D2L Inc.

Hello and welcome to the D2L Inc Q1 fiscal 2025 financial results conference call. My name is Carla and I will be coordinating your call today. During the presentation, you can register to ask a question by pressing star followed by one on your telephone keypad. And if you change your mind, please press star followed by two. I will now hand the call over to Craig Armitage to begin. Craig, please go ahead.

Good morning. Welcome to the D2L Inc fiscal 2025 first quarter results conference call. Listeners are reminded that portions of today's discussion will include statements that contain forward-looking information. Any such statements are subject to risks and uncertainties that could cause actual results to differ materially from a conclusion, forecast, or projection in the forward-looking information. Further, certain material factors or assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information. For identification and discussion of such risks and certainties, factors and assumptions, as well as further information concerning forward-looking statements, please refer to the risks identified in the company's annual and interim management discussion and analysis or the most recently filed annual information form, in each case as filed under the company's profile on CDARplus at www.cdarplus.com. In addition, during this call, reference will be made to various non-IFRS financial measures, including constant currency revenue, adjusted EBITDA, adjusted gross profits, adjusted gross margin, and free cash flow. These non-IFRS financial measures do not have any standardized meanings prescribed by IFRS and may not be comparable to similar measures presented by other public companies. Please refer to the company's MV&A for the three-month Senate April 30th, 2024 for more information about these and certain other non-IFRS financial measures, including, where applicable, a reconciliation of historical non-IFRS financial measures to the most directly comparable IFRS financial measures from our financial statements. This morning's call is being recorded on June 5th, 2024 at 8.30 a.m. Eastern Time. Now I'd like to turn that call over to John Baker, Chief Executive Officer, D2L. Please go ahead, John.

Thank you, Craig, and thank you, everyone, for joining us for our Q1 earnings call. We released financial results after markets closed yesterday, which you can find on the investor relations section of our website at d2l.com. Please note that the results we're discussing today are in U.S. dollars. I'm joined this morning by Stephen Laster, our president, and Josh Huff, our CFO. On the back of delivering a strong 2024, I'm pleased to report it was a solid start to fiscal 2025, highlighted by strong growth in our subscription and support revenue, annual recurring revenue, and operating profitability. Total revenue was up 10% to $48.5 million, including 10% growth in our SaaS revenue, Annual recurring revenue was up 11% year over year to $190.3 million and increased by 12% on a constant currency basis. And adjusted EBITDA increased to $4 million, up from $2.8 million in Q1 of last year. Simply put, we have a clear path to achieve our full year growth outlook, which includes exiting the year with low to mid-teens adjusted EBITDA margins. I'm very impressed with what the team has done to make sure that we're delivering on our balance of growth and profitability. During the first quarter, D2L celebrated its 25th anniversary, an incredible milestone for our team. When I started the company in my third year of university, it was to have a transformational impact on the way the world learned, because learning has this wonderful ripple effect across our campuses, companies, communities, and country. Building more engaging and inspiring learning experiences was my inspiration at the beginning, and we are as dedicated as ever to this vision. We've clearly come a long way since those early founding days, and each quarter we continue to strengthen our fundamentals. We now have a global team supporting well over 18.5 million people using our learning platform in countries all around the world. Through our great efforts and the care of our team for our clients, D2L has become the number one learning platform in many countries around the world. For example, I just got back from Singapore where we now are number one with over 70% market share. And in our most competitive market, North American higher education, we're now the fastest growing learning management system, and we're winning more than 50% of the time. Our work with corporate clients to deliver better upskilling experiences is also growing quickly. And from a financial perspective, we have a strong balance sheet with no debt and are balancing top line growth with increasing profitability, giving us the ability to invest for the future. At the same time, as we've increased efficiencies and margins, we're making substantial investments in product innovation, doubling down on the voice of customer and our focus on the learning moment. Stephen is going to touch on a few exciting product milestones that we have ahead. In this past quarter, we also won several important awards that validate the hard work of our team. We won two Cody Awards, one for the best learning management system across education, and the second award for the best customer education LMS in the corporate market. And D12 Brightspace was also named the easiest to use learning platform by G2 for both the corporate and education markets. As we like to say, it was not easy to become the easiest to use learning platform. It was a tremendous effort and investment over many years to achieve this milestone. Our team had many thousands of design sessions with users and are really focused on building moments of delight and ease of use into the workflows that are truly transforming learning. These awards are recognition of the incredible work of many D2Lers who live our mission and obsess over customer experiences day in and day out. Thank you. It's helped us to pull ahead of our competition. As we prepare to welcome over 1,000 of our customers at our annual Fusion Conference next month, it's also a very exciting time for D2L. We're hard at work.