Instructure Holdings, Inc. (NYSE:INST) Q3 2023 Earnings Call Transcript

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In its 11th annual LMS data update issued in early October, Edutechnica illustrated that Instructure is the only LMS market participant in higher education that continues to gain share, with Canvas LMS leading by more than double its nearest competitor by both number of institutions and enrollments. While we continue to win more than our fair share of competitive bake-offs, we have seen a slowdown in the timing of deal close in higher education, both domestically and overseas. Our strong competitive position and industry-leading platform give us confidence in the long-term durable growth of our business. In higher education, we continue to see great success in adding new institutions as state systems look to standardize around the Instructure Learning Platform.

The Montana University system was looking to consolidate all of its 16 higher ed and one K-12 school onto one platform to drive ease of use, better content sharing with Canvas Commons and provide students a consistent experience across its different campuses. 10 schools within the system chose to move off of two competitors products and onto Canvas. In North American K-12, the Pasadena Independent School District took advantage of Instructure’s growing suite of K-12 solutions, choosing Canvas, Studio, Mastery Connect, Mastery Item Bank, and Training Portal. With nearly 50,000 students, Pasadena ISD signed a tenure contract whereby Instructure will place its current classroom solutions because district’s leaders understood that Canvas is the go-to system for large districts like theirs.

They saw Instructure as best suited to handle both curriculum and assessment needs for all their stakeholders. When their teachers saw Mastery Connect, they demanded to have it in the words of our customer during the kickoff call. CFRE, a private and independent education company based in Germany, selected Canvas and Credentials to aid in its focus on non-traditional students across vocational, higher education, and further education. With 18 brands and more than 30,000 students in Germany, CFRE selected our platform based on quality of delivery and user experience. Second, we continue to drive growth with existing customers, both through cross-sell and up-sell, where we see a $1 billion plus opportunity. We had a very successful set of customer up-sells in Q3.

Demonstrating our continued momentum in serving non-traditional education providers, AWS renewed and expanded its partnership with Instructure by extending its user base for AWS Academy. A partner with Instructure since 2019, the AWS Academy is one of the largest Canvas users and is continuing to scale rapidly. Our ability to scale with best in category uptime convinced AWS to expand with Instructure. Our relationship that started as a pilot in 2019 to several hundred users will expand to 1.2 million users in 2024 and 1.4 million users in 2025 under our contract. South College in Knoxville, Tennessee is an example we see often in our existing customers, starting with initial cohort of users, viral usage of Canvas, and a growing student body resulted in a significant upsell as we doubled the number of licenses across campus.

Within North American K-12, in a strong cross-sell, the Nevada Department of Education added Mastery Connect coupled with its multi-year renewal of Canvas. A customer since 2020, Canvas and now Mastery Connect will be available to Nevada’s diverse set of school districts with nearly 0.5 million students statewide. They will use Mastery Connect and the Mastery Item Bank to support formative assessment practices in classrooms to provide teachers with real-time, standard-of-line data that teachers can use to personalize the needs of each student individually. The power of our platform strategy, our third key driver, thrives on innovation and partnerships. And those were evident again in Q3. In September, we announced an exclusive partnership with K16 Solutions, an industry leader for content and data migration and integration, extending access to a powerful archiving solution for all Canvas customers.

In this revenue sharing agreement, Canvas archiving powered by K16 solutions gives Canvas users a simple way to control access to sensitive data and backup all student and course data with the click of a button. Our expanded arrangement with the Alabama Community College System, ACCS, represented yet another example of a maturity path we’ve seen with many higher ed institutions. As part of a broader statewide initiative by Alabama’s governor to reskill and transform the quality of the state’s workforce, ACCS saw the value of the Instructure learning platform. The system not only opted to standardize on Canvas across its 24 community and technical campuses statewide, a competitive displacement of 12 new campuses in favor of Canvas, they also will add studio, impact, and credentials as a seamless way to digitally transform the state’s broader workforce enhancement initiative.

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