Joe Vruwink: Okay. I’ll leave it there. Thank you very much.
Steve Daly: Thanks, Joe.
Operator: We’ll go next now to Fred Havemeyer at Macquarie.
Fred Havemeyer: Hi. Thank you. And firstly, Dale, it has been an absolute pleasure working with you. Sorry to see you go, but I honestly, I’m a little envious that you have a substitute teacher gig lined up already. That’s fantastic. And Peter, I’m really looking forward to working with you. Just for this quarter, I’m particularly interested in the competitive win that you called out in your press release, Montana and Pasadena, higher education and K-12, respectively. Curious to hear you called out some of the aspects that led to those wins. I’m quite curious to hear a little more qualitatively and deliberately here, what drove those competitive wins? What are the differentiating factors for Instructure?
Steve Daly: Yes. It’s a great question, Fred. It’s the — we’re seeing more and more this trend towards particularly education systems that are looking at how do we better address this change in kind of the student expectation, right? The student is much more mobile. They want to be able to move through their learning journey, right, by picking and choosing, right? It used to be I applied, I went to a university. I went there for four years, I got my degree. It’s much more mobile nowadays. And so what we’re seeing is that the systems are starting, like Montana, Alabama Community College System, right, they’re starting to look at this and say, what’s the best way for us to provide a student experience that is best-in-class and consistent across that?
And so what we saw, particularly with Montana was this — they looked at somebody like California Community College System that is standardized on Canvas. They said, they looked at that and said, okay, we want that kind of student experience. We want the ability for students to be able to share courses. Interestingly enough, as part of that deal, they had which is part of the Parchment portfolio in there. And so we see them and we see them looking at how do we make that transition from K-12 systems within Montana, make that easier and simpler. So I would say, for us, the advantage was that we have the market-leading position in both K-12 and higher ed, which was a key decision factor. The fact that we’ve demonstrated our ability to scale to large implementations across the system that we had some of the stuff that we’ve been working on with catalog, with some of the technologies to address nontraditional really well was good for them.
And then the fact that we have strategic relationships that we have a community of institutions that have done similar things that they can share and talk with each other. All of those things added in on top of the fact that market-leading LMS, but a much broader platform than we had even three years ago that has all the pieces that have them address that both the traditional and the nontraditional. What we’ve referred to in the past is omnichannel was a really big decision factor for them.
Fred Havemeyer: Thank you for that.
Operator: Thank you. We go next now to Brian Peterson at Raymond James.
Brian Peterson: Thank you taking the question. Dale, I’ve really enjoyed working with you. You’ve done and taught me a lot of math over the years, so maybe I can join Joe up there in Utah for some remedial lessons. Peter, look forward to meeting you at the conference. So Steve, just on Parchment, you guys mentioned a $2 billion incremental TAM, $115 million in revenue. Is there anything that you can share about some of their products or part of the platform that are maybe ahead in the adoption curve and what products have the most white space?
Dale Bowen: Yes. It’s a good question. We will plan a much more fulsome review of this when we do our — when we give you our 2024 guidance after this deal has closed. But let me just give you a high level, Brian. As you look at the overall revenue, that TAM breaks down between the awards product, which is a lot of the credentialing pieces and the pathways product. Within the credentials, part of their business is around transcripts and diplomas, a good, steady grower. What we’re seeing in that space is that the mix and amount of credentials that an individual student is requesting is increasing. And so with this mobility that students are expecting, right, they need to make more requests of these transcripts. So from that perspective, we see growth through just the number per student that we’re seeing.
In addition, as those transcripts get more — get broader, right, as you start to think about it in the context of badging, as you think about it as a portfolio, that will be an outsized grower in our opinion. And on the pathway side, it’s still early days when we talk about kind of dual enrollment and course sharing, it’s becoming a much more — it’s much more a topic of conversation in the selling process. So that area will show outsized growth versus the rest of the business as well. That makes sense.
Steve Daly: Brian, let me just add. They have a very small footprint in international. They bought a company that was based internationally based out of Australia. We believe that there’s an opportunity to grow international above the average growth rate for the company as we kind of leverage our infrastructure worldwide.
Brian Peterson: Understood. And maybe just following up to some prior questions just on the LMS activity this year. Steve, would you say it’s more of a budget dynamic? Or is it more of other priority dynamic? And as you kind of look at the lens of nontraditional learning and those ambitions there, I’d be curious what your existing customers are doing there and how they may be leveraging Canvas versus what some of your noncustomers are struggling with? Is there an insight to be going from there?
Steve Daly: Yes. No, it’s a good question. I think budget and priority are — they both come into play. We know the budgets have been tight in higher education, and part of that is the enrollment decline. They need to find new revenue streams, right? And so it’s a little bit of that and a little bit of the prioritization, right? And we got to figure out what we’re going to do for the future. Our existing customers are grappling with the same challenges, right? A lot of our conversations are about how do we extend to the Canvas environment outside of the four walls, outside of the traditional learning experience? How do we create this omnichannel experience for learners that are either all remote or hybrid or all in person? And we’re getting a lot of energy, if you will, around then how do we demonstrate skills, how do we demonstrate that to — for the student as they’re looking to go out into the workforce?
