Instructure Holdings, Inc.
Q4 2022 Earnings Call Transcript

Published: 13 Feb 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

[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.

[Operator:]

Thank you. [Operator Instructions] 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.

[Steve Daly:]

Yeah. That's -- you hit it spot on, Terry, as usual. The opportunity here is to make -- we had a customer interaction that was sales heavy when we won a deal and then we'd hand it off to CX and they would go run with it. This allows us to have relationships that kind of span. There aren't these awkward handoffs. And then sales is engaged throughout helping our customers understand not only how to get the most out of what they just bought from us, but also what else we can do for them. So, we do believe this will ultimately be an accelerant to our business. It will allow us to better cross-sell, better up-sell into our existing customer base. And it's not something that we said oh, this is -- the sales process is broken, we got to make a change. This was really a strategic move to do something that we thought would actually improve our -- the durability of our revenue growth over the next five to 10 years.

[Terry Tillman:]

Okay. Got it. And thanks for the kindness. I don't think I've been spot on in anything in years, but thank you, that sound nice. And then just a follow-up question. Maybe just relates to 9.7% growth is the mid-point, roughly speaking. Is there anything you can share just at a high level on relative growth rates across the three major kind of segments? Thank you.

[Steve Daly:]

Yeah. We continue to see that kind of the domestic market between K-12 and higher ed will be kind of that high single digit grower for us. There's -- it's a -- those are good markets. They're solid growers in higher ed. We do have more opportunity in K-12 from a cross-sell perspective. And then international, international will still be our fastest growing. We are seeing some headwinds from currency in there. So, we included in our guidance is that this should be a grower in kind of the low-teens on an as reported basis. It would be high-teens in a constant currency basis. So, we will see a little bit of that headwind from a currency basis that we didn't really see in 2022, it will hit us in 2023.

[Terry Tillman:]

That’s great color. Thank you.

[Operator:]

And our next question will come from Matt VanVliet with BTIG. Please go ahead.

[Matthew VanVliet:]

Good afternoon and thanks for taking my question. Obviously, a lot of talk about cross-sell success and a nice large opportunity ahead of you. Curious on how you're thinking about that impacting the seasonality of the model? Should we think about a little more of that potentially coming sort of throughout the year, a little less reliant on the second quarter? Or does it just kind of make deals bigger when you do get those larger deals closed at the end of the school year?

[Steve Daly:]

Yeah. Yeah. I wish the cross-sell would have an impact on seasonality. But it will -- I don't know that it will have a big impact on seasonality. We may align more of the cross-sell to our renewals, which the majority happened in Q3. So, kind of Q2, Q3 will still be our biggest quarters. What will change our -- over time, what will change the seasonality is our international business, because it tends to be more heavily weighted towards Q4. So, we may see some kind of normalizing of that across -- from a seasonality perspective, but don't expect cross-sell to drive that change in seasonality.

[Matthew VanVliet:]

Okay. Helpful. And then, thinking about the channel program, obviously, only about a year old. But are you looking to potentially push that into any newer markets that you haven't addressed quite yet? Or conversely, maybe in addition, do you need some additional leadership as that continues to grow, maybe people with significant channel experience elsewhere whether or not inside the education room?

[Steve Daly:]

Yeah. We have -- we did bring -- when we started this investment, we brought in a seasoned exec Jack Jackson just won an award, by the way, for Channel Chief. But -- so, we brought him in specifically to help us craft this strategy. As of right now, Matt, we have -- we are targeting the right geos for our channel. And as you know, when it comes to channel, there's a lot of kind of enablement, there's ramping, there's -- and so most of our focus right now is on making sure that those partners that we brought in over the last nine to 12 months are enabled -- are ready to sell, are able to deploy, are able to support the products in the countries that we've targeted. So, that's where most of our investment is going right now.

[Matthew VanVliet:]

All right. Great. Thank you.

[Operator:]

And our next question will come from Stephen Sheldon with William Blair. Please go ahead.

[Stephen Sheldon:]

Thank you. Just one for me guess, on Canvas credentials, you gave some good commentary there, but just curious of a priority does it seem like universities are kind of placing now on including some type of credential in decrease pathways, especially as they think more about the eventual employability of graduatory, it seems like we're still in the very early innings there. And do you think it will become a much bigger priority by universities as we think about the next few years?

[Steve Daly:]

Yeah. That's a great question, Stephen. And very much the top of mind of the educators that we're talking to within our existing as well as new customers that we talk to. It's in every conversation that we have. I would say in the traditional university environment, not everybody is the same, but there's definitely pockets that are very, very much leaning into it. I'm thinking of community colleges, some of the -- some of those types of educational institutions are leaning in. But everybody is looking at what their strategy is going to be, how they're going to do this, how they're going to implement this over time. I think the other thing that we're seeing is we -- it's opening up a lot of conversations with non-traditional like City and Guilds, right, which is not your traditional university, but is -- or PeopleCert that we announced last year, right, that's doing a lot of retraining, certification, that kind of work. So, it does -- there are a lot of conversations going on. And when you combine this with the investments we've made in our catalog product, when you look at the things that we've done with our portfolio set of products around portfolios, it creates this whole product solution that allows us to -- allow the university to build, to issue, to store and verify their credentials in a way that one, attracts new students to them, but also provides a currency for finding new jobs as you mentioned. So, yeah, it's very good. It's early days, but great signal.

[Stephen Sheldon:]

Makes a lot of sense. Thank you.

[Steve Daly:]

Yeah.

[Dale Bowen:]

Thanks Steve.

[Operator:]

And our next question will come from Brent Thill with Jefferies. Please go ahead.

[David Lustberg:]

This is David Lustberg for Brent. Thanks for taking the question. I wanted to double-click on the cross-sell comment, I believe you guys said 43% of your customers are on two plus products. Maybe if we could dig in a little bit on that. I'll ask a few questions and add to which have one big sense. But is there any watermark you think compared to last year 2021? What was more than one product, maybe talk about the dynamics of two plus products in K-12 versus higher? And if there's any differential there? And then, just thinking forward, on the cross-sell opportunity. Obviously, you guys are bigger in higher ed, but if you just think about from the product standpoint, is there more cross-sell from a product standpoint in higher ed versus K-12? I appreciate if you could just touch on any of the dynamics.

[Steve Daly:]

Sure, David. So, year-over-year, our attach rate was for two or more products in 2020 -- as we left 2021 was about in the high 30s percent attach rates. So, we're up five or six points, 600 basis points from attach rate perspective. The other statistic I think that Dale shared was that 60% of our new deals had more than one product. So, we're seeing that. We're landing bigger. We continue to land bigger when they get a new logo. And so -- and then as we think about how we look at the cross-sell opportunity between higher ed and K-12, the ARPU stacks are about the same for each of those. We land bigger in higher ed. And we have about a 50% ARPU uplift from the LMS. And in K-12, we land smaller on the LMS, but we have two to three times cross-sell opportunity. So, the absolute dollars are bigger in K-12 for cross-sell, but the overall opportunity is similar from a revenue per student perspective.

[David Lustberg:]

Got it. That's really helpful color. I appreciate it. And one more, if I can. Just as you guys think about your conversations with K-12 and higher ed institutions, has there been any commentary around the budget around them and maybe if they're getting more constrained? I think most folks, I think, probably K-12 is pretty defensible, especially with what they have going with the ESSER funding that continues to aid growth there. But maybe any commentary just around what you're hearing from customers around their budgets?

[Steve Daly:]

Yeah. I think I would say there -- like everybody else, they're being very judicious in how they're spending their money and where they're spending their money. The -- in K-12, you're right, there still is a lot of stimulus dollars. Only about 30% has been spent to date. There's plenty of money out there, but they are being very thoughtful about how they're spending that money. What we like about that is that our technology is critical infrastructure. It's the foundation for their digital transformations. So, we feel good that -- and we've been told that regardless of what happens to the budgets, the money that they've earmarked for our part of the digital transformation process is durable and they expect to be able to fund those going forward. So, we're seeing good signal there.

[David Lustberg:]

Okay, guys. Thanks.

[Steve Daly:]

Thanks David.

[Operator:]

And your final question will come from Steve Enders with Citi. Please go ahead.

[Steven Enders:]

Hi. Thanks for taking the question. I guess, just want to follow-up on the last point around the outlook for K-12 and how you're thinking about the opportunity at this point? And I guess, the pipeline opportunity there. I mean, does this feel like something that might kind of continue to push into 2024? Is there an opportunity as you kind of see it today for things to become a little bit more of a 2023 opportunity?

[Steve Daly:]

The dollars have to be committed before the end of September in 2024. So, there's enough money out there that I don't think they're going to wait until July of 2024 to start committing these dollars. There is a couple of things that we see going on here though, Steve. The first is that, again, they're being thoughtful. So, they're not just going out and spending like drunken sailors type of thing. They're making sure that they can get a return on that investment. And there are a number of required proofs, if you will, when a school or a district invests in education technology that they have to show efficacy of what they've invested in, which for us, part of the investment thesis for our -- for LearnPlatform was that Learn is one of those technologies that can provide evidence that the technology is working in the environment. It's going to be something that becomes much more top of mind, much more important. In addition, there are regulations that require proof of efficacy anyway. So, we feel good that the dollars that are earmarked for ESSER will create for us some enduring demand, not just in the spending of those dollars, but also -- and then after those technologies get deployed, how does the school prove efficacy. And so, again, we feel like there's a long-term kind of tailwind here for us, because these extra funds are coming into the system.

[Steven Enders:]

Okay. No, that's helpful context there. And maybe for Dale, just wanted to touch on the RPO number in the quarter. I know 4Q usually isn't that -- isn't that big of a bookings quarter for you all. But just anything to call out there on sequential decline there. And is there kind of any FX impact or anything we should be thinking about that would be impacting the number there?

[Dale Bowen:]

Sure. It's a great question. We're pleased with where our RPO landed. You may remember last quarter we signaled that it was going to come down from where we landed in Q3, in part because there's a lot of factors that play into where RPO goes including some seasonality of contracts and timing of renewals. And there is a host of things that we're seeing that are contributing to that. However, we've got great confidence in our RPO where it is now and where it's headed over the next four or five quarters and it gives us great confidence in the 2023 guidance that we provided on this call.

[Steven Enders:]

Okay. Great. Appreciate the questions here.

[Dale Bowen:]

Thanks Steve.

[Operator:]

And that will conclude today's question-and-answer session. I would now like to turn the call back over to CEO, Steve Daly, for closing remarks.

[End of Q&A:]

[Steve Daly:]

Great. Thanks operator. Thank you everybody for joining us today. So, we're very pleased with our results, not only in Q4, but throughout the year and we are very well-positioned for stellar 2023. Our business -- we'll continue to grow with best-in-class margins and our position in the education ecosystem affords us ample opportunity for growth for years to come as we execute on our learning platform strategy. So, I just wanted to thank our customers, our employees, our partners and our investments for your support in this really important endeavor that we're all going on together and I look forward to sharing our continued momentum with you next quarter. So, thank you very much.

[Operator:]

And that will conclude today's conference. Thank you for your participation and you may now disconnect.