a very high priority strategically for each of these districts and each of these states and so we feel confident that this will be a tailwind for us for the next couple of years in the last budget year that just ended this quarter in Q2. We haven't seen a lot of it yet flow through.

So there's still a lot of dry powder if you will for the next couple of years, we believe..

Got it.

And then as a follow-up, you touched on some of the cross-selling success during the quarter, but I wanted to ask, as you continue to build out your product set, are you able to provide an update on how reception of some of your more recent product additions like Canvas Credentials for example has been? And also, just how your ability to attach those additional modules at signing has trended?.

Yes, a couple of the examples that I used in my prepared remarks, each of those we were able to attach additional products, you know Studio, Catalog and Impact being the most commonly attached in the new logo sale.

It's still early days from a Canvas Credentials perspective, with the Concentric Sky acquisitions, but the pipeline is growing nicely and it's a – you know it’s a – and the customers are excited about it. And again, our strategy has always been, we've got really strong customer base that knows how to address a traditional degree-seeking student.

Every one of those institutions wants to go address the reskilling market or the credential market, the certificate market and provide students that maybe will never come on campus for a four year degree, the opportunity to interact with the education institution.

So the Catalog and Credentials investments that we're making, I expect to be big growth drivers in the future for us as the education landscape begins to shift. .

Got it! That’s great to hear.

Thank you, and congrats again on a strong quarter!.

Thank you. .

Your next question comes from the line of Brent Thill with Jefferies. Your line is open..

Thanks.

Can you help outline the international drivers? Kind of what are the top two or three markets that you're finding great traction now in, and maybe if you can just talk to the build out of how that's going?.

Sure. We are, you know the – we're seeing strength across the markets. We saw particular strength in APAC and Latin America. Both of those markets performed very well for us this past quarter and we are targeting primarily higher education institutions in those markets.

The K-12 market is very fragmented and whereas in higher education it's quite easier to address than that K-12 market. So we feel good about the progress that we're making in those markets. We had good growth across EMEA, Latin America and APAC this past quarter, but those two stood out as exceptionally strong both quarters. .

And just on assessment, is there a baseball reference in terms of the [inaudible] you're in or what hole you're on the golf course. I don't know which way you’d kind of describe for us where this is at.

Can you give us a flavor of where do you think you're at, and then maybe kind of what brings this to the next level? What's the piece that supercharged that, that continued cross-sell?.

Yes. I would say we're still early innings. I think we're in maybe the second or third inning from an assessment perspective and there’s kind of two things that are driving that.

One is, there is a move in the, basically in the education world to recognize that waiting until the end of the year to do an assessment is formed with risk as far as you know if your success is really measured by the number of students that have mastered certain concepts.

And so more and more institutions are looking at a way to predict that throughout the year and give teachers the tools to be able to assess whether or not a student is on track to show mastery at the end of the semester.

In order to do that, that requires – you know it's really hard if you're doing it with pencil and paper, right, and bubble sheets and things like that. So having that automated through an online system that's integrated with the Learning Management System is one of those technologies that you have to have in place to be able to do that well.

And so, we're seeing good – like we mentioned in the remarks, from a product line perspective, we're seeing great growth in our assessment business as part of that digital transformation. It’s not just Learning Management, but also Integrating Assessment Management.

As we see that continue, we think the uptake in these interim and formative assessments is going to accelerate. So again, I think we're early innings, as we get penetration of technologies like our MasteryConnect assessment management system, that will be kind of the early indicator that we'll see faster and faster growth in that space..

Thank you. .

There are no further questions. I'd like to turn the call back to CEO, Steve Daly for closing remarks..

Well, I just wanted to again thank our customers, our partners, employees and our shareholders for your ongoing support. We're proud of our performance during our first year as a public company.

We look forward to continuing to execute on our strategy in building a growing and highly profitable vertical software business that has a significant impact on the digital transformation of education. So, thank you for joining us today, and we'll see you next quarter..

This concludes today's conference call. You may now disconnect..