D2L Inc. Announces First Quarter Fiscal 2024 Financial Results & Increases Full-Year Adjusted EBITDA(1) Outlook

• Total Q1 revenue increased 6% year-over-year to US$44.2 million and Constant Currency Revenue¹ grew 9% year-over-year to US$45.5 million
• Subscription and support revenue increased by 10% over the prior year
• Annual Recurring Revenue² reached US$170.9 million, up 7% over the prior year, and Constant Currency Annual Recurring Revenue² grew 10%
• Net income for the period was $1.1 million

TORONTO, June 7, 2023 /CNW/ - D2L Inc. (TSX: DTOL) ("D2L" or the "Company"), a leading global learning technology company, today announced financial results for its Fiscal 2024 first quarter ended April 30, 2023. All amounts are in U.S. dollars and all figures are prepared in accordance with International Financial Reporting Standards (IFRS) unless otherwise indicated.

"It was a strong start to the new fiscal year for D2L, as we reported healthy gains in revenue and annual recurring revenue, expanded gross margins and improved profitability, demonstrating continued progress on our balanced growth plan," said John Baker, CEO of D2L. "Despite the macroeconomic environment, we are seeing an improving new business environment overall as leaders across education and business prioritize investments in better learning experiences. Our strong win rate and momentum in higher education position the company particularly well for renewed activity in this market. I'm proud of how our team is accelerating transformation as a trusted partner to our clients, working closely with them to redefine the future of learning."  

First Quarter Fiscal 2024 Financial Highlights

• Total revenue of $44.2 million, up 6% from the same period in the prior year. Constant Currency Revenue¹ grew 9% year-over-year to $45.5 million.
• Subscription and support revenue was $39.2 million, an increase of 10% over the prior year, reflecting growth from new customers and strong revenue retention and expansion from existing customers.
• Annual Recurring Revenue² as at April 30, 2023 increased by 7% year-over-year to $170.9 million and Constant Currency Annual Recurring Revenue² reached $174.5 million, a 10% increase over the prior year.
• Gross profit increased 13% to $29.9 million (67.6% gross profit margin) from $26.4 million (62.9% gross profit margin) in the same period of the prior year.
• Positive Adjusted EBITDA¹ of $2.8 million, compared with an Adjusted EBITDA loss of $1.5 million for the comparative period in the prior year.
• Income for the period was $1.1 million, compared with a loss of $4.8 million for the same period of the prior year.
• Cash flow used in operating activities was $17.0 million, versus $15.3 million in the same period in the prior year, and negative Free Cash Flow¹ was $18.7 million, compared to negative Free Cash flow of $16.2 million in the same period in the prior year. Cash flows from operations generally have a seasonal low in the first quarter each year and a seasonal high in the second quarter each year.
• Strong balance sheet at quarter end, with cash and cash equivalents of $92.1 million and no debt.

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.

First Quarter Fiscal 2024 Financial Results – Selected Financial Measures
(in thousands of U.S. dollars, except for percentages)

	Three months ended April 30
	2023	2022	Change	Change
	$	$	$	%
Subscription & Support Revenue	39,190	35,766	3,424	9.6 %
Professional Services & Other Revenue	5,038	6,104	(1,066)	-17.5 %
Total Revenue	44,228	41,870	2,358	5.6 %
Constant Currency Revenue^1	45,525	41,870	3,655	8.7 %
Gross Profit	29,880	26,353	3,527	13.4 %
Adjusted Gross Profit^1	29,991	26,423	3,568	13.5 %
Adjusted Gross Margin^1	67.8 %	63.1 %
Income (Loss) for the period	1,110	(4,763)	5,873	123.3 %
Adjusted EBITDA (Loss)^1	2,811	(1,505)	4,316	286.8 %
Cash Flows Used in Operating Activities	(17,035)	(15,298)	(1,737)	-11.4 %
Free Cash Flow^1	(18,684)	(16,202)	(2,482)	-15.3 %

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.

Business & Operating Highlights

• D2L continued to grow its customer base in education globally, including Charles Sturt University, European Association of International Education, Universidade São Francisco, Taylor University, University of Niagara Falls, and the Savannah-Chatham County Public School System in Georgia.
• Signed new corporate customers across multiple regions, including Year Up, Inc. and Sexuality Education Resource Centre.
• D2L was named one of Canada's Best Managed Companies for the 11th consecutive year and earned two awards for its innovative human resources team.
• D2L released its inaugural Environmental, Social, Governance ("ESG") Report, highlighting the Company's approach to social impact and sustainability, and its commitment to building products that help transform the way the world learns. 
• In May, D2L acquired Connected Shopping Ltd., a SaaS e-commerce and course catalog company and makers of Course Merchant. This acquisition will allow D2L to deliver Course Merchant as a part of its own suite of products to address the growing needs of higher education and training organizations worldwide.
• In May, D2L announced the appointment of Jennifer Ogden-Reese as Chief Marketing Officer.

Financial Outlook

Financial Guidance Fiscal 2024 
The Company is updating its previous guidance for Fiscal 2024 to reflect an improved Adjusted EBITDA outlook. For Fiscal 2024, the Company is expecting Adjusted EBITDA in the range of $6 million to $8 million, rather than its previous guidance in the range of $4 million to $6 million. This revision is reflective of D2L's gross margin expansion, continued cost optimization, and measured prioritization of expenditures.   

Conference Call & Webcast

D2L management will host a conference call on Thursday, June 8, 2023 at 8:30 am ET to discuss its first quarter Fiscal 2024 financial results.

Date:		Thursday, June 8, 2023
Time:		8:30 am (ET)
Dial in number:		Canada/US: 1 [phone] International: 1 [phone] Access code: 752755
Webcast:		A live webcast will be available at ir.d2l.com/events-and-presentations/events/
Replay:		Canada/US: 1 [phone] or International: [phone] (replay code: 542815) Available until June 15, 2023

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; and demand outlook.

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; and the Company's ability to retain key personnel, 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 Management's Discussion and Analysis ("MD&A") for the three months ended April 30, 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.
Condensed Consolidated Interim Balance Sheets
(In U.S. dollars)

As at April 30, 2023 and January 31, 2023
(Unaudited)

		April 30, 2023	January 31, 2023
Assets
Current assets:
	Cash and cash equivalents	$    92,092,008	$   110,732,236
	Trade and other receivables	24,637,569	20,894,794
	Uninvoiced revenue	2,931,720	2,107,015
	Prepaid expenses	7,598,592	8,183,390
	Deferred commissions	4,585,332	4,487,043
		131,845,221	146,404,478
Non-current assets:
	Other receivables	—	193,036
	Prepaid expenses	219,398	122,469
	Deferred income taxes	159,092	189,178
	Right-of-use assets	10,909,077	11,205,371
	Property and equipment	5,633,554	4,287,095
	Deferred commissions	6,999,640	6,849,779
	Intangible assets	282,034	288,099
	Goodwill	7,028,916	7,070,432
Total assets		$    163,076,932	$    176,609,937
Liabilities and Shareholders' Equity
Current liabilities:
	Accounts payable and accrued liabilities	$    17,836,607	$   23,450,767
	Deferred revenue	74,122,367	85,662,830
	Lease liabilities	1,221,201	1,127,600
		93,180,175	110,241,197
Non-current liabilities:
	Deferred income taxes	455,367	398,906
	Lease liabilities	11,815,270	11,878,556
		12,270,637	12,277,462
		105,450,812	122,518,659
Shareholders' equity:
	Share capital	359,048,816	357,639,824
	Additional paid-in capital	47,310,771	46,084,161
	Accumulated other comprehensive loss	(5,213,016)	(5,001,805)
	Deficit	(343,520,451)	(344,630,902)
		57,626,120	54,091,278
	Related party transactions
	Subsequent event
Total liabilities and shareholders' equity		$    163,076,932	$    176,609,937

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

For the three months ended April 30, 2023 and 2022
(Unaudited)

		2023	2022
Revenue:
	Subscription and support	$    39,189,661	$    35,766,503
	Professional services and other	5,038,278	6,103,581
		44,227,939	41,870,084
Cost of revenue:
	Subscription and support	11,240,740	11,438,628
	Professional services and other	3,107,304	4,078,365
		14,348,044	15,516,993
Gross profit		29,879,895	26,353,091
Expenses:
	Sales and marketing	12,440,667	13,057,090
	Research and development	11,145,353	11,285,167
	General and administrative	6,189,503	6,407,040
		29,775,523	30,749,297
Income (loss) from operations		104,372	(4,396,206)
Interest and other income (expenses):
	Interest expense	(156,008)	(237,600)
	Interest income	876,107	18,246
	Other income	15,463	—
	Foreign exchange gain (loss)	430,172	(28,218)
		1,165,734	(247,572)
Income (loss) before income taxes		1,270,106	(4,643,778)
Income taxes (recovery):
	Current	74,642	189,516
	Deferred	85,013	(70,631)
		159,655	118,885
Income (loss) for the period		1,110,451	(4,762,663)
Other comprehensive loss:
	Foreign currency translation loss	(211,211)	(53,665)
Comprehensive income (loss)		$    899,240	$   (4,816,328)
Earnings (loss) per share – basic		$   0.02	$   (0.09)
Earnings (loss) per share – diluted		0.02	(0.09)
Weighted average number of common shares – basic		53,224,007	52,987,915
Weighted average number of common shares – diluted		54,752,509	52,987,915

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

For the three months ended April 30, 2023 and 2022
(Unaudited)

	Share Capital		Additional paid-in	Accumulated other	Deficit	Total
	Shares	Amount	capital	comprehensive loss
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	128,073	1,111,373	(450,449)	—	—	660,924
Issuance of Subordinate Voting Shares on settlement of restricted share units	24,097	297,619	(397,164)	—	—	(99,545)
Stock-based compensation	—	—	2,074,223	—	—	2,074,223
Other comprehensive loss	—	—	—	(211,211)	—	(211,211)
Income for the period	—	—	—	—	1,110,451	1,110,451
Balance, April 30, 2023	53,298,700	$    359,048,816	$    47,310,771	$  (5,213,016)	$   (343,520,451)	$    57,626,120
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	85,774	667,033	(218,526)	—	—	448,507
Stock-based compensation	—	—	1,650,053	—	—	1,650,053
Other comprehensive loss	—	—	—	(53,665)	—	(53,665)
Loss for the period	—	—	—	—	(4,762,663)	(4,762,663)
Balance, April 30, 2022	52,998,276	$    354,945,019	$    43,118,321	$   (3,384,373)	$  (331,016,840)	$    63,662,127

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

For the three months ended April 30, 2023 and 2022
(Unaudited)

			2023	2022
Operating activities:
	Income (loss) for the period		$    1,110,451	$   (4,762,663)
	Items not involving cash:
		Depreciation of property and equipment	291,732	557,254
		Depreciation of right-of-use assets	321,071	629,323
		Amortization of intangible assets	4,376	55,645
		Gain on disposal of property and equipment	(15,463)	—
		Stock-based compensation	2,074,223	1,650,053
		Net interest expense (income)	(720,099)	219,354
		Income tax expense	159,655	118,885
	Changes in operating assets and liabilities:
		Trade and other receivables	(3,582,301)	3,214,425
		Uninvoiced revenue	(807,077)	(372,689)
		Prepaid expenses	448,517	452,896
		Deferred commissions	(231,019)	(214,492)
		Accounts payable and accrued liabilities	(5,551,696)	(4,965,676)
		Deferred revenue	(11,383,125)	(11,953,677)
		Right-of-use assets and lease liabilities	—	129,413
	Interest received		876,107	18,246
	Interest paid		(7,522)	(74,299)
	Income taxes paid		(22,509)	—
	Cash flows used in operating activities		(17,034,679)	(15,298,002)
Financing activities:
	Payment of lease liabilities		(132,994)	(547,484)
	Proceeds from exercise of stock options		660,924	448,507
	Taxes paid on settlement of restricted share units		(99,545)	—
	Cash flows from (used in) financing activities		428,385	(98,977)
Investing activities:
	Purchase of property and equipment		(1,664,474)	(904,353)
	Proceeds from disposal of property and equipment		15,463	—
	Cash flows used in investing activities		(1,649,011)	(904,353)
Effect of exchange rate changes on cash and cash equivalents			(384,923)	(258,681)
Decrease in cash and cash equivalents			(18,640,228)	(16,560,013)
Cash and cash equivalents, beginning of period			110,732,236	114,675,495
Cash and cash equivalents, end of period			92,092,008	98,115,482

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 Gross Profit, Adjusted Gross Margin, Free Cash Flow, 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, 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 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 April 30
	2023	2022
Income (loss) for the period	1,110	(4,763)
Stock-based compensation	2,074	1,650
Foreign exchange loss (gain)	(430)	28
Net interest expense (income)	(720)	219
Income tax expense	160	119
Depreciation and amortization	617	1,242
Adjusted EBITDA	2,811	(1,505)
Adjusted EBITDA Margin	6.4 %	-3.6 %

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:

(in thousands of U.S. dollars, except for percentages)	Three months ended April 30
	2023	2022
Gross profit for the period	29,880	26,353
Stock based compensation	111	70
Adjusted Gross Profit	29,991	26,423
Adjusted Gross Margin	67.8 %	63.1 %

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" 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 April 30
	2023	2022
Cash flow from (used in) operating activities	(17,035)	(15,298)
Net purchases of property and equipment	(1,649)	(904)
Free Cash Flow	(18,684)	(16,202)
Free Cash Flow Margin	-42.2 %	-38.7 %

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:

(in thousands of U.S. dollars)	Three months ended April 30
	2023	2022
Total revenue for the period	44,228	41,870
Negative impact of foreign exchange rate changes over the prior period	1,297	—
Constant Currency Revenue	45,525	41,870

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 April 30
(in millions of U.S. dollars, except percentages)	2023	2022	Change
	$	$	%
Annual Recurring Revenue	170.9	159.3	7.3 %
Constant Currency Annual Recurring Revenue	174.5	159.3	9.5 %

SOURCE D2L Inc.

Craig Armitage, Investor Relations, [email protected], [phone]