DTOL D2L Inc

• Full-year revenue grew 11% to US$168.4 million and Constant Currency Revenue¹ increased 14% to $172.6 million
• Q4 2023 revenue grew 3% year over year to US$42.7 million and Constant Currency Revenue¹ increased 6% to US$44.0 million
• Annual Recurring Revenue² of US$168.0 million as at January 31, 2023, representing growth of 9% for the year and Constant Currency Annual Recurring Revenue ² growth of 11% for the year
• Company achieved positive full-year cash flow from operating activities of $3.8 million compared to $0.1 million in prior year
• Strong balance sheet at year end, with cash and cash equivalents of US$110.7 million and no debt

TORONTO, April 4, 2023 /CNW/ - D2L Inc. (TSX: DTOL) ("D2L" or the "Company"), a leading global learning technology company, today announced financial results for its fiscal 2023 fourth quarter and full year ended January 31, 2023 ("Fiscal 2023"). All amounts are in U.S. dollars and all figures are prepared in accordance with International Financial Reporting Standards (IFRS) unless otherwise indicated.

"As we navigated the near-term macroeconomic challenges last year, our team made good progress toward our balanced growth plan, and positioned us well for margin expansion and growth in Adjusted EBITDA and Free Cash Flow this fiscal year," said John Baker, CEO of D2L. "While we accelerate profitability, we continue to make disciplined investments to build on our success in core markets, including higher education, where we are seeing a strong competitive win rate and market share gains. The long-term demand outlook remains robust as organizations across all our markets look to replace legacy technology and experiences with a flexible, modern learning platform."

Fourth Quarter Fiscal 2023 Financial Highlights

• Total revenue of $42.7 million, up 3% from the comparative period in the prior year. Constant Currency Revenue¹ grew 6% year-over-year to $44.0 million.
• Subscription and support revenue was $37.8 million, an increase of 4% over the prior year, reflecting growth from new customers and revenue retention and expansion from existing customers, and was partially offset by foreign exchange headwinds from non-USD denominated revenues.
• Annual Recurring Revenue² as at January 31, 2023 increased by 9% year-over-year to $168.0 million and Constant Currency Annual Recurring Revenue² reached $171.4 million, an 11% increase over the prior year.
• Net Revenue Retention Rate² of 102% at year end versus 107% for the fiscal year ended January 31, 2022. Approximately 40% of the decrease year-over-year reflects the impact of foreign exchange.
• Positive Adjusted EBITDA¹ of $0.4 million, compared to an Adjusted EBITDA loss of $0.4 million for the comparative period in the prior year.
•  Loss for the period was $6.2 million, compared with a loss of $3.9 million for the same period of the prior year. The higher loss in the current period was mainly driven by a loss on impairment in the amount of $4.5 million on intangible assets acquired from Bayfield Design Inc. in the prior year.
• Cash flow used in operating activities was $5.3 million, versus $4.0 million in the same period in the prior year, and Free Cash Flow¹ was negative $7.0 million, compared to negative Free Cash flow of $4.1 million in the same period in the prior year.

Fourth Quarter and Full Year Fiscal 2023 Financial Results

Selected Financial Measures

Fourth Quarter Business & Operating Highlights

• D2L's customer list grew to more than 1,240 at January 31, 2023 (from over 1,150 as at January 31, 2022), representing a broad cross-section of colleges, universities, K-12 school districts and companies in more than 40 countries.
• Continued to grow customer base in higher education around the world, as highlighted by multiple new agreements, including Marist College, DeSales University and Universidad el Bosque.
• Signed new global corporate customers, including the Canadian Association of Energy Contractors, Tennis Canada Coach Education, Rung For Women, and CCS Disability Action.
• Earned two employer of choice awards, including Canada's Top Employers for Young People 2023, for the ninth consecutive year, and one of Waterloo Area's Top Employers 2023, for the 12^th consecutive year.
• Brightspace earned two corporate awards including the 2022 Brandon Hall Group Gold Award for Best Advance in Technology Innovation for the Remote Workforce and one of Craig Weiss Group's Top 10 Learning Systems in the World 2023.
• In February, D2L announced the promotion and appointment of Josh Huff to Chief Financial Officer.

Financial Outlook

D2L is initiating financial guidance for the year ended January 31, 2024 ("Fiscal 2024") as a supplement to the target operating model, which reflects the operating levels the Company expects to achieve by the year ended January 31, 2025 ("Fiscal 2025") and maintain thereafter, and is unchanged from the target operating model disclosed in D2L's MD&A for the second quarter of Fiscal 2023 (as restated under "Medium Term Target Operating Model" on page 22 of the Company's MD&A for the year ended January 31, 2023). D2L plans to continue making measured investments for growth in Fiscal 2024, while optimizing its operations and expenditures towards increasing levels of profitability. Specifically, for Fiscal 2024 the Company is issuing the following guidance:

• Subscription and support revenue in the range of $159 million to $161 million, implying growth of 9% to 10% over Fiscal 2023;
• Total revenue in the range of $180 million to $182 million, implying growth of 7% to 8% over Fiscal 2023; and
• Adjusted EBITDA in the range of $4 million to $6 million.

The above guidance demonstrates the continuation of D2L's operations to one of balanced growth and profitability, including returning to positive Adjusted EBITDA in Fiscal 2024 relative to an Adjusted EBITDA loss in Fiscal 2023. The achievement of our positive Adjusted EBITDA guidance in Fiscal 2024, and the modeled Adjusted EBITDA outlined in our Fiscal 2025 target operating model, is based upon continued efficiencies in our operations and scale as we grow our topline revenue. These guided revenue growth rates in Fiscal 2024 are impacted by the levels of sales activity that occurred during Fiscal 2023, and the resulting impact of such activity on the corresponding revenue recognition in Fiscal 2024. This impact on revenue growth is expected to be most pronounced in the first half of Fiscal 2024, after which we expect growth rates to begin to accelerate.

Conference Call & Webcast

D2L management will host a conference call on Wednesday, April 5, 2023 at 8:30 am ET to discuss its fourth quarter fiscal 2023 financial results.

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, profitability, business strategy, performance, achievements, prospects, objectives, opportunities, business plans and growth strategies; long-term demand outlook; and the Company's expectations in respect of margin expansion and Free Cash Flow growth in Fiscal 2024.

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 expand margins, grow Adjusted EBITDA and Free Cash Flow; the effects of foreign currency exchange rate fluctuations on our operations; the effects of inflation 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 referenced under "Financial Outlook" of the Company's MD&A for the three and 12 months ended January 31, 2023 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, including at "Summary of Factors Affecting Our Performance" of the Company's MD&A for the three and 12 months ended January 31, 2023, or in the "Risk Factors" section of the Company's most recently filed Annual Information Form. 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.
Consolidated Balance Sheets
(In U.S. dollars)

As at January 31, 2023 and January 31, 2022

D2L Inc.
Consolidated Statements of Comprehensive Loss
(In U.S. dollars)
Years ended January 31, 2023 and 2022

D2L Inc.
Consolidated Statements of Changes in Shareholders' Equity
(In U.S. dollars)

Years ended January 31, 2023 and 2022

D2L Inc.
Consolidated Statements of Cash Flows
(In U.S. dollars)
Years ended January 31, 2023 and 2022

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 changes in the fair value of redeemable convertible preferred shares, stock-based compensation, foreign exchange gains and losses, transaction-related expenses, non-recurring activities, 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 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:

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" 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:

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 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:

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" section in the Company's MD&A.

The following table reconciles our Constant Currency Revenue to revenue, for the periods indicated:

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 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. 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.

• Net Revenue Retention Rate: We define Net Revenue Retention Rate for a fiscal year by considering all customers at the beginning of a fiscal year, and dividing our annual subscription revenue attributable to this group of customers at the end of the fiscal year, by the annual subscription revenue attributable to this group of customers in the prior fiscal year. By implication, this ratio, expressed as a percentage, excludes any sales from new customers acquired during the fiscal year, but does include incremental sales from the existing base of customers during the fiscal year being measured. We believe that measuring the ability to retain and expand revenue generated from the existing customer base is a key indicator of the long-term value that we provide to customers. Net Revenue Retention Rate for the fiscal year ended January 31, 2023 was 102% (107% for the fiscal year ended January 31, 2022).

SOURCE D2L Inc.