Total revenue increased 11% year-over-year to US$49.2 millionSubscription and support revenue grew 12% year-over-year to US$44.0 millionAnnual Recurring Revenue1 reached US$198.3 million, up 11% over the prior year, and Constant Currency Annual Recurring Revenue1 grew 12%Adjusted EBITDA2 of US$4.2 million (8.6% margin) in the quarterCompany increases revenue guidance to $199 million to $202 million and Adjusted EBITDA guidance to $22 million to $24 million
TORONTO, Sept. 4, 2024 /CNW/ – D2L Inc. (TSX: DTOL) (“D2L” or the “Company”), a leading global learning technology company, today announced financial results for its Fiscal 2025 second quarter ended July 31, 2024. All amounts are in U.S. dollars and all figures are prepared in accordance with International Financial Reporting Standards (“IFRS”) unless otherwise indicated.
“Our second-quarter results demonstrate continued execution on our balanced growth and profitability plan, highlighted by strong growth in Annual Recurring Revenue, subscription revenue, and Free Cash Flow generation,” said John Baker, CEO of D2L. “Our year-to-date performance positions us for continued growth and meaningful Adjusted EBITDA margin expansion in the second half of the year. At the same time, we are reinforcing our commitment to innovation that empowers our customers to create greater impact, achieve better outcomes, and deepen the human connection to learning. In recent months, we have significantly expanded our products and solutions, both through internal development and acquisition, which gives us more opportunity to create even deeper relationships with our growing customer base.”
Second Quarter Fiscal 2025 Financial Highlights
Total revenue was $49.2 million, up 11% from the same period in the prior year.Subscription and support revenue was $44.0 million, an increase of 12% over the same period of the prior year.Annual Recurring Revenue1 as at July 31, 2024 increased by 11% year-over-year, from $178.5 million to $198.3 million. Constant Currency Annual Recurring Revenue1 increased 12% to $200.6 million.Cash flow from operating activities was $31.4 million, up 37% versus $22.9 million in the same period in the prior year, and Free Cash Flow2 was $31.2 million, up 53% from $20.4 million in the same period in the prior year. Cash flows from operations have a seasonal low in the first quarter each year and a seasonal high in the second quarter each year.Cash flow from operating activities for the trailing 12-month period ended July 31, 2024 was $26.4 million, compared with $8.7 million for the trailing 12-month period ended July 31, 2023.Gross profit increased 12% to $33.4 million (67.9% gross profit margin) from $29.7 million (66.7% gross profit margin) in the same period of the prior year.Gross profit margin for subscription and support revenue increased to 72.9%, from 72.5% in the same period of the prior year.Adjusted EBITDA2 increased to $4.2 million from a loss of $0.5 million for the same period in the prior year, and grew to $8.2 million year to date from $2.3 million in the comparative six-month period in the prior year.Loss for the period was $0.3 million, compared with a loss of $4.8 million for the comparative period of the prior year. The Q2 2025 results included approximately $1.2 million in non-recurring expenses and transaction-related costs. These expenses are net of a gain of $0.9 million on the disposal of the Company’s majority ownership stake in SkillsWave.During the quarter, the Company completed the acquisition of H5P Group for an initial total consideration of $31.3 million.Strong balance sheet at quarter end, with cash and cash equivalents of $98.1 million and no debt.During the quarter ended July 31, 2024, the Company repurchased and canceled 106,900 Subordinate Voting Shares under its normal course issuer bid (“NCIB”). The Company has repurchased 279,480 shares since the inception of the NCIB on December 3, 2024.
1 Refer to “Key Performance Indicators” section of this press release.
2 A non-IFRS financial measure or non-IFRS ratio. Refer to “Non IFRS Financial Measures” section of this press release.
Second Quarter Fiscal 2025 Financial Results – Selected Financial Measures
(in thousands of U.S. dollars, except for percentages)
Three months ended July 31
Six months ended July 31
2024
2023
Change
Change
2024
2023
Change
Change
$
$
$
%
$
$
$
%
Subscription & Support Revenue
44,017
39,405
4,612
11.7 %
86,971
78,595
8,376
10.7 %
Professional Services & Other Revenue
5,151
5,065
86
1.7 %
10,692
10,103
589
5.8 %
Total Revenue
49,168
44,470
4,698
10.6 %
97,663
88,698
8,965
10.1 %
Constant Currency Revenue1
49,568
44,470
5,098
11.5 %
98,019
88,698
9,321
10.5 %
Gross Profit
33,373
29,681
3,692
12.4 %
66,050
59,561
6,489
10.9 %
Adjusted Gross Profit 1
33,522
29,853
3,669
12.3 %
66,345
59,844
6,501
10.9 %
Adjusted Gross Margin1
68.2 %
67.1 %
67.9 %
67.5 %
Loss for the period
(262)
(4,828)
4,566
94.6 %
310
(3,718)
4,028
108.3 %
Adjusted EBITDA (Loss)1
4,213
(534)
4,747
889.0 %
8,232
2,277
5,955
261.5 %
Cash Flows From Operating Activities
31,443
22,888
8,555
37.4 %
16,617
5,853
10,764
183.9 %
Free Cash Flow1
31,223
20,449
10,774
52.7 %
16,271
1,765
14,506
821.9 %
1 A non-IFRS financial measure or non-IFRS ratio. Refer to the “Non-IFRS Financial Measures and Reconciliation of Non-IFRS Financial Measures” section of this press release for more details.
Second Quarter Business & Operating Highlights
D2L continued to grow its customer base in education in North America, including the additions of Stark State College and University of Texas at Rio Grande Valley.D2L continued to expand its international customer base, including Hanze University of Applied Sciences and SteelCorp Construction S.A.Signed new corporate customers, including Ontario Nurses’ Association and a large healthcare non-profit with 50,000 learners.Acquired H5P Group, a leading SaaS learning solution and provider of interactive content creation software with a global user base serving millions of individuals spanning more than 50 countries.Hosted its annual, sold-out user-conference, Fusion 2024, where global edtech leaders had access to inspiring keynotes, engaging discussions on the future of learning, and demonstrations of learning innovation.Launched D2L Lumi, a new artificial intelligence (AI)-powered feature in Brightspace to help build better content, assessments, and activities, saving educators valuable time.Launched D2L Achievement+ for Brightspace, a new add-on package that can help institutions and organizations implement a competency-based learning model, allowing learners to advance and master material at a pace that suits them best.Completed the previously announced transaction to spin-out SkillsWave into a new independent standalone company.Subsequent to quarter end, appointed Marta DeBellis to the Company’s Board of Directors. DeBellis is an executive leader and leadership coach bringing over 30-years of global go-to-market experience focused on technology, for brands such as Adobe, Intel, and Instructure.
Financial Outlook
D2L updated its previously issued financial guidance for the year ended January 31, 2025 (“Fiscal 2025”) as follows:
Subscription and support revenue in the range of $178 million to $181 million, implying growth of 11% at the midpoint over Fiscal 2024, an increase from previously issued guidance of $177 million to $180 million (growth of 10% at the midpoint);Total revenue in the range of $199 million to $202 million, implying growth of 10% at the midpoint over Fiscal 2024, an increase from previously issued guidance of $197 million to $201 million (growth of 9% at the midpoint); andAdjusted EBITDA in the range of $22 million to $24 million, an increase from previously issued guidance of $21 million to $23 million (implying Adjusted EBITDA margin of 11% at the midpoint, consistent with previous guidance).
The Company expects revenue and Adjusted EBITDA to increase as Fiscal 2025 progresses, enabling the Company to exit the year with low-to-mid-teen Adjusted EBITDA Margin.
These guidance revisions reflect the Company’s continued progress in balancing revenue growth with operating efficiency improvements, as well as the partial year contributions in the Company’s third and fourth quarter from the acquisition of H5P on July 9, 2024, inclusive of business combination accounting.
For additional details on the Company’s outlook, including the principal underlying assumptions and risk factors regarding achievement, refer to the “Financial Outlook” section of the Company’s Management’s Discussion and Analysis for the three and 12 months ended January 31, 2024 (the “Annual MD&A”), as well as the “Forward-Looking Information” section therein, below and in the Company’s Management’s Discussion and Analysis for the three months ended July 31, 2024 (the “Interim MD&A”).
Conference Call & Webcast
D2L management will host a conference call on Thursday, September 5, 2024 at 8:30 am ET to discuss its second quarter Fiscal 2025 financial results.
Date:
Thursday, September 5, 2024
Time:
8:30 am (ET)
Dial in number:
Canada/US: 1 (833) 470-1428
International: 1 (404) 975-4839
Access code: 540799
Webcast:
A live webcast will be available at ir.d2l.com/events-and-presentations/events/
The webcast will also be archived
Forward-Looking Information
This press release includes statements containing “forward-looking information” within the meaning of applicable securities laws. In some cases, forward-looking information can be identified by the use of forward-looking terminology such as “plans”, “expects”, “budget”, “scheduled”, “estimates”, “outlook”, “target”, “forecasts”, “projection”, “potential”, “prospects”, “strategy”, “intends”, “anticipates”, “seek”, “believes”, “opportunity”, “guidance”, “aim”, “goal” or variations of such words and phrases or statements that certain future conditions, actions, events or results “may”, “could”, “would”, “should”, “might”, “will”, “can”, or negative versions thereof, “be taken”, “occur”, “continue” or “be achieved”, and other similar expressions. Statements containing forward-looking information are not historical facts, but instead represent management’s expectations, estimates and projections regarding future events or circumstances.
This forward-looking information relates to the Company’s future financial outlook and anticipated events or results and includes, but is not limited to, statements under the heading “Financial Outlook” and information regarding: the Company’s financial position, financial results, business strategy, performance, achievements, prospects, objectives, opportunities, business plans and growth strategies, including the Company’s balanced growth and profitability plan; the Company’s budgets, operations and taxes; and judgments and estimates impacting on financial statements.
Forward-looking information is based on certain assumptions, expectations and projections, and analyses made by the Company in light of management’s experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, including the following: the Company’s ability to win business from new customers and expand business from existing customers; the timing of new customer wins and expansion decisions by existing customers; the Company’s ability to generate revenue and expand its business while controlling costs and expenses; the Company’s ability to manage growth effectively; the Company’s ability to hire and retain personnel effectively; the effects of foreign currency exchange rate fluctuations on our operations; the ability to seek out, enter into and successfully integrate acquisitions, including the acquisition of H5P; business and industry trends, including the success of current and future product development initiatives; positive social development and attitudes toward the pursuit of higher education; the Company’s ability to maintain positive relationships with its customer base and strategic partners; the Company’s ability to adapt and develop solutions that keep pace with continuing changes in technology, education and customer needs; the ability to patent new technologies and protect intellectual property rights; the Company’s ability to comply with security, cybersecurity and accessibility laws, regulations and standards; the assumptions underlying the judgments and estimates impacting on financial statements; and the Company’s ability to retain key personnel; the factors and assumptions discussed under the “Financial Outlook” of the Annual MD&A; and that the list of factors referenced in the following paragraph, collectively, do not have a material impact on the Company.
Although the Company believes that the assumptions underlying such forward-looking information were reasonable when made, they are inherently uncertain and are subject to significant risks and uncertainties and may prove to be incorrect. The Company cautions investors that forward-looking information is not a guarantee of the future and that actual results may differ materially from those made in or suggested by the forward-looking information contained in this press release. Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties and other factors, including but not limited to the risks identified herein, or at “Summary of Factors Affecting Our Performance” of the Company’s Interim MD&A or in the “Risk Factors” section of the Company’s most recently filed annual information form, in each case filed under the Company’s profile on SEDAR+ at www.sedarplus.com. If any of these risks or uncertainties materialize, or if assumptions underlying the forward-looking information prove incorrect, actual results might vary materially from those anticipated in the forward-looking information.
Given these risks and uncertainties, investors are cautioned not to place undue reliance on forward-looking information, including any financial outlook. Any forward-looking information that is contained in this press release speaks only as of the date of such statement, and the Company undertakes no obligation to update any forward-looking information or to publicly announce the results of any revisions to any of those statements to reflect future events or developments, except as required by applicable securities laws. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless specifically expressed as such, and should only be viewed as historical data.
About D2L Inc. (TSX: DTOL)
D2L is transforming the way the world learns—helping learners of all ages achieve more than they dreamed possible. Working closely with customers all over the world, D2L is supporting millions of people learning online and in person. Our global workforce is dedicated to making the best learning products to leave the world better than they found it. Learn more at www.D2L.com.
D2L Inc.
Condensed Consolidated Interim Statements of Financial Position
(In U.S. dollars)
As at July 31, 2024 and January 31, 2024
(Unaudited)
July 31, 2024
January 31, 2024
Assets
Current assets:
Cash and cash equivalents
$ 98,059,870
$ 116,943,499
Trade and other receivables
28,519,428
23,025,690
Uninvoiced revenue
3,542,139
3,971,861
Prepaid expenses
7,643,525
10,517,226
Deferred commissions
5,365,809
5,334,864
143,130,771
159,793,140
Non-current assets:
Other receivables
476,385
537,056
Prepaid expenses
290,583
119,872
Deferred income taxes
544,501
529,674
Right-of-use assets
8,642,646
8,774,960
Property and equipment
7,729,392
8,427,734
Deferred commissions
7,785,682
7,730,724
Investment in associate
341,334
—
Loan receivable from associate
5,031,127
—
Intangible assets
18,416,205
770,707
Goodwill
26,051,803
10,440,091
Total assets
$ 218,440,429
$ 197,123,958
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities
$ 27,839,548
$ 32,635,926
Deferred revenue
113,252,795
93,727,368
Lease liabilities
1,366,283
1,002,464
Contingent consideration
311,549
271,479
142,770,175
127,637,237
Non-current liabilities:
Deferred income taxes
4,334,057
587,075
Lease liabilities
11,096,375
11,707,534
Contingent consideration
4,529,000
311,839
19,959,432
12,606,448
162,729,607
140,243,685
Shareholders’ equity:
Share capital
367,404,918
364,830,884
Additional paid-in capital
46,517,830
47,485,107
Accumulated other comprehensive loss
(7,471,175)
(4,998,317)
Deficit
(350,740,751)
(350,437,401)
55,710,822
56,880,273
Total liabilities and shareholders’ equity
$ 218,440,429
$ 197,123,958
D2L INC.
Condensed Consolidated Interim Statements of Comprehensive Loss
(In U.S. dollars)
For the three and six months ended July 31, 2024 and 2023
(Unaudited)
Three months ended July 31
Six months ended July 31
2024
2023
2024
2023
Revenue:
Subscription and support
$ 44,017,554
$ 39,405,679
$ 86,971,029
$ 78,595,340
Professional service and other
5,150,798
5,064,462
10,692,215
10,102,740
49,168,352
44,470,141
97,663,244
88,698,080
Cost of revenue:
Subscription and support
11,928,116
10,852,459
23,874,726
22,093,199
Professional services and other
3,867,294
3,936,514
7,738,162
7,043,818
15,795,410
14,788,973
31,612,888
29,137,017
Gross profit
33,372,942
29,681,168
66,050,356
59,561,063
Expenses:
Sales and marketing
14,591,271
14,961,079
27,496,210
27,401,746
Research and development
11,863,787
12,519,168
24,154,558
23,664,521
General and administrative
8,480,828
7,312,207
16,580,259
13,501,710
34,935,886
34,792,454
68,231,027
64,567,977
Loss from operations
(1,562,944)
(5,111,286)
(2,180,671)
(5,006,914)
Interest and other income (expense):
Interest expense
(153,886)
(142,866)
(314,546)
(298,874)
Interest income
944,693
840,405
2,028,738
1,716,512
Other income (expense)
(59,433)
(211)
43
15,252
Gain on SkillsWave disposal transaction
917,395
—
917,395
—
Foreign exchange gain (loss)
(147,067)
(364,693)
83,714
65,479
1,501,702
332,635
2,715,344
1,498,369
(Loss) income before income taxes
(61,242)
(4,778,651)
534,673
(3,508,545)
Income taxes (recovery):
Current
305,923
316,769
356,668
391,411
Deferred
(104,581)
(267,464)
(131,677)
(182,451)
201,342
49,305
224,991
208,960
(Loss) income for the period
(262,584)
(4,827,956)
309,682
(3,717,505)
Other comprehensive gain (loss):
Foreign currency translation gain (loss)
(1,677,168)
746,510
(2,472,858)
535,299
Comprehensive loss
$ (1,939,752)
$ (4,081,446)
$ (2,163,176)
$ (3,182,206)
(Loss) earnings per share – basic
$ (0.00)
$ (0.09)
$ 0.01
$ (0.07)
(Loss) earnings share – diluted
$ (0.00)
$ (0.09)
$ 0.01
$ (0.07)
Weighted average number of common shares – basic
54,374,056
53,430,984
54,195,897
53,328,052
Weighted average number of common shares – diluted
54,374,056
53,430,984
55,770,096
53,328,052
D2L INC.
Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity
(In U.S. dollars)
For the six months ended July 31, 2024 and 2023
(Unaudited)
Share Capital
Additional paid-in
capital
Accumulated other
comprehensive loss
Deficit
Total
Shares
Amount
Balance, January 31, 2024
53,978,085
$ 364,830,884
$ 47,485,107
$ (4,998,317)
$ (350,437,401)
$ 56,880,273
Issuance of Subordinate Voting Shares on exercise of options
351,007
3,043,827
(1,593,216)
—
—
1,450,611
Issuance of Subordinate Voting Shares on settlement of restricted share units
355,840
1,287,144
(4,290,550)
—
—
(3,003,406)
Stock-based compensation
—
—
4,916,489
—
—
4,916,489
Repurchase of share capital for cancellation under NCIB
(238,280)
(1,756,937)
—
—
—
(1,756,937)
Change in share repurchase commitment under ASPP
—
—
—
—
(613,032)
(613,032)
Other comprehensive loss
—
—
—
(2,472,858)
—
(2,472,858)
Income for the period
—
—
—
—
309,682
309,682
Balance, July 31, 2024
54,446,652
$ 367,404,918
$ 46,517,830
$ (7,471,175)
$ (350,740,751)
$ 55,710,822
Balance, January 31, 2023
53,146,530
357,639,824
46,084,161
(5,001,805)
(344,630,902)
54,091,278
Issuance of Subordinate Voting Shares on exercise of options
301,494
2,702,550
(1,146,774)
—
—
1,555,776
Issuance of Subordinate Voting Shares on settlement of restricted share units
209,695
961,800
(2,405,427)
—
—
(1,443,627)
Stock-based compensation
—
—
5,169,006
—
—
5,169,006
Other comprehensive gain
—
—
—
535,299
—
535,299
Loss for the period
—
—
—
—
(3,717,505)
(3,717,505)
Balance, July 31, 2023
53,657,719
$ 361,304,174
$ 47,700,966
$ (4,466,506)
$ (348,348,407)
$ 56,190,227
D2L INC.
Condensed Consolidated Interim Statements of Cash Flows
(In U.S. dollars)
For the six months ended July 31, 2024 and 2023
(Unaudited)
2024
2023
Operating activities:
(Loss) income for the period
$309,682
$(3,717,505)
Items not involving cash:
Depreciation of property and equipment
861,831
721,635
Depreciation of right-of-use assets
612,221
643,910
Amortization of intangible assets
179,233
32,572
Gain on disposal of property and equipment
(47,194)
(15,670)
Stock-based compensation
4,916,489
5,169,006
Net interest income
(1,714,192)
(1,417,638)
Income tax expense
224,991
208,960
Gain on SkillsWave disposal transaction
(917,395)
—
Loss from equity accounted investee
96,764
—
Changes in operating assets and liabilities:
Trade and other receivables
(4,478,486)
(7,434,422)
Uninvoiced revenue
325,811
(615,095)
Prepaid expenses
2,528,054
1,573,388
Deferred commissions
(271,090)
(1,331,109)
Accounts payable and accrued liabilities
(6,439,504)
(4,182,827)
Deferred revenue
19,061,544
14,936,043
Right-of-use assets and lease liabilities
(49,476)
—
Interest received
1,984,358
1,717,429
Interest paid
(17,757)
—
Income taxes paid
(548,991)
(435,663)
Cash flows from operating activities
16,616,893
5,853,014
Financing activities:
Payment of lease liabilities
(853,965)
(262,024)
Proceeds from exercise of stock options
1,450,611
1,555,776
Taxes paid on settlement of restricted share units
(3,003,406)
(1,443,627)
Repurchase of share capital for cancellation under NCIB
(1,756,937)
—
Cash flows used in financing activities
(4,163,697)
(149,875)
Investing activities:
Purchase of property and equipment
(393,023)
(4,103,826)
Proceeds from disposal of property and equipment
47,194
15,670
Acquisition of business, net of cash acquired
(22,308,927)
(2,766,284)
Payment of contingent consideration
(249,436)
—
Transfer of cash on disposal of SkillsWave
(1,483,357)
—
Proceeds from sale of majority ownership stake in SkillsWave
809,038
—
Issuance of loan to SkillsWave
(5,000,000)
—
Cash flows used in investing activities
(28,578,511)
(6,854,440)
Effect of exchange rate changes on cash and cash equivalents
(2,758,314)
690,427
Decrease in cash and cash equivalents
(18,883,629)
(460,874)
Cash and cash equivalents, beginning of period
116,943,499
110,732,236
Cash and cash equivalents, end of period
98,059,870
110,271,362
Non-IFRS Financial Measures and Reconciliation of Non-IFRS Financial Measures
The information presented within this press release refers to certain non-IFRS financial measures (including non-IFRS ratios) including Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Gross Profit, Adjusted Gross Margin, Free Cash Flow, Free Cash Flow Margin, and Constant Currency Revenue. These measures are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS. Non-IFRS financial measures should not be considered in isolation nor as a substitute for analysis of the Company’s financial information reported under IFRS and are unlikely to be comparable to similar measures presented by other issuers. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of the Company’s results of operations, financial performance and liquidity from management’s perspective and thus highlight trends in its core business that may not otherwise be apparent when relying solely on IFRS measures. The Company believes that securities analysts, investors and other interested parties frequently use non-IFRS financial measures in the evaluation of the Company. The Company’s management also uses non-IFRS financial measures to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts, and to assess our ability to meet our capital expenditures and working capital requirements.
Adjusted EBITDA and Adjusted EBITDA Margin
Adjusted EBITDA is defined as net income (loss), excluding interest, taxes, depreciation and amortization (or EBITDA), adjusted for stock-based compensation, foreign exchange gains and losses, non-recurring expenses, transaction-related expenses, fair value adjustment of acquired deferred revenue, income (loss) from equity accounted investee, impairment charges and other income and losses. Adjusted EBITDA Margin is calculated as Adjusted EBITDA expressed as a percentage of total revenue. For an explanation of recent changes to and management’s use of Adjusted EBITDA and Adjusted EBITDA Margin see “Non-IFRS and Other Financial Measures – Non-IFRS Financial Measures and Non-IFRS Financial Ratios – Adjusted EBITDA and Adjusted EBITDA Margin” section in the Company’s Interim MD&A, which section is incorporated by reference herein.
The following table reconciles Adjusted EBITDA to income (loss) for the period, and discloses Adjusted EBITDA Margin, for the periods indicated:
(in thousands of U.S. dollars, except for percentages)
Three months ended July 31
Six months ended July 31
2024
2023
2024
2023
(Loss) income for the period
(262)
(4,828)
310
(3,718)
Stock-based compensation
2,584
3,095
4,917
5,169
Foreign exchange loss (gain)
147
365
(84)
(65)
Non-recurring expenses(1)
1,045
150
1,866
150
Transaction-related costs(2)
151
552
823
552
Fair value adjustment of acquired deferred revenue
139
—
139
—
Loss from equity accounted investee
97
—
97
—
Net interest income
(791)
(698)
(1,714)
(1,418)
Income tax expense
201
49
225
209
Depreciation and amortization
902
781
1,653
1,398
Adjusted EBITDA
4,213
(534)
8,232
2,277
Adjusted EBITDA Margin
8.6 %
-1.2 %
8.4 %
2.6 %
Notes:
(1)
These expenses relate to non-recurring activities, such as certain legal fees incurred that are not indicative of continuing operations, and changes of workforce or technology whereby certain functions were realigned to optimize operations.
(2)
These expenses include certain legal and professional fees that were incurred in connection with acquisition and other strategic transactions, including the disposal of our majority ownership stake in SkillsWave and our acquisition of H5P. These expenses also include post-combination compensation costs from the acquisition of H5P. These expenses are net of a gain of $0.9 million recognized on the disposal of our majority ownership stake in SkillsWave. These expenses would not have been incurred if not for these transactions and are not considered expenses indicative of the Company’s continuing operations.
Adjusted Gross Profit and Adjusted Gross Margin
Adjusted Gross Profit is defined as gross profit excluding related stock-based compensation expenses. Adjusted Gross Margin is calculated as Adjusted Gross Profit expressed as a percentage of total revenue. For an explanation of management’s use of Adjusted Gross Profit and Adjusted Gross Margin see “Non-IFRS and Other Financial Measures – Non-IFRS Financial Measures and Non-IFRS Financial Ratios – Adjusted Gross Profit and Adjusted Gross Margin” section in the Company’s Interim MD&A, which section is incorporated by reference herein.
The following table reconciles Adjusted Gross Margin to gross profit expressed as a percentage of revenue, for the periods indicated:
(in thousands of U.S. dollars, except for percentages)
Three months ended July 31
Six months ended July 31
2024
2023
2024
2023
Gross profit for the period
33,373
29,681
66,050
59,561
Stock based compensation
149
172
295
283
Adjusted Gross Profit
33,522
29,853
66,345
59,844
Adjusted Gross Margin
68.2 %
67.1 %
67.9 %
67.5 %
Free Cash Flow and Free Cash Flow Margin
Free Cash Flow is defined as cash provided by (used in) operating activities less net additions to property and equipment. Free Cash Flow Margin is calculated as Free Cash Flow expressed as a percentage of total revenue. For an explanation of management’s use of Free Cash Flow and Free Cash Flow Margin see “Non-IFRS and Other Financial Measures – Non-IFRS Financial Measures and Non-IFRS Financial Ratios – Free Cash Flow and Free Cash Flow Margin” section in the Company’s Interim MD&A, which section is incorporated by reference herein.
The following table reconciles our cash flow from (used in) operating activities to Free Cash Flow, and discloses Free Cash Flow Margin, for the periods indicated:
(in thousands of U.S. dollars, except for percentages)
Three months ended July 31
Six months ended July 31
2024
2023
2024
2023
Cash flow from operating activities
31,443
22,888
16,617
5,853
Net addition to property and equipment
(220)
(2,439)
(346)
(4,088)
Free Cash Flow
31,223
20,449
16,271
1,765
Free Cash Flow Margin
63.5 %
46.0 %
16.7 %
2.0 %
Constant Currency Revenue
Constant Currency Revenue is defined as foreign-currency-denominated revenues translated at the historical exchange rates from the comparable prior period into our U.S. dollar functional currency. For an explanation of management’s use of Constant Currency Revenue see “Non-IFRS and Other Financial Measures – Non-IFRS Financial Measures and Non-IFRS Financial Ratios – Constant Currency Revenue” section in the Company’s Interim MD&A, which section is incorporated by reference herein.
The following table reconciles our Constant Currency Revenue to revenue, for the periods indicated:
Three months ended July 31
Six months ended July 31
(in thousands of U.S. dollars)
2024
2023
2024
2023
$
$
$
$
Total revenue for the period
49,168
44,470
97,663
88,698
Negative impact of foreign exchange rate changes over the prior period
400
—
356
—
Constant Currency Revenue
49,568
44,470
98,019
88,698
Key Performance Indicators
Management uses a number of metrics, including the key performance indicators identified below, to help us evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions. Our key performance indicators may be calculated in a manner different than similar key performance indicators used by other issuers. These metrics are estimated operating metrics and not projections, nor actual financial results, and are not indicative of current or future performance.
Annual Recurring Revenue and Constant Currency Annual Recurring Revenue: We define Annual Recurring Revenue as the annualized equivalent value of subscription revenue from all existing customer contracts as at the date being measured, exclusive of the implementation period. Our calculation of Annual Recurring Revenue assumes that customers will renew their contractual commitments as those commitments come up for renewal. We believe Annual Recurring Revenue provides a reasonable, real-time measure of performance in a subscription-based environment and provides us with visibility for potential growth to our cash flows. We believe that increasing Annual Recurring Revenue indicates the continued strength in the expansion of our business, and will continue to be our focus on a go-forward basis. We define Constant Currency Annual Recurring Revenue as foreign-currency-denominated Annual Recurring Revenue translated at the historical exchange rates from the comparable prior period into our U.S. dollar functional currency.
As at July 31
(in millions of U.S. dollars, except percentages)
2024
2023
Change
$
$
%
Annual Recurring Revenue
198.3
178.5
11.1 %
Constant Currency Annual Recurring Revenue
200.6
178.5
12.4 %
For further information, please contact:
Craig Armitage, Investor Relations
ir@d2l.com
(416) 347-8954
SOURCE D2L Inc.
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