Josh Baer: Okay. Great. And then, Peter, just wondering, you’re coming into this company that’s already very efficient, talking about 40%, 41% margins. So just wondering where you see some of the largest sources of leverage from here. Thank you.
Peter Walker: Sure. So thanks for the question, Josh. So I’d say we have a disciplined approach to capital allocation that prioritizes investing in the long term durable revenue growth and allows for us to expand margins. So I’m coming in with definitely a framework around how we’re going to continue to execute against that going forward. In terms of, specifically, where does margin expansion come from in the future? I think there’s probably two opportunities you can think about. I think first would be optimization of our hosting platform, and that would be in terms of scale and efficiency. As Steve mentioned, we have a new CTO on board and Michael has already focused on both of these opportunities in the hosting platform. And then the second is really our opportunity to continue to expand our footprint in lower-cost geographies. We’ve had great success with this and Budapest, and it’s really early days for us in terms of what the opportunity is here.
Josh Baer: Got it. Thank you very much.
Peter Walker: Thanks.
Operator: Your next question comes from the line of Devin Au from KeyBanc Capital Markets.
Devin Au: Great. Thanks for taking my questions. I also have another question on the longer deal cycle in higher ed. Maybe just to clarify, did you see the selling environment get more challenging the deal cycle stretched out even more so than last quarter. And are you expecting that difficult selling environment persists or perhaps deteriorate in ’24?
Steve Daly: Yeah. We saw — it was similar as far as what we saw last quarter. We got a little more fidelity in that. Q4 tends to be our large quarter for international. So we saw that the international higher ed was exhibiting similar characteristics. But it hasn’t gotten worse. But we are seeing it in Q1. We still see those kind of elongated sales cycles.
Devin Au: Got it. That’s helpful. And then just one on LearnPlatform. It seems like that business getting traction. Could you just give us an update on how that business finished in ’23. And when we look at ’24, could we see LearnPlatform driving a more meaningful contribution to revenue? Or is that more of ’25 and beyond timeframe? Thank you.
Steve Daly: Yes, the business is performing well. We’ve been able to kind of put it into the sellers bag as they’re out selling. And we’re seeing good pipe. We saw good pipeline build. And we started to see some deals close in 2023. So we do expect that to continue to be one of our growth areas. We saw cross-sell was our fastest area of bookings growth in 2023. And as we mentioned in the prepared remarks, in Q4, we saw it even accelerating with 49% growth in cross-sell bookings. So this is just one of the products that contributes to that above the overall company growth rate.
Operator: Your next question comes from the line of Frederick Havemeyer from Macquarie Research.
Frederick Havemeyer: Hey, thank you very much. I wanted to revisit the higher education landscape as well here. Around the deals that you’re seeing, are there any impacts at all from enrollment trends? Or just generally, how are you seeing enrollment trend, higher education playing out through higher education institutions in their overall demand for software platforms?
Steve Daly: Yeah, it’s good to hear from you, Fred. What we’re seeing, the enrollment trends have been down, they’ve been down for years. And what we’re seeing really from our perspective is we haven’t seen a change in our retention rates. Our retention rates remain on trend. They are good, world-class retention. So we feel good about that part is the enrollment dynamics. What it is really? It’s really a catalyst for universities and institutions to really look at how do they reach more students, right? And recognizing that the student that’s going to plan to come on on-campus and receive a degree is declining, where do we go get more revenue as an institution? So that really is a big driver for the discussions that we’re having. It’s a driver for some of the longer conversations because this is a bigger long-term opportunity for the institutions to again drive growth into their business model and ultimately into our business model.
Frederick Havemeyer: Thank you very much for that. And on the K-12 landscape, I wanted to revisit assessments as well. Within and beyond the asset landscape, where have you seen assessments in mastery here ranking in terms of your K-12 priorities, and how are you viewing that into 2024 as an area for potential growth?
Steve Daly: Yeah, we continue to be bullish on the assessment opportunity. Ultimately, we want to own the assessment management platform and the delivery of all assessment content across and integrate that tightly with the learning management system. So teachers have a real-time view and get real-time feedback on how they’re doing both from a delivery of education as well as learners receiving that education. And so we believe that’s still a long-term growth opportunity for us. It’s part of what contributed to that outsized growth in cross sell this year. And we’ve taken some of the key learnings from 2023 that led to that growth, and we’re applying them to our go-to-market model. And Chris will go into that in more detail at the Investor Day to continue to drive that outsized growth in cross sell.
So we are believers in the assessment business in K-12 and ultimately believe we can apply a lot of those learnings to higher ed, particularly as higher ed moves to more competency-based and outcomes-based learning over time. So we do believe it’s a long-term driver of growth for our business.
Frederick Havemeyer: Great. Thank you very much, and I’m looking forward to seeing at Investor Day.
Steve Daly: Great. Thanks, Fred.
Operator: Your next question comes from the line of Brent Thill from Jefferies.
David Lustberg: This is David Lustberg for Brent. I wanted to ask about some of the acquisitions that I think you guys mentioned during beta. It would be helpful if you could talk through the offering that you have in beta. Any early feedback you’ve received on these launches? And more broadly, how do you guys think about monetizing AI over time? Is this something that you think is more kind of plug into the platform and something you can use to justify raising prices in the future? Do you think you’re going join specifically for AI’s use?
Steve Daly: Yeah, it’s a great questions, David. And we got pretty far in the call before we got an AI question. So good on you for bringing it up. So there are a number of features and products around. And I mentioned in the prepared remarks, search, natural language analytics, course creation, work that we’re doing, there’s a number of others that we’ve previewed. And we expect to go into beta in the first half. I would say we are learning as we go along, David. As far as where can we monetize this and where is it going to be a core innovation that again helps us win more as well as retain and get price increases, I do believe that the analytics piece that we are baiting now will be a charge for add-on. But again, we’re working through all of those questions.
In fact, we’ve made significant progress in this last six months on understanding the cost models and how we can do this most cost effectively. So we don’t hammer our gross margins. The underlying privacy architecture, that’s necessary in education and the revenue potential for each of these. So again, we’ll go into a little more detail in our Investor Day in a couple of weeks. So hopefully you can make it, David.
David Lustberg: Yeah, we’ll be there. And maybe just second question if I may. Thinking about the cross-sell opportunity, you guys will sometimes give some color on different products that are performing well on cross sell. I think maybe it was last quarter or maybe two quarters ago, you talked about assessments being the fastest growing product. Just wondering if there’s any incremental color you guys can add on what you’re seeing on cross sell, and any specific product drivers that are maybe having an outsized impact? Thanks, guys.
Steve Daly: Yes, I think I would — what I would say is, look, we’ve grow. We talked about 49% increase in bookings in Q4 of cross-sell. That’s actually — we were kind of in the mid 20s growth of cross-sell bookings for the year, so we’re seeing acceleration going out of the year. And part of that, we attribute to some of the changes that Chris has been making. He has piloted some ideas as far as how do we marry our customer success and our sellers together to get better opportunities and do better from a cross-sell perspective. So we’ll share some of those details with you in the Investor Day. But I will say we’re pretty optimistic and pretty bullish about that cross-sell opportunity and our ability to to solve more problems for our customers longer term.
David Lustberg: Got it. See you guys in few weeks.
Operator: Your next question comes from the line of William McNamara from BTIG.
William McNamara: This is Bill on for Matt. Thanks for taking my question. When you’re going and competing for these deals such as the recent announcement with the Montana University System, what would you say customers are the most interested in that you’re able to win them with, that set you apart from the competition?
Steve Daly: Yeah, there’s a couple of things. One is just our footprint and the fact that we have a footprint both in K-12 and higher education. So particularly when you’re talking about state systems, there’s really a lot of conversations about how do we keep students as they go from high school into higher ed, how do we make that transition as simple as possible. Specifically in that Montana University System, Parchment had some technology that is integrated with Canvas that made that transition much more seamless and easier for them. And so they really liked. We went in and actually joint sold in that case. And so as we bring that into our portfolio, we think that’s going to be an accelerant for us as far as winning more of those types of deals long term and as we get even tighter integration as one company going forward.
So it really is about our footprint, about our ability to manage some of those transition seamlessly. And then, in Montana and the Alabama Community College System, we already had landed in some of those institutions. And so the experience that they had, both from a user experience as well as the number of integrations that are there, our large partner ecosystem, the community that they were able to join and how massive that was, all of those played into the decision when they decided which of the incumbents that has a position in those systems to go with, it made Canvas the easy choice.
William McNamara: Thanks for taking my question.
Operator: Your next question comes from the line of Noah Herman from JPMorgan.
Noah Herman: Hey, guys, thanks for taking the questions. Just sticking with international a little bit. What do you really see here now going into this year as the biggest whitespace opportunity to really expand the — the expansion of their national percentage of total revenue. I know it’s sort of reached a little bit above that 20% mark that you referenced pretty frequently, but should we think about the levers for momentum and growth going forward here. Thanks.
Steve Daly: Yeah, we’ve made some investments in some of the developed markets, particularly the Benelux region, Spain, and Europe, the Philippines, and some of the Southeast Asian countries. So those will provide us, — those will be the biggest growth driver for us. We’ll continue to be in the channel. And so we have investments that we’re making in Japan and India, in some of the public markets in Southeast Asia. Latin America is almost entirely a channel. So those are probably the areas where we’ll see on the most growth in the next couple of years, particularly as we kind of refine our strategy there and put a little more wood behind the arrow around a few of our key partners.
Noah Herman: Great. And as we are thinking about the guidance philosophy for 2024, any change there relative to prior years? And are you carrying any extra conservatism in the model at all? Thanks.
Peter Walker: Yes, I appreciate the question, Noah. I would say guidance philosophy is relatively consistent with prior years. I would point you to the midpoint of the range as our expectation for performance.
Operator: And we have no further questions in our queue at this time. I will now turn the call back over to Chief Executive Officer, Steve Daly for closing remarks.
Steve Daly: Well, thank you, everybody, for joining us today. Our exceptional fourth-quarter and full-year 23 results were driven by our increasing competitive advantage, our strong execution, and our formidable cash flow we generate, and reinvest behind high-growth initiatives. And we head into 2024 with meaningfully enhanced scale, a broader portfolio, and access to new buyers through the Parchment acquisitions. And so I’ve never personally been more excited about our ability to elevate teaching and learning and drive results for our shareholders. And we’ll share a lot more about our journey and the roadmap ahead in our March 12th Investor Day. So we look forward to and hope to see all of you there today. Thanks
Operator: This concludes today’s conference call. Thank you for your participation and you may now disconnect.
