D2L Inc.

Hello everyone and welcome to the D2L Incorporated Q3 fiscal 2025 financial results conference call. My name is Emily and I'll be coordinating your call today. After the presentation you will have the opportunity to ask any questions which you can do so by pressing start followed by the number one on your telephone keypad. I will now turn the call over to our host Craig Armitage to begin. Please go ahead.

Good morning, ladies and gentlemen. 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 the 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, uncertainties, factors, and assumptions, as well as further information concerning forward-looking statements, please refer to the company's annual and interim management's discussion and analysis and the most recently filed annual information form. And each case is filed on 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 profit, 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 MD&A for the three and nine months ended October 31st, 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. I'd now like to turn the 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 Q3 earnings call. We released financial results after the market 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. I'm pleased to report that it was another strong quarter for D2L, highlighted by healthy growth in subscription revenue and significant margin expansion, as we successfully balanced growth and market share gains with improving profitability. Subscription and support revenue grew 13% year-over-year to $46.8 million in a quarter. Our services revenue increased to $7.5 million in the quarter. Annual recurring revenue grew 12% year-over-year, and for the first time in our history, ARR has surpassed $200 million in the quarter at $201.7 million. And adjusted EBITDA for the quarter was $10.4 million, and adjusted EBITDA margin was 19.2%, benefiting from strong subscription revenue growth, disciplined expense management, and a significant contribution for professional services, which Josh will explain later. Over the course of the fiscal 2025, we have meaningfully advanced our Rule of 40 performance through a combination of strong SAS revenue growth and margin improvements, reaching 25% for the fiscal year to date. This demonstrates our continued progress as a company, and I want to thank the entire D2L team for their hard work and commitment to building the market-leading product to providing truly exceptional client experiences. We continue to execute well, delivering efficient growth as we navigate the broader macroeconomic conditions. At the same time, as we increase profitability, we're making disciplined investments that will support our long-term growth ambition to be the market leader. We're staying focused on innovations that will improve the learning experience and make it easier for faculty and our clients to engage and inspire learners to achieve more than they ever dreamed possible. And these innovations are hitting the mark. This is showing in our pipeline generation, and it comes through in my discussions with customers. Over the past quarter, I've visited with many dozens of customers and prospects in key markets around the world, from the Netherlands to South Africa to Singapore and many other locations. These discussions are reinforcing how well the market is embracing our core learning platforms and our new product offerings, including our AI offering D2L Lumi, and Creator+. It's clear from those conversations that our roadmap is aligned with customer priorities and how much customers value the partnership with D2L and our role in transforming learning experiences and helping them achieve their strategic goals. In addition to this on-the-ground feedback, the impact of our work continues to be validated by powerful customer outcomes. For example, the American College of Financial Services has seen an 18% year-over-year increase in conferrals of undergraduate professional designations and certifications and a 13% bump in graduate degree conferrals through D2L Brightspace. ACFS was also an early adopter of our Creator Plus content offering tool and has leveraged our AI with D2L Lumi. And the results are that our faculty are seeing a material increase the speed of course design and creation and student outcomes are outperforming expectations with lumi we are strategically integrating ai into the everyday workflows within our learning platform and additional products to enhance them in meaningful ways while keeping humans at the core of everything that we do not surprisingly ai is at the top of the list in my discussions with customers and they love the thoughtfulness and the approach that we have taken with it As adoption increases, we believe AI will act as a broader catalyst for renewed market activity and investments in better learning platforms and experiences. We look forward to continuing this important work in building better learning moments and delivering delightful experiences across our growing product portfolio. We're building products that advance our goal to be the category leader in learning. With no debt, a strong balance sheet, growing cash flow, and a great team, We have the capacity to make the right investments, take market share in more markets, and advance a new one as we invest to win and continue to balance our growth and profitability. And with that, I'll turn the call over to Stephen.