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D2L Inc. Announces Second Quarter Fiscal 2023 Financial Results & Updated Outlook

·27 min read
  • Total Q2 revenue grew 12% year over year to US$41.2 million and Constant Currency Revenue1 increased 15% to US$42.4 million

  • Total year-to-date revenue grew 16% year over year to US$83.0 million and Constant Currency Revenue1 increased 18% to US$84.5 million

  • Annual Recurring Revenue2 increased by 10% year over year to US$158.5 million and Constant Currency Annual Recurring Revenue2 increased 13% to US$162.4 million

  • Gross profit for Q2 increased 13% to US$26.6 million (64.6% gross profit margin) and increased 19% for the year-to-date period to US$52.9 million (63.7% gross profit margin)

  • Strong balance sheet at quarter end, with cash and cash equivalents of US$113.5 million and no debt

TORONTO, Sept. 7, 2022 /CNW/ - D2L Inc. (TSX: DTOL) ("D2L" or the "Company"), a global learning technology company, today announced financial results for its fiscal 2023 second quarter ended July 31, 2022. All amounts are in U.S. dollars and all figures are prepared in accordance with International Financial Reporting Standards (IFRS) unless otherwise indicated.

D2L Inc. (CNW Group/D2L Inc.)
D2L Inc. (CNW Group/D2L Inc.)

"We continue to see healthy long-term demand across our education and corporate markets as organizations replace legacy technology and experiences with modern platforms built for the future of work and learning," said John Baker, President and CEO of D2L. "The outstanding reception and feedback at our recent user conference also underscored that D2L's value proposition and differentiation remain exceptionally strong.  However, the overall pace of new business growth in the second quarter was slower than we expected, mainly reflecting delays in expanding our sales and marketing teams, as well as the impact of changes in foreign exchange rates. At the same time, we are pleased with our gross profit expansion and our ability to generate operating efficiencies and leverage as we scale, the combination of which will yield improved Adjusted EBITDA performance and a significantly faster path to profitability as reflected in our updated outlook. While we remain focused on expanding sales and marketing activities especially as our win rate and long-term value support the investment, in the current macroeconomic environment, we are evolving our medium-term operating model towards one of balanced growth and profitability."

Second Quarter Fiscal 2023 Financial Highlights

  • Total revenue of $41.2 million, up 12% from the comparative period in the prior year. Constant Currency Revenue1 grew 15% year-over-year to $42.4 million.

  • Annual Recurring Revenue2 increased by $14.5 million or 10% to $158.5 million, relative to the same period of the prior year. Constant Currency Annual Recurring Revenue2 reached $162.4 million, an $18.4 million or 13% increase over the same quarter last year.

  • Subscription and support revenue was $35.8 million, an increase of 8.5% over the prior year, and was primarily attributable to the growth in new customers coupled with strong revenue retention and expansion from existing customers.

  • Professional services and other revenue was $5.4 million, up 41% from the same period of the prior year. The increase reflects several significant delivered professional services engagements, including new customer implementations and content development work for new and existing customers.

  • Gross Profit for the quarter was $26.6 million (64.6% of revenue), an increase of 13% from Gross Profit of $23.5 million (63.9% of revenue) in the comparative period in the prior year.

  • Adjusted EBITDA1 loss of $1.5 million, compared to positive Adjusted EBITDA of $1.0 million for the comparative period in the prior year. Loss for the period decreased to $4.8 million, compared with a loss of $17.8 million for the same period of the prior year. The year-over-year improvement was largely the result of the $15.6 million fair value loss on the redeemable convertible preferred shares that was recognized in the prior period, with no corresponding impact in the current period.

  • Cash flow from operating activities was $16.2 million, versus $20.4 million in the same period in the prior year, and Free Cash Flow1 for Q2 was $16.0 million, compared to Free Cash Flow of $20.2 million in the same period in the prior year.

1 A non-IFRS financial measure or non-IFRS ratio. Please refer to "Non-IFRS Financial Measures and Reconciliation of Non-IFRS Financial Measures" section of this press release.

2 Please refer to "Key Performance Indicators" section of this press release.

Second Quarter Fiscal 2023 Financial Results

Selected Financial Measures


Three months ended July 31

Six months ended July 31


2022

2021

Change

Change

2022

2021

Change

Change

$

$

$

%

$

$

$

%

Subscription & Support Revenue

35,817

33,005

2,812

8.5 %

71,584

63,567

8,017

12.6 %

Professional Services & Other Revenue

5,356

3,789

1,567

41.4 %

11,460

7,763

3,697

47.6 %

Total Revenue

41,173

36,794

4,379

11.9 %

83,044

71,330

11,714

16.4 %










Constant Currency Revenue1

42,372

36,794

5,578

15.2 %

84,509

71,330

13,179

18.5 %

Gross Profit

26,585

23,512

3,073

13.1 %

52,939

44,415

8,524

19.2 %

Adjusted Gross Profit 1

26,671

23,543

3,128

13.3 %

53,095

44,477

8,618

19.4 %

Adjusted Gross Margin1

64.8 %

64.0 %



63.9 %

62.4 %



Loss for the period

(4,803)

(17,803)

13,000

73.0 %

(9,566)

(52,249)

42,683

-81.7 %

Adjusted EBITDA (loss)1

(1,465)

961

(2,426)

-252.4 %

(2,969)

922

(3,891)

-422.0 %

Cash Flows from (used in) Operating Activities

16,225

20,395

(4,170)

-20.4 %

927

551

376

68.2 %

Free Cash Flow1

16,016

20,165

(4,149)

-20.6 %

-186

177

(363)

-205.1 %

1 A non-IFRS financial measure or non-IFRS ratio.  Please refer to the "Non-IFRS Financial Measures and Reconciliation of Non-IFRS Financial Measures" section of this press release for more details.

Second Quarter Fiscal 2023 Business & Operating Highlights

  • Launched Brightspace Creator+ Early Access Program, the next evolution of D2L's Engagement+ package, which will simplify the complexity of creating learning content, thereby empowering content creators to build compelling and engaging courses for their learners.

  • In July 2022, D2L hosted its annual Fusion customer conference in person for the first time in three years. This year's conference was well attended, with nearly 3,000 registrations and 100 speaking sessions, including a spotlight on D2L's Brightspace Creator+ Early Access Program.

  • Continued growth and market share expansion in the higher education market, as highlighted by new customer agreements with The University of Windsor, Bentley University, Colorado Christian University, and St. John Fisher University.

  • Boston Public Schools contracted D2L Brightspace to help it deliver professional learning for all its staff because of the platform's flexibility and the partnership D2L offers to create truly individualized learning experiences.

  • Signed a new customer agreement with the American College of Lifestyle Medicine that will enable them to scale the reach of their certifications, grow their membership conversion rate and bring forward a new B2B model with healthcare systems.

  • Signed a new customer agreement with Midwest Communications, a radio and digital media company, to support automation of employee onboarding, training, and development programs.

Financial Outlook

The Company is updating its previous guidance for the 12 months ended January 31, 2023, as previously provided in its press release dated June 8, 2022, to reflect lower revenue growth and reduced Adjusted EBITDA loss. Specifically, for fiscal 2023 the Company is expecting:

  • Total revenue in the range of $168 million to $170 million, implying growth of 11% to 12% over the year ended January 31, 2022 (12%-14% on a constant currency basis), rather than our previous guidance of total revenue in the range of $175 million to $178 million, implying growth of 15% to 17% over the same period; and

  • Adjusted EBITDA loss in the range of $6 million to $8 million, rather than our previous guidance of Adjusted EBITDA loss in the range of $9 million to $11 million.

D2L continues to see robust long-term demand for learning platforms across its education and corporate markets. The change in the expected revenue growth for fiscal 2023 mainly reflects headwinds to scaling the Company's sales and marketing teams, elongated buying cycles in its corporate market, as well as the impact of changes in foreign exchange rates, particularly the strengthening U.S. dollar and weakening GBP. In addition, D2L is now expecting a lower Adjusted EBITDA loss in fiscal 2023, reflecting disciplined cost optimization and a measured prioritization of investments, thereby putting the Company on an accelerated path to profitability.

Medium Term Target Operating Model
In the current macroeconomic environment, we are evolving the Company's target operating model towards one of balanced growth and profitability. Management is presenting the updated target operating model due to an evolution of our strategy in response to changes including external factors outside our control, impacting the markets that our customers operate in, labour market constraints, and general economic conditions. These factors include interest rate uncertainty, inflationary pressure, foreign exchange impact, near-term pressures on new business growth as a result of sales and marketing capacity challenges, and buying pattern changes within areas of the markets we serve.

OUR TARGET OPERATING MODEL


Updated

Original


Medium Term (FY25)

Medium Term (FY25)

Revenue Growth

12-15%

20-25%

Adjusted Gross Margin *

65-70%

65-70%

Adjusted EBITDA Margin *

13-16%

5-15%

Free Cash Flow Margin *

16-19%

10-20%

* As a % of revenue


Our target operating model reflects the operating levels that we expect to achieve by the 12 months ended January 31, 2025 ("FY25") and maintain thereafter. Our target operating model is based on assumptions and factors that we believe are reasonable in the circumstances, given the applicable time periods, our current and past growth rates, our current customer contractual commitments and renewal experience and historic results, as well as our view of the drivers of our growth, estimated growth in our target addressable market, and our expectations for our growth strategies. Our updated target operating model and the assumptions and factors underlying and supporting its achievement are described further in the "Financial Outlook - Medium Term Target Operating Model" section of the Company's Management's Discussion and Analysis for the three and six months ended July 31, 2022 ("MD&A"). See also the assumptions and factors noted at "Forward-Looking Information" below or in the Company's MD&A.

Adjusted EBITDA Margin, Adjusted Gross Margin and Free Cash Flow Margin are non-IFRS financial measures or non-IFRS ratios. Please refer to the "Non-IFRS Financial Measures and Reconciliation of Non-IFRS Financial Measures" section of this press release for more details.

The purpose of disclosing our medium-term financial target operating model is to provide investors with more information concerning the Company's results of operations that management currently believes is achievable. However, there can be no assurance that we will be successful in achieving the levels of revenue growth, Adjusted Gross Margin, Adjusted EBITDA Margin, and Free Cash Flow Margin set out above. Nor can any assurances be given regarding the realization of our expectations and drivers that anticipated growth and margin improvements are based on.  Our target operating model is also forward-looking information for the purposes of applicable securities laws in Canada and readers are therefore cautioned that actual results may vary materially from those discussed or referenced above. See also "Summary of Factors Affecting our Performance" and "Forward-Looking Information" in the Company's MD&A and "Risk Factors" in the Company's AIF, each of which is available under the Company's profile on SEDAR at www.sedar.com, for a description of other assumptions underlying the forward-looking information and of the risks and uncertainties that generally impact our business and that could cause actual results to vary materially.

Conference Call & Webcast
D2L management will host a conference call on Thursday, September 8, 2022 at 8:30 am ET to discuss its second quarter fiscal 2023 financial results.

Date:


Thursday September 8, 2022

Time:


8:30 am (ET)

Dial in number:


Canada: 1 (833) 950-0062
United States: 1 (844) 200-6205

Access code: 531024

Webcast:


A live webcast will be available at ir.d2l.com/events-and-presentations/events/




Replay:


Canada: 1 (226) 828-7578 or US: 1 (866) 813-9403
(replay code: 463686)

Available until September 15, 2022


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; the Company's budgets, operations and taxes; the markets in which the Company operates; industry trends and the Company's competitive position; expansion of the Company's product offerings; trends in research and development expenses as a percentage of revenue; the timing and pace for achieving profitability; and expectations regarding the growth of the Company's customer base, revenue and revenue generation potential.

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 returning to levels consistent with historical experiences; the effects of foreign currency exchange rate fluctuations on our operations; the ability to seek out, enter into and successfully integrate acquisitions; 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 Company's ability to retain key personnel; the factors and assumptions discussed under "Financial Outlook - Medium Term Target Operating Model" above 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, assumptions and other factors, including but not limited to: the Company's ability to hire and retain personnel returning to levels consistent with historical experiences; the effects of foreign currency exchange rate fluctuations on our operating results; and the risks identified herein, including at "Summary of Factors Affecting Our Performance" of the Company's MD&A, or in the "Risk Factors" section of the Company's AIF. 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 clients all over the world, D2L is supporting millions of people learning online and in person. Our growing global workforce is dedicated to making the best learning products to leave the world better than they found it. Learn more about D2L for K-12, higher education and businesses at www.D2L.com.

D2L Inc.
Condensed Consolidated Interim Balance Sheets
(In U.S. dollars)

As at July 31, 2022 and January 31, 2022
(Unaudited)


July 31,

January 31,



2022

2022


Assets








Current assets:





Cash and cash equivalents

$    113,485,070

$    114,675,495



Trade and other receivables (note 3)

32,333,635

26,155,906



Uninvoiced revenue

2,341,679

2,253,146



Prepaid expenses

7,391,026

7,930,462



Deferred commissions

3,723,363

3,711,334




159,274,773

154,726,343






Non-current assets:





Prepaid expenses

158,384

178,585



Deferred income taxes

140,586

139,101



Right-of-use assets (note 4)

12,865,546

1,323,017



Property and equipment

2,492,430

2,323,708



Deferred commissions

7,525,467

7,510,242



Intangible assets

5,298,706

5,537,024



Goodwill 

7,434,702

7,474,647






Total assets

$    195,190,594

$    179,212,667







Liabilities and Shareholders' Equity








Current liabilities:





Accounts payable and accrued liabilities

$    20,205,509

$    24,340,115



Deferred revenue

96,537,092

82,915,871



Lease liabilities (note 4)

768,792

1,199,013



Provisions (note 6)

3,265,449

3,265,449




120,776,842

111,720,448







Non-current liabilities:





Deferred income taxes

366,556

418,403



Lease liabilities (note 4)

13,163,452

693,921




13,530,008

1,112,324




134,306,850

112,832,772


Shareholders' equity:





Share capital (note 8):

355,272,944

354,277,986



Additional paid-in capital

44,961,975

41,686,794



Accumulated other comprehensive loss

(3,530,963)

(3,330,708)



Deficit

(335,820,212)

(326,254,177)



60,883,744

66,379,895


Subsequent event




Contingencies




Related party transactions








Total liabilities and shareholders' equity

$    195,190,594

$    179,212,667









D2L Inc.
Condensed Consolidated Interim Statements of Comprehensive Loss
(In U.S. dollars)

For the three and six months ended July 31, 2022 and 2021
(Unaudited)


Three months ended July 31

Six months ended July 31


2022

2021

2022

2021






Revenue:






Subscription and support

$    35,817,285

$    33,005,333

$    71,583,788

$    63,566,943


Professional services and other

5,356,142

3,788,969

11,459,723

7,763,117



41,173,427

36,794,302

83,043,511

71,330,060

Cost of revenue:






Subscription and support

11,403,524

10,284,569

22,842,152

21,342,615


Professional services and other

3,184,484

2,997,665

7,262,849

5,572,809



14,588,008

13,282,234

30,105,001

26,915,424







Gross profit

26,585,419

23,512,068

52,938,510

44,414,636







Expenses:






Sales and marketing

14,021,773

11,057,440

27,078,863

21,193,790


Research and development

10,450,798

9,569,557

21,735,965

17,894,388


General and administrative

6,578,462

4,584,794

12,985,502

8,934,191



31,051,033

25,211,791

61,800,330

48,022,369







Loss from operations

(4,465,614)

(1,699,723)

(8,861,820)

(3,607,733)







Interest and other income (expenses):






Interest expense

(166,257)

(60,485)

(403,857)

(175,843)


Interest income

156,835

19,195

175,081

22,106


Loss on redeemable convertible preferred shares

(15,609,413)

(47,924,708)


Foreign exchange loss

(150,140)

(245,069)

(178,358)

(240,772)



(159,562)

(15,895,772)

(407,134)

(48,319,217)







Loss before income taxes

(4,625,176)

(17,595,495)

(9,268,954)

(51,926,950)







Income taxes (recovery):






Current

165,580

62,039

355,096

116,322


Deferred

12,616

145,678

(58,015)

206,063



178,196

207,717

297,081

322,385







Loss for the period

(4,803,372)

(17,803,212)

(9,566,035)

(52,249,335)







Other comprehensive gain (loss):






Foreign currency translation gain (loss)

(146,590)

756,922

(200,255)

1,176,970

Comprehensive loss

$  (4,949,962)

$   (17,046,290)

$   (9,766,290)

$   (51,072,365)







Loss per share – basic

$   (0.09)

$   (0.64)

$   (0.18)

$   (1.89)

Loss per share – diluted

(0.09)

(0.64)

(0.18)

(1.89)






Weighted average number of common shares – basic

53,004,320

27,968,240

52,996,253

27,690,520

Weighted average number of common shares – diluted

53,004,320

27,968,240

52,996,253

27,690,520







D2L Inc.
Condensed Consolidated Interim Statements of Shareholders' Equity (Deficiency)
(In U.S. dollars)

For the six months ended July 31, 2022 and 2021
(Unaudited)


Share Capital

Additional paid-in
capital

Accumulated other
comprehensive
loss

Deficit

Total


Shares

Amount








Balance, January 31, 2022

52,912,502

$    354,277,986

$    41,686,794

$   (3,330,708)

$   (326,254,177)

$    66,379,895

Issuance of Subordinate Voting Shares on exercise of options

120,224

994,958

(368,690)

626,268

Stock-based compensation

3,643,871

3,643,871

Other comprehensive loss

(200,255)

(200,255)

Loss for the period

(9,566,035)

(9,566,035)

Balance, July 31, 2022

53,032,726

$    355,272,944

$    44,961,975

$   (3,530,963)

$   (335,820,212)

$    60,883,744








Balance, January 31, 2021

26,468,768

$    217,633

$    45,285,371

$   (4,190,459)

$   (228,601,100)

$   (187,288,555)

Issuance of Class O common shares on exercise of options

1,521,332

17,765,188

(6,450,017)

11,315,171

Stock-based compensation

795,724

795,724

Other comprehensive gain

1,176,970

1,176,970

Loss for the period

(52,249,335)

(52,249,335)








Balance, July 31, 2021

27,990,100

$    17,982,821

$    39,631,078

$   (3,013,489)

$   (280,850,435)

$   (226,250,025)

 

D2L Inc.
Condensed Consolidated Interim Statements of Cash Flows
(In U.S. dollars)

For the six months ended July 31, 2022 and 2021
(Unaudited)




2022

2021

Operating activities:




Loss for the period

$   (9,566,035)

$   (52,249,335)


Items not involving cash:





Depreciation of property and equipment

938,887

699,429



Depreciation of right-of-use assets

1,101,355

722,331



Amortization of intangible assets

208,472

9,527



Fair value loss on redeemable convertible preferred shares

47,924,708



Stock-based compensation

3,643,871

795,724



Net interest expense

228,776

153,737



Income tax expense

297,081

322,385


Changes in operating assets and liabilities:





Trade and other receivables

(6,472,931)

(10,047,249)



Uninvoiced revenue

(115,215)

1,454,906



Prepaid expenses

505,606

(1,684,069)



Deferred commissions

(266,499)

(580,544)



Accounts payable and accrued liabilities

(4,129,872)

(4,331,171)



Deferred revenue

14,467,740

17,763,284



Right-of-use assets and lease liabilities

133,336

(18,810)


Interest received

175,081

22,106


Interest paid

(75,052)

(78,925)


Income taxes paid

(147,493)

(326,670)


Cash flows from operating activities

927,108

551,364






Financing activities:




Payment of lease liabilities

(1,113,960)

(1,178,507)


Proceeds from exercise of stock options

626,268

11,315,171


Borrowings on credit facility

7,000,003


Repayments to credit facility

(7,000,003)


Cash flows (used in) from financing activities

(487,692)

10,136,664






Investing activities:




Purchase of property and equipment

(1,113,301)

(374,161)


Issuance of shareholder loan

(16,138,612)


Cash flows used in investing activities

(1,113,301)

(16,512,773)






Effect of exchange rate changes on cash and cash equivalents

(516,540)

1,615,075

Decrease in cash and cash equivalents

(1,190,425)

(4,209,670)

Cash and cash equivalents, beginning of period

114,675,495

45,303,944

Cash and cash equivalents, end of period

113,485,070

41,094,274


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), as adjusted for changes in the fair value of redeemable preferred shares, stock-based compensation, foreign exchange gains and losses, transaction-related expenses and other income and losses. Adjusted EBITDA Margin is calculated as Adjusted EBITDA expressed as a percentage of total revenue.  For an explanation of the management's use of Adjusted EBITDA and Adjusted EBITDA Margin see "Non-IFRS and Other Financial Measures" section in the Company's MD&A.

The following table reconciles Adjusted EBITDA to 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

2022

2021

2022

2021

Loss for the period

(4,803)

(17,803)

(9,566)

(52,249)

Loss on redeemable convertible preferred shares

15,609

47,925

Stock-based compensation

1,994

406

3,644

796

Foreign exchange loss

150

245

178

241

Transaction-related costs(1)

1,585

2,302

Interest expense net of interest income

9

41

229

154

Income tax expense

178

208

297

322

Depreciation and amortization

1,007

670

2,249

1,431

Adjusted EBITDA

(1,465)

961

(2,969)

922

Adjusted EBITDA Margin

-3.6 %

2.6 %

-3.6 %

1.3 %

(1)  These costs include professional, legal, consulting and accounting fees incurred in connection with the Company's IPO, which closed on November 3, 2021, and related other activities, and are not considered indicative of continuing operations. These costs did not meet the criteria for capitalization and thus were expensed in the Company's consolidated statements of comprehensive loss. Share issuance costs that met the criteria for capitalization are described in Note 13(b) of the Company's annual audited consolidated financial statements for the year ended January 31, 2022. 


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 the management's use of Adjusted Gross Profit and Adjusted Gross Margin see "Non-IFRS and Other Financial Measures" section in the Company's MD&A.


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

2022

2021

2022

2021

Gross profit for the period

26,585

23,512

52,939

44,415

Stock based compensation

86

31

156

62

Adjusted Gross Profit

26,671

23,543

53,095

44,477

Adjusted Gross Margin

64.8 %

64.0 %

63.9 %

62.4 %


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 the management's use of Constant Currency Revenue see "Non-IFRS and Other Financial Measures" section in the Company's MD&A.

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, except for percentages)

2022

2021

2022

2021

$

$

$

$

Total revenue for the period

41,173

36,794

83,044

71,330

Impact of foreign exchange rate changes over the prior period

1,199

1,465

Constant Currency Revenue

42,372

36,794

84,509

71,330


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 the management's use of Free Cash Flow and Free Cash Flow Margins see "Non-IFRS and Other Financial Measures" section in the Company's MD&A.

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

2022

2021

2022

2021

Cash flow from operating activities

16,225

20,395

927

551

Purchase of property and equipment, net of proceeds on disposal

(209)

(230)

(1,113)

(374)

Free Cash Flow

16,016

20,165

(186)

177

Free Cash Flow Margin

38.9 %

54.8 %

-0.2 %

0.2 %


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: 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 an 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. Annual recurring revenue as at July 31, 2022 was $158.5 million ($144.0 million as at July 31, 2021).

  • Constant Currency Annual Recurring Revenue: Constant Currency Annual Recurring Revenue is defined 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. Constant Currency Annual Recurring Revenue as at July 31, 2022 was $162.4 million ($144.0 million as at July 31, 2021).

SOURCE D2L Inc.

Cision
Cision

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