Instructure Holdings, Inc. (NYSE:INST) Q4 2022 Earnings Call Transcript

Instructure Holdings, Inc. (NYSE:INST) Q4 2022 Earnings Call Transcript February 13, 2023

Operator: Ladies and gentlemen, thank you for standing by and welcome to Instructure’s Fourth Quarter and Fiscal Year 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, April Scee, Investor Relations. April, please go ahead.

April Scee: Good afternoon, and welcome to Instructure’s fourth quarter and full year 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 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 can find the reconciliation of our GAAP to non-GAAP measures included in our press release, which is posted in the Investor Relations section of the website. With that, let me turn the call over to Steve.

Steve Daly: Thank you, April and good afternoon, everyone. Thank you all for joining us for our fourth quarter and full year 2022 earnings call. During today’s call, Dale and I will provide details on our fourth quarter results and provide first quarter and full year 2023 guidance. Instructure delivered another strong quarter in Q4, exceeding our previously communicated guidance ranges across our core guidance metrics of revenue and adjusted EBITDA. At Instructure, we take great pride in serving the vital global community of educators and students. Throughout the COVID pandemic and its aftermath, we have played a critical role in supporting educators, students, parents and leaders as they navigated unprecedented challenges. This unwavering commitment to customer satisfaction has resulted in consistent quarter-to-quarter performance and high retention rates.

As we move into 2023, we are committed to growing these relationships and further expanding our impact on the educational landscape, and we are confident we can continue to deliver balanced growth and profitability. Our strong fourth quarter financial performance capped off a truly outstanding year for Instructure. Fourth quarter GAAP revenue was $124.7 million, up 12.8% year-over-year. Allocated combined receipts or ACR, was also $124.7 million, up 11.9% year-over-year. Full year 2022 GAAP revenue was $475.2 million, up 17.2% year-over-year, while ACR was $476.1 million, up 14.8%. Foreign exchange pressured top line results by approximately 1% for the first quarter and roughly 0.5 percentage point for the year. Thanks to our focused investment approach, fourth quarter adjusted EBITDA grew 16.7% year-over-year to $48.6 million, a 39% margin.

Full year 2022 adjusted EBITDA increased 22.4% to $179.6 million. Total customers grew 7.6% year-over-year to 7,436 at the end of 2022, which highlights the continued growth opportunity in our customer base. I now want to talk about five key highlights from the quarter to date: Continued success with new logos, the power of our platform strategy, wins in non-traditional education, how M&A is advancing our strategy, and continued operational efficiency. First, our focused go-to-market and expanded set of offerings are driving continued strength in bringing new logos onto the platform. Our new logo win rates increased in the second half of 2022 from an already very healthy rate as higher education in K-12 institutions in the U.S. and across our major international markets, continue to choose Instructure’s solutions because they solve real meaningful challenges across the teaching and learning landscape.

In higher education, we hold a 40% market segment share and continued to see high competitive win rates during the fourth quarter as we help institutions face a challenging enrollment with students exploring non-traditional learning options. Both existing and new customers are choosing Instructure’s learning platform to meet this challenge, while supporting their traditional students. Our cloud-native platform continues to displace legacy systems given its ease of use, scalability, flexibility and superior user experience. During the quarter, the University of Louisiana system selected Canvas and Impact due to improved functionality, consistency of user experience, alignment with other state university systems and greatly enhanced 24×7 technical support for end users.

Looking ahead, we expect the North American higher education growth opportunity to remain strong as nearly 40% of higher education institutions in the U.S. still use legacy LMS systems, providing plenty of opportunity. In U.S. K-12, Canvas became the market segment share leader in the fourth quarter with 33% of all K-12 districts using Canvas and the Instructure learning platform as the foundation of their digital transformation. We continue to hear from K-12 decision-makers that the digital transformation of education is a long-term investment and that our solutions are more critical than ever. Because of our investment, both organic and inorganic, we are well-positioned to capitalize on new opportunities that emerge as K-12 systems settled into post-COVID normalcy.

For example, Charles County, a large Maryland Public School District selected Canvas in a competitive RFP during the quarter. This decision was driven by the power of our integrations with Instructure’s materials and other third-party tools, our superior scale and reliability and our best-in-class service. The initial contract includes foreign structured products, Canvas LMS, Canvas Studio, MasteryConnect and Impact. Looking ahead, the pipeline for new logos is robust. Win rates remain high, the funding environment remains favorable, and we’re confident we will continue to gain share due to the essential role we play in the post-pandemic classroom. International remained the fastest growing part of our business in Q4 with several large wins during the quarter, including a five-year multi-million dollar win with the University of Santo Tomas in the Philippines that included Canvas LMS and Canvas Studio.

Their in-depth evaluation process, solicited feedback from teachers, students and administrators and Canvas was the preferred LMS by all stakeholders. In a familiar refrain, they told us the choice was clear due to overall ease of use, simple, well-designed mobile experiences optimized for student instructors, broad support for outcomes and the sheer breadth of integratable third-party tools. This and other examples validate our platform as the best approach to solving problems and aligning with stakeholders’ internal investments. We also continue to see success with our channel partner program, which allows potential partners to generate revenue, not just by reselling, but also through implementation, training and support services. During the quarter, we had several notable wins, including Nihon University, the largest higher education institution in Japan, whose college of science and technology will be a driving adoption across other colleges in 2023.

In addition, prefectural Kumamoto University, which is part of the 90 university public system in Japan, is providing a use case scenario to other prefectural universities in Japan to drive adoption. Second, I wanted to talk about our platform strategy and our foundational role in driving the next wave of ed tech innovation. Since our technology touches 90% of all the workflows in teaching and learning, our customers look to us and rely on us to continue automating and simplifying more and more of the teaching and learning workflows. These integrations will continue to come from both our own products and our partners. Our own products now represent a $1 billion cross-sell opportunity due to the excess our success in selling Canvas and through our organic and inorganic addition of products.

Our efficient go-to-market focused on the whole customer journey and expanded set of platform offerings is driving higher penetration of products across our customer base, with 43% of our customers having two or more products in 2022. This has been particularly noteworthy in K-12, where we continue to see a strong cadence of existing customers adding additional seats or new products, including Maryland County Public Schools, which added Catalog during the quarter. We also have over 800 partners on our platform. a year-over-year increase of nearly 40%, resulting in 10.5 billion launches of partner apps in the last 12 months. Our platform is so powerful that partners like eLumen are building businesses that exist solely because of the Instructure learning platform.

eLumen is taking the power of Canvas outcomes and adding core tools like curriculum mapping, advanced assessment planning and juried assessment for accreditation to create more sustainable assessment and more valuable insights about student learning. Our strong platform helps create loyalty and retention with our existing customers and provides a strong, referenceable and powerful ecosystem effect that improves our win rates and is a key to creating our stable and durable business. Third, our strategy also unlocks new opportunities and allows us to win in segments that have different expectations. We’ve talked in prior calls about the opportunities that exist in non-traditional education environments. During the quarter, we won a large three-year deal with the City and Guilds of London Institute.

C&G is the largest awarding body for continuing education in the U.K. and Ireland. They work with over 8,000 continuing education colleges and training providers in the U.K. and touch roughly 250,000 students nationwide. Following a multi-year procurement process, C&G chose Instructure as its instructional learning technology partner for the future growth of their organization. They are initially rolling out Canvas and Impact to their community and are already evaluating how credentials may support their vision for the future. Fourth, we continue to use strategic M&A to increase our TAM and rapidly expand our learning platform capabilities. LearnPlatform, our sixth acquisition since 2019 extends the capabilities of our platform by providing stakeholders across the educational landscape with real-time meaningful data on the effectiveness of their tools and evidence-based insight into inventory, compliance, procurement and usage.

I want to take a minute to discuss how each of these six acquisitions fits into our platform strategy, increases the durability of our model. Together, they create an unmatched value proposition in the ed tech ecosystem. Kimono, Eesysoft and Learn platform married with the open and extensible integrations with Canvas, will enable partners that join the Instructure ecosystem to integrate, receive feedback on usage, directly reach end users to address adoption issues and prove efficacy in the learning process. We believe this drives great value for our partners, helps our customers optimize their ed tech investments and creates long-term network effects that drive durable growth and retention. Concentric Sky and our organic development in Catalog, Studio and Canvas give us the unique ability to offer in-person, hybrid and remote learning for both traditional and non-degree seeking learners on the same platform.

This enables us to win a disproportionate share of the market for non-traditional opportunities, which opens up a new market of students to drive our long-term growth. The partnerships with Thunderbird $100 million learner program and PeopleCert last quarter as well as our win this quarter with C&G demonstrate our growing traction in this exciting new market. Mastery and Certica provide a standards-based ways to access students’ progress along their learning journey that complements the quizzing and assessment solutions native to Canvas. As we integrate broad support of standards, outcomes, competencies and skills across the portfolio and align them with our credential solutions from Concentric Sky, we are poised to support the market as it moves towards competency-based education.

This is another long-term trend that will provide durable growth. Finally, Instructure continues to run an efficient, focused business. Our best-in-class margins enable us to make disciplined investments that expand our platform and drive long-term growth. We are always looking for ways to drive efficiency and continue to identify areas where we can lower costs, increase velocity and expand productivity. For example, investment in our infrastructure have allowed us to continue to improve our gross margins, which in turn enabled us to increase our R&D and sales capacity by more than 20% this last year, while improving our adjusted EBITDA margins. We are confident we can continue to deliver a healthy balance of growth and profitability with continued investment in innovation.

This coupled with our strong free cash flow and conservative balance sheet allow us to capitalize on additional opportunities to expand our platform through M&A as seller valuation expectations continue to adjust to current markets. Through our focus and discipline, we have multiple avenues to drive long-term sustainable growth, both organically and through M&A. Looking into 2023 and beyond, we believe the Instructure learning platform is uniquely positioned to help educational institutions and developers solve the complex challenges that the new post-COVID normal demands. We expect that our work over the last few years at creating a healthy profitable business will allow us to capitalize on opportunities to accelerate our strategy and create durable growth in the coming years.

We continue to see strong RFP activity in U.S. higher education, as we win in these competitive procurements, stakeholders share with us that they see real value in a platform and partner community that are purpose-built to help them reach more learners in more places in more ways. More and more, of our core customers are looking for us for the solutions they need to meet the demands of non-traditional learners. Our opportunities with them alongside new and growing ones with vocational providers and training organizations provide another vehicle for us to grow the business in the year ahead. Our K-12 customers, in addition to scaling quality teaching through the use of learning and assessment technologies want help knowing what works in their classrooms.

Our Insights and Elevate family of products focused on the empowering use visualization and safe exchange of data are foundational to the modern classroom. This all becomes even more compelling with our acquisition of LearnPlatform. It gives us access to more budgets in K-12 as we help schools know that each dollar spent meeting students’ needs is achieving the right outcomes. And our ability to service the other half of this market enabling the ed tech providers to demonstrate their value will only become more important in the future. In our area of highest growth, international, customers are increasingly seeing what North America already knows, the Canvas can anchor their teaching and learning strategies and grow with them as they add additional capabilities.

We continue to invest in growing our direct go-to-market in focused geographies, our wins offer us the referenceability the education market demands. And as we outlined earlier, the signal from our channel investments we’ve made to address the breadth of the international opportunity are positive. All these factors give us confidence in our guidance for 2023 and position us to continue to drive durable growth in each of our segments. We are uniquely positioned in the ed tech ecosystem to help our customers accelerate their digital transformation. In summary, I couldn’t be more excited to lead Instructure as we evolve into the most comprehensive teaching and learning platform worldwide. I would like to thank our customers, our partners, our employees and shareholders for your ongoing support.

Before I turn the call over to Dale to talk about our financial results and the ongoing momentum we’re seeing in the business, I want to welcome Chris Ball, Instructure’s new President and Chief Operating Officer. Chris will continue to evolve our focus on the whole customer journey, further enhancing our opportunity set and the durability of our model. Chris is a deeply experienced and mission-driven executive who helped write the growth and platform story for several other successful significant companies. I also want to acknowledge the contributions of Frank Maylett in his capacity as Chief Revenue Officer. As you know, Frank will step down effective February 15, now that we have Chris Ball aboard. We are confident there will be a seamless transition.

Now, I will turn it over to Dale.

Dale Bowen: 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 will be discussing certain non-GAAP results. Our GAAP financial results, along with a 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 fourth quarter, we continued to show a combination of strong top line growth and expanding adjusted EBITDA margins. For the full year, we expanded adjusted EBITDA margin by 240 basis points. We expect to expand on our industry-leading margins as we deliver durable profitable growth in the years ahead.

As Steve mentioned, we generated fourth quarter 2022 total GAAP revenue and ACR of $124.7 million, up 12.8% and 11.9% year-over-year, respectively. Subscription and support ACR accounted for 92% of our fourth quarter revenue at $114.6 million, up 12.5% year-over-year, primarily as a result of the continued momentum within our core Canvas LMS products, both domestically and internationally, in addition to the strong up-sell and cross-sell of our other products. Professional services and other revenue accounted for 8% of our fourth quarter revenue at $10.2 million, up 6.3% year-over-year. Deferred revenue at the end of the fourth quarter was $289.4 million, up 13.2% year-over-year. Remaining performance obligations, or RPO, were $760.1 million at the end of the fourth quarter, up 9% year-over-year.

We expect to recognize revenue on approximately 75% 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 was supported by our optimized cloud architecture and flexible support model that scales to meet seasonal customer demand. In the fourth quarter, gross profit was $96.7 million, representing a 77.5% gross margin, up from 77.1% in the fourth quarter of 2021. We couldn’t be more pleased with our enhanced operating model and continued leverage on the gross margin line.

Turning now to operating expenses. Sales and marketing expenses for the fourth quarter were $24.1 million or 19.4% of ACR, up from 19.2% in the fourth quarter of 2021. Research and development expenses for the fourth quarter were $16.3 million or 13.1% of ACR compared to 12.0% in the fourth quarter of 2021 as we invested to pursue our robust product roadmap. General and administrative expenses for the fourth quarter were $9.7 million or 7.8% of ACR, down from 9.4% in the fourth quarter of 2021. Non-GAAP operating income for the fourth quarter was $46.5 million, representing a 37.3% operating margin, up from 36.5% in the fourth quarter of 2021. Fourth quarter adjusted EBITDA was $48.6 million, representing a 39.0% adjusted EBITDA margin, up from 37.4% in the fourth quarter of 2021.

Non-GAAP net income for the fourth quarter was $28.4 million or $0.20 per share compared to $31.0 million or $0.22 per share a year ago. Normalized for the newly added tax effective adjustments, non-GAAP net income performance would have been $40.0 million or $0.28 per share. Turning to the balance sheet and cash flow statement. We ended the fourth quarter with $190.3 million in cash, cash equivalents and restricted cash and $490.5 million of long-term debt, net of discount, resulting in a 1.7 times net debt to trailing 12-month adjusted EBITDA ratio. Full year 2022 GAAP operating cash flow was $140.3 million compared to $105.1 million in the prior year. Full year free cash flow was $134.0 million compared to $100.9 million in the prior year.

Adjusted unlevered free cash flow, which adjusts for the impact of transaction costs, sponsor costs, impaired leases and other non-recurring costs paid in cash, was $173.5 million, a 2.9% year-over-year increase from $168.7 million in 2021. Adjusted unlevered free cash flow for 2022 was lower than expected primarily due to delayed collections. I will now conclude the call by providing guidance for Q1 and for the full year of 2023 for revenue and adjusted EBITDA. We have provided additional guidance details in our earnings press release. For the first quarter of fiscal 2023, we expect revenue in the range of $126.5 million to $127.5 million. For the full year, we expect revenue to be in the range of $519.4 million to $523.4 million. We will no longer be providing ACR guidance as GAAP revenue and ACR will now converge based upon the adoption of ASU 2021-08.

We expect first quarter adjusted EBITDA in the range of $47.0 million to $48.0 million, representing an adjusted EBITDA margin of 37.4% at the mid-point of the range. For the full year, we expect adjusted EBITDA in the range of $198.0 million to $202.0 million, representing an adjusted EBITDA margin of 38.4% at the mid-point of the range. For the full year, we expect adjusted unlevered free cash flow to be in the range of $200.0 million to $204.0 million. In summary, 2022 was an incredible year for Instructure. We executed at a very high level, exceeding our guidance in every quarter and we are leading the digital transformation of education from our position at the center of teaching and learning. And financially, we offer a rare combination of double-digit growth and best-in-class margins.

We couldn’t be more pleased about our momentum in the marketplace and look forward to updating you on our progress throughout 2023. With that, Steve and I are happy to take any of your questions.

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Q&A Session

Operator: Thank you. Our first question will come from the line of Josh Baer with Morgan Stanley. Please go ahead.

Joshua Baer: Great. Thanks for the question. I think last quarter you were talking a little bit about some challenges in K-12, just around staffing, priorities, focus. Could you just talk about the environment in K-12 over the last quarter? Are you still seeing a weakness there or maybe some improvement?

Steve Daly: Yeah. Thanks for the question, Josh. What we’ve seen is that in our K-12 markets, we’ve kind of seen it normalize a bit. So, we feel good about the pace of deal activity that we’re seeing to start the year. I don’t know that necessarily magically the challenges have gone away, but our customers are recognizing that two things. One is that they’ve got to continue under a new normal, and they’ve got to continue to make that investment in their digital transformation strategies and that technology can actually help with some of these challenges that they’re facing. And so, yeah, so we feel good about the activity we’re seeing in K-12 — in the first six weeks of the year.

Joshua Baer: Great. And then one more, if I can. You talked about the increase in win rates in the back half of 2022. Just wondering if you could provide a little more context. Wondering if it’s more related to changes in your competition like sort of external or internal related to improvements in product or platform or go-to-market. Thank you.

Steve Daly: Yeah. I think the — I think it’s evidence that the platform strategy is working for us. As we get more and more technology, as we bring more products, as we’re able to talk with our customers about a bigger platform strategy and digital transformation and what that looks like for the next five years, we have a much more robust set of products to offer. And that the success begets success as well, right? There’s a very referential sale. And we’re finding that our kind of world-class customer base, the customers that we do have on board really are providing us with good momentum in the marketplace as we compete against our competition. I wouldn’t say necessarily that the competition has changed. I would say it’s more our position. Thanks Josh.

Operator: And our next question will come from Noah Herman with JP Morgan. Please go ahead.

Noah Herman: Hey, guys. Thanks for taking the question. Just two questions on our end. First, was there any revenue contribution from the LearnPlatform acquisition? And I think last quarter you outlined about $750 million of cross-selling opportunities. And I think I heard this quarter that got bumped up to $1 billion. Can you just maybe unpack that a little bit for us? Thanks.

Dale Bowen: Sure. Noah, so, we’re really excited about LearnPlatform, but it has a de minimis impact to our P&L looking into 2023. However, longer term, the impact is much, much more substantial. In terms of unpacking the expansion of our cross-sell opportunities to $1 billion, this is a function of continuing to grow our customer base as well as adding new products and functionality, both organically as well as through our acquisitions.

Noah Herman: Got it. Thank you.

Operator: And our next question will come from Fred Havemeyer with Macquarie. Please go ahead.

Frederick Havemeyer: Yeah. Thank you. I think there’s a lot of positive points to honestly have a couple of conversations here about. But I wanted to perhaps begin just by asking about Chris. So, with Chris Ball coming on board, he brings it looks like a very strong enterprise software and software sales background. I wanted to ask, is there any sort of change in go-to-market strategy or generally Instructure’s philosophy on how it’s structuring its sales under Chris’ leadership?

Steve Daly: Yeah. Hey, Fred. Good to hear from you. The — yes, the impetus — part of the impetus with bringing Chris in was that we recognized that we had an opportunity to kind of unify our — the way that we interact with our customers. So, bring together customer success with our sales teams. I don’t know that the motion necessarily changes as much as we get tighter with our customers and we kind of leverage the power that we have. I think I’ve shared with it on multiple occasions that when I started here, every customer told me, look, the way you work with me is better than any other company I work with, don’t change that. And so, we feel like there’s an opportunity for us to be able to leverage that across first contact all the way through renewal and to be able to better serve them, engage our sales teams more actively with existing customers, not just new customers and keep that continuity of experience.

And ultimately, we believe it will help our ability to cross-sell. So, we think it’s a good move to kind of continue to drive that growth and really have success with existing customers.

Frederick Havemeyer: Thank you. I’m looking forward to seeing that play out. And then perhaps, Dale, a question and — frankly, also complement with adjusted EBITDA margins coming in again, much stronger than expected this year. And looking into next year, guiding to a little over 38% adjusted EBITDA margins, just how should we be thinking overall about Instructure’s potential for adjusted EBITDA margin expansion? And generally, you consistently have shown us nice magnitude to beat. Just have you, at this point, taken some of the low-hanging fruit of adjusted EBITDA margin off the table, so to speak? Or how should we generally think about your potential to deliver margin going forward?

Dale Bowen: Thanks Fred. This is — the whole business is operating efficiency — with efficiency and looking for more. I would say that we’ve got — I mean, there was low-hanging fruit probably three years ago. Now it’s all about refining the business. We continue to expand our sales and marketing headcount. We mentioned that here in the prepared remarks, 20%-plus year-over-year. Some of that has to do with finding lower cost locations for people to work. But we’re getting more out of our team members and everybody is aligned and trying to find efficiencies. So, where do we see that going in the next couple of years? As we discussed in the past, we see adjusted EBITDA margins could grow to the 40% mark. And we’ve got confidence that we can get there while continuing to invest in the business.

Frederick Havemeyer: Thanks. Thank you both very much.

Operator: Our next question will come from Brian Peterson with Raymond James. Please go ahead.

Brian Peterson: Hi, gentlemen. Thanks for taking the question. So, I wanted to hit on pricing. Well, I think what you know is my favorite topic, but I’d be curious to know what you’ve seen from a pricing perspective. And anything on renewals that are coming up and how that may be impacting things competitively, if at all?

Steve Daly: Yeah. I’m glad you asked that because — your are — at least you’re consistent, Brian, when it comes to pricing. So, we have — I would say I wouldn’t — it hasn’t necessarily changed. We still are never the kind of low cost leader when we go into these RFPs. We still never won a deal and been the lowest price when it comes to a deal. So that dynamic hasn’t changed, but we continue to sell on value. Our win rates — like I said, we’re actually above kind of what we’ve historically seen in this second half versus the rest of — the previous average win rate. So, we feel like the strategy is paying off. We continue to gain market share, both in higher ed and K-12 and internationally. So, we feel good about where we are, again, from a value proposition and how we can combat kind of the low cost competitors.

Brian Peterson: That’s good to hear. And Steve, maybe a follow-up just on international. You mentioned a couple of large wins this quarter. In terms of your footprint, partner distribution strategy, I’d love to just kind of understand what is your level of confidence in attacking some of these international opportunities now versus maybe a few years ago? Thanks guys.

Steve Daly: Yeah. Compared to a few years ago, I feel really good. As we’ve mentioned in the past, in 2020, 2021 timeframe, we really went through and looked at each market individually rather than kind of lumping international as a whole. We’ve made investments. We continue to see those payoff in our direct — in the markets where we want to go direct. We continue to add sales capacity in those areas. We’re about almost a year into our channel investment. So, we’re starting to see good signal there. But it’s still early until we start to see kind of a material impact on the growth, but the early signs are good. I feel good about where we’re at, and our focus in the channel and the investments that we’re making there.

Brian Peterson: Good to hear. Thanks Steve.

Operator: And our next question will come from Terry Tillman with Truist Securities. Please go ahead.

Terry Tillman: Thank you. Hey, good afternoon Steve, Dale. Solid job on the quarter. I just had two questions. And I don’t even think there’s a bunch of multi-parter, so you’re going to be in good shape today with me. When we see new sheriff in town, we have a new President and COO, sometimes people wonder could they break things or could there be disruption or maybe some short-term pain, long-term gain. I don’t know if that’s directly related to the idea of more closely aligning customer success with sales. But what I’m wondering about kind of glass half-full standpoint, if you can better align those teams, is there a greater or more expediency in terms of driving up-selling or cross-selling of the expanded product set? Maybe you could just share a little bit more about trying to bring these teams together and what that could do in the numbers.