D2L Inc. Announces Financial Results for Third Quarter Fiscal 2022

December 8, 2021

Annual recurring revenue grows 20% year over year to US$149.6 million
Total subscription and support revenue increases by 20% for Q3 to US$34.9 million and by 19% fiscal year to date to US$98.5 million

TORONTO, Dec. 08, 2021 (GLOBE NEWSWIRE) -- D2L Inc. (TSX: DTOL) (“D2L” or the “Company”), a global learning technology leader, today announced financial results for its fiscal 2022 third quarter ended October 31, 2021.

“We’re having a strong year at D2L, and we experienced continued momentum across the business during the third quarter,” said John Baker, President and CEO of D2L. “Our results reflect an increase in new customers and expanded relationships with existing customers – early returns from our investments in sales – as well as sustained adoption of digital learning experiences across our core markets. Our year-to-date performance puts us on track to achieve approximately 20% revenue growth for the full year.”

Mr. Baker added: “In our more than 20-year history, the market backdrop and opportunity have never been stronger. D2L’s mission to transform the way the world learns is also more vital than ever, as we work with educators to tackle learning loss from the pandemic and support employers to meet the pressing need for upskilling in the workforce. With new growth capital from the recent IPO, we are executing on an expanded strategy to press our advantage and become the category leader in learning.”

Third Quarter Fiscal 2022 Financial Highlights
(All amounts are in U.S. dollars unless otherwise indicated)

  • Annual Recurring Revenue1 increased by $25.0 million or 20% year-over-year to $149.6 million as at October 31, 2021, compared with $124.6 million as at October 31, 2020.
  • Revenue of $39.1 million, up 18% from the comparative period in the prior year.
  • Subscription and support revenue of $34.9 million, an increase of 20% over the same period in the prior year.
  • Adjusted Gross Profit1 of $25.1 million (64.2% of revenue), an increase of 30% from Adjusted Gross Profit of $19.3 million (58.1% of revenue) in the prior year.
  • Gross Profit of $17.0 million, compared with $19.3 million in the prior year. Gross profit in the current period included one-time, non-cash stock-based compensation expenses of $8.1 million related to the unwinding of an Employee Stock Trust as part of the Company’s initial public offering (“IPO”).
  • Adjusted EBITDA1 loss of ($0.3) million, compared to Adjusted EBITDA of $2.1 million for the comparative period in the prior year.
  • Net loss of $41.5 million, compared with a net loss of $28.1 million in the same quarter of the prior year. The higher net loss mainly reflects one-time, non-cash stock-based compensation expenses of $65.8 million related to the unwinding of the Employee Stock Trust. These were partly offset by a one-time fair value gain of $25.9 million on the Company’s redeemable convertible preferred shares, also related to the IPO.
  • Cash flow from operating activities of $3.5 million, versus $10.1 million in the prior year, and Free Cash Flow1 of $3.2 million, compared with $9.5 million in the prior year.
  • Subsequent to quarter end, D2L completed its IPO for total gross proceeds of C$150.0 million (C$88 million to D2L after factoring the secondary offering and underwriter commissions).

1 Please refer to “Non-IFRS Financial Measures and Reconciliation of Non-IFRS Financial Measures” section of this press release.

Third Quarter Fiscal 2022 Business & Operating Highlights

  • Signed a new customer agreement with the State University of New York (SUNY), the largest comprehensive education system in the U.S., to deliver the D2L Brightspace learning environment to 400,000 learners across SUNY’s 64 colleges and universities.
  • Signed a new customer agreement with the University of Groningen, one of the oldest in the region and one of the most prestigious in the world, serving more than 34,000 students. D2L Brightspace was selected to replace a legacy learning platform. D2L now supports >40% of the top universities across the Netherlands.
  • Signed a new customer agreement with Lee Valley Tools, a Canadian business serving customers around the world, to help onboard, train and engage employees across the country using D2L Brightspace.
  • Expanded a customer agreement with Energy Safety Canada, the national safety association for Canada’s oil and gas industry. D2L Brightspace will be used to help develop and deliver health and safety training courses to ensure workers are ready to work safely.
  • Acquired exclusive course content, development tools, and talent from Bayfield Design, a provider of digital learning courseware, expanding cross-sell opportunities within the Company’s K-12 customer base.
  • Expanded a strategic partnership with Ellucian to better serve customers with an integrated platform that unites people, processes, data and technology to create highly personalized learning experiences.  
  • D2L Wave welcomed University of Manitoba, McMaster University, the University of Guelph and York University as academic partners. D2L Wave provides working professionals with opportunities to upskill and reskill through access to an online catalog of high-quality education options from leading educational institutions. 
  • Launched a new Parent and Guardian App to enhance learning collaboration post-pandemic – making it easier than ever for teachers and families to connect, stay informed, and receive notifications to support learning. 
  • Subsequent to quarter end, signed a new customer agreement with British Columbia’s Ministry of Education to help deliver Brightspace’s exceptional, flexible learning experiences for up to 670,000 learners in K-12 across the province. 

Third Quarter Fiscal 2022 Financial Results

Selected Financial Measures

  Three months ended October 31,   Nine months ended October 31,
  2021   2020   Change   Change   2021   2020   Change   Change
$   $   $   %   $   $   $   %
Subscription & Support Revenue 34,930   29,219   5,711   19.5%   98,497   82,626   15,871   19.2%
Professional Services & Other Revenue 4,214   3,953   261   6.6%   11,977   9,810   2,167   22.1%
Total Revenue 39,144   33,172   5,972   18.0%   110,474   92,436   18,038   19.5%
Gross Profit 17,016   19,261   (2,245)   -11.7%   61,431   57,239   4,192   7.3%
Adjusted Gross Profit 1 25,125   19,278   5,847   30.3%   69,602   57,294   12,308   21.5%
Adjusted Gross Margin1 64.2%   58.1%           63.0%   62.0%        
Net Income (loss) (41,543)   (28,081)   (13,462)   47.9%   (93,793)   (30,329)   (63,464)   -209.3%
Adjusted EBITDA (loss)1 (291)   2,102   (2,393)   -113.8%   631   7,041   (6,410)   -91.0%
Cash Flow from Operating Activities 3,526   10,120   (6,594)   -65.2%   4,077   18,151   (14,074)   -77.5%
Free Cash Flow1 3,200   9,469   (6,269)   -66.2%   3,377   16,736   (13,359)   -79.8%

1 Please refer to “Non-IFRS Financial Measures and Reconciliation of Non-IFRS Financial Measures” section of this press release.

Conference Call & Webcast
D2L management will host a conference call on Thursday, December 9, 2021 at 8:30 am ET to discuss its third quarter fiscal 2022 financial results.

Date:   Thursday, December 9, 2021
Time:   8:30 a.m. (ET)
Dial in number:   Canada: 1 (226) 828-7575 or 1 (833) 950-0062
United States: 1 (844) 200-6205
Access code: 097764
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: 991447)
Available until December 27, 2021

Forward-Looking Information
This press release includes statements containing “forward-looking information” within the meaning of applicable securities laws. Forward-looking information may relate to our future financial outlook and anticipated events or results and may include information regarding our financial position, business strategy, growth strategies, addressable markets, budgets, operations, financial results, taxes, dividend policy, plans and objectives. Particularly, information regarding our expectations of future results, performance, achievements, prospects or opportunities or the markets in which we operate is forward-looking information. 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. The Company has based the forward-looking information on its current expectations and projections about future events and financial trends that it believes might affect its financial condition, results of operations, business strategy and financial needs.

This forward-looking information includes, but is not limited to, statements regarding industry trends; our growth rates and growth strategies; addressable markets for our products and solutions; expansion of our product offerings; expectations regarding the growth of our customer base; expectations regarding our revenue and revenue generation potential; our business plans and strategies; and our competitive position in our industry.

Forward-looking information is based on certain assumptions 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 generate revenue while controlling costs and expenses; the Company’s ability to manage growth effectively; the ability to seek out, enter into and successfully integrate acquisitions, including the Bayfield Acquisition; 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.

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. In addition, even if the Company’s results of operations, financial condition and liquidity and the development of the industry in which it operates are consistent with the forward-looking information contained in this press release, those results or developments may not be indicative of results or developments in subsequent periods. 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 factors described in the “Risk Factors” section of the Company’s final long form prospectus dated October 27, 2021. 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. 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.

For further information, please contact:
Craig Armitage, Investor Relations
(416) 347-8954



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

As at October 31, 2021 and January 31, 2021

    October 31, 2021   January 31, 2021  
Current assets:    
  Cash and cash equivalents $ 42,855,903   $ 45,219,561  
  Trade and other receivables   28,637,213     14,620,383  
  Uninvoiced revenue   1,690,331     3,090,154  
  Prepaid expenses   5,403,177     5,355,166  
  Deferred commissions   3,737,876     3,441,396  
  Shareholder loan receivable   16,361,988      
      98,686,488     71,726,660  
Non-current assets:    
  Restricted cash       84,383  
  Other receivables       207,018  
  Prepaid expenses   188,718     1,079,974  
  Deferred income taxes   162,539     237,809  
  Right-of-use assets   1,732,711     2,932,487  
  Property and equipment   2,728,885     2,917,308  
  Deferred commissions   6,706,555     6,174,607  
  Intangible assets   7,938,950     340,719  
  Goodwill   4,939,896      
Total assets $ 123,084,742   $ 85,700,965  
Liabilities and Shareholders' Deficiency
Current liabilities:    
  Accounts payable and accrued liabilities $ 22,792,245   $ 21,779,773  
  Deferred revenue   89,517,304     68,679,553  
  Lease liabilities   1,704,238     2,092,319  
  Consideration payable   9,041,810      
  Redeemable convertible preferred shares   200,211,647      
      323,267,244     92,551,645  
Non-current liabilities:    
  Deferred income taxes   416,037     232,915  
  Lease liabilities   784,709     2,021,425  
  Redeemable convertible preferred shares       178,183,535  
      1,200,746     180,437,875  
      324,467,990     272,989,520  
Shareholders' deficiency:    
  Share capital:    
  Class A common shares   1     1  
  Class O common shares   18,150,136     217,632  
  Additional paid-in capital   105,942,854     45,285,371  
  Accumulated other comprehensive loss   (3,081,902 )   (4,190,459 )
  Deficit   (322,394,337 )   (228,601,100 )
    (201,383,248 )   (187,288,555 )
Borrowings on credit facility
Commitments and contingencies
Related party transactions    
Subsequent events    
Total liabilities and shareholders' deficiency $ 123,084,742   $ 85,700,965  


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

For the three and nine months ended October 31, 2021 and 2020

    Three months ended October 31   Nine months ended October 31  
    2021   2020   2021   2020  
  Subscription and support 34,929,904   29,219,116   98,496,847   82,626,402  
  Professional services and other 4,213,973   3,953,043   11,977,090   9,809,505  
    39,143,877   33,172,159   110,473,937   92,435,907  
Cost of revenue:        
  Subscription and support 11,471,144   10,901,699   32,813,759   28,306,474  
  Professional services and other 10,656,842   3,009,078   16,229,651   6,890,992  
    22,127,986   13,910,777   49,043,410   35,197,466  
Gross profit 17,015,891   19,261,382   61,430,527   57,238,441  
  Sales and marketing 31,285,484   7,537,595   52,479,274   22,380,325  
  Research and development 17,826,481   7,534,606   35,720,869   22,220,285  
  General and administrative 35,141,364   3,054,930   44,075,555   8,312,041  
    84,253,329   18,127,131   132,275,698   52,912,651  
Income (loss) from operations (67,237,438 ) 1,134,251   (70,845,171 ) 4,325,790  
Interest and other income (expense):        
  Interest expense (58,729 ) (55,652 ) (234,572 ) (175,167 )
  Interest income 120,860   14,947   142,966   74,349  
  Gain (loss) on redeemable convertible preferred shares 25,896,597   (28,661,178 ) (22,028,112 ) (35,061,178 )
  Foreign exchange gain (loss) (207,129 ) (650,184 ) (447,901 ) 633,755  
    25,751,599   (29,352,067 ) (22,567,619 ) (34,528,241 )
Loss before income taxes (41,485,839 ) (28,217,816 ) (93,412,790 ) (30,202,451 )
Income taxes (recovery):        
  Current 7,112   182,378   123,434   256,480  
  Deferred 50,950   (319,488 ) 257,013   (129,942 )
    58,062   (137,110 ) 380,447   126,538  
Loss for the period (41,543,901 ) (28,080,706 ) (93,793,237 ) (30,328,989 )
Other comprehensive income (loss):        
  Foreign currency translation income (loss) (68,413 ) 1,036,369   1,108,557   (148,900 )
Comprehensive loss (41,612,314 ) (27,044,337 ) (92,684,680 ) (30,477,889 )
Loss per share – basic (1.48 ) (1.06 ) (3.37 ) (1.15 )
Loss per share – diluted (1.48 ) (1.06 ) (3.37 ) (1.15 )
Weighted average number of common
 shares – basic
27,997,960   26,467,265   27,794,246   26,467,217  
Weighted average number of common
 shares – diluted
27,997,960   26,467,265   27,794,246   26,467,217  


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

For the nine months ended October 31, 2021 and 2020

  Class A
Common Shares
Class O
Common Shares
  Deficit   Total  
  Shares   Amount   Shares   Amount          
Balance, January 31, 2021 26,447,059   $ 1   21,709   $ 217,632   $ 45,285,371   $ (4,190,459 ) $ (228,601,100 ) $ (187,288,555 )
Issuance of Class O common
shares on exercise of options
    1,543,462   17,932,504   (6,502,427 )     11,430,077  
Stock-based compensation         67,159,910       67,159,910  
Other comprehensive loss           1,108,557     1,108,557  
Loss for the period             (93,793,237 ) (93,793,237 )
Balance, October 31, 2021 26,447,059   $ 1   1,565,171   $ 18,150,136   $ 105,942,854   $ (3,081,902 ) $ (322,394,337 ) $ (201,383,248 )
Balance, January 31, 2020 26,447,059   $ 1   20,134   $ 204,586   $ 44,534,317   $ (3,976,580 ) $ (187,105,218 ) $ (146,342,894 )
Stock-based compensation         425,156       425,156  
Other comprehensive income           (148,900 )   (148,900 )
Loss for the period             (30,328,989 ) (30,328,989 )
Balance, October 31, 2020 26,447,059   $ 1   20,134   $ 204,586   $ 44,959,473   $ (4,125,480 ) $ (217,434,207 ) $ (176,395,627 )


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

For the nine months ended October 31, 2021 and 2020

      2021   2020  
Operating activities:    
  Loss for the period (93,793,237 ) (30,328,989 )
  Items not involving cash:    
    Depreciation of property and equipment 1,074,877   918,230  
    Depreciation of right-of-use assets 1,168,675   1,358,322  
    Amortization of intangible assets 218,269   13,122  
    Interest on lease liabilities 160,163   174,562  
    Interest on Shareholder Loan (105,851 )  
    Fair value loss on redeemable convertible preferred shares 22,028,112   35,061,178  
    Deferred income tax expense (recovery) 257,013   (129,942 )
    Stock-based compensation 67,159,910   425,156  
  Changes in operating assets and liabilities:    
    Trade and other receivables (13,521,310 ) (4,703,001 )
    Uninvoiced revenue 1,447,632   (549,864 )
    Prepaid expenses (2,118,343 ) (1,428,727 )
    Deferred commissions (699,259 ) (2,186,137 )
    Accounts payable and accrued liabilities 491,557   4,127,719  
    Deferred revenue 20,316,131   15,442,844  
    Lease assets and liabilities (6,880 ) (43,484 )
  Cash flows from operating activities 4,077,459   18,150,989  
Financing activities:    
  Payment of lease liabilities (1,781,057 ) (1,756,980 )
  Proceeds from issuance of common shares 11,430,077    
  Borrowings on credit facility 7,000,003    
  Repayments to credit facility (7,000,003 )  
  Cash flows from (used in) financing activities 9,649,020   (1,756,980 )
Investing activities:    
  Purchase of property and equipment (699,897 ) (1,414,811 )
  Issuance of shareholder loan (16,498,329 )  
  Repayment of shareholder loan 242,191    
  Acquisition of business from related party (645,844 )  
  Cash flows used in investing activities (17,601,879 ) (1,414,811 )
Effect of exchange rate changes on cash, cash equivalents and restricted cash 1,427,359   203,177  
Increase (decrease) in cash, cash equivalents and restricted cash (2,448,041 ) 15,182,375  
Cash, cash equivalents and restricted cash, beginning of period 45,303,944   31,468,089  
Cash, cash equivalents and restricted cash, end of period 42,855,903   46,650,464  
Supplemental disclosure of cash flows:    
  Interest paid 16,303    
  Income taxes paid 393,484   339,761  


Non-IFRS Financial Measures and Reconciliation of Non-IFRS Financial Measures

The information presented in this press release refers to certain non-IFRS financial measures including Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Gross Profit, Adjusted Gross Margin, and Free Cash Flow, as well as key performance indicators used by management, such as Annual Recurring Revenue and Net Revenue Retention Rate. These measures are not recognized measures under International Financial Reporting Standards (“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 companies. 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 and key performance indicators in the evaluation of issuers. The Company’s management also uses non-IFRS financial measures and key performance indicators in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts, and assess our ability to meet our capital expenditures and working capital requirements.

Key Performance Indicators
Management uses a number of metrics, including the key performance indicators identified below, to help us evaluate the business, measure performance, identify trends affecting the business, formulate business plans and make strategic decisions. D2L’s key performance indicators are not measures calculated in accordance with IFRS and may be calculated in a manner different than similar key performance indicators used by other companies. Since some of these metrics do not have comparable IFRS measures, the Company is unable to provide quantitative reconciliations of these measures to IFRS measures. 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: D2L defines 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. D2L’s calculation of Annual Recurring Revenue assumes that customers will renew their contractual commitments as those commitments come up for renewal. The Company believes Annual Recurring Revenue provides a reasonable, real-time measure of performance in a subscription-based environment and provides visibility for potential growth to cash flows. The Company believes that an increasing Annual Recurring Revenue indicates the continued strength in the expansion of the business, and will continue to be a focus on a go-forward basis. Annual recurring revenue as at October 31, 2021 was $149.6 million ($129.5 million as at January 31, 2021).
  • Net Revenue Retention Rate: D2L defines Net Revenue Retention Rate for a fiscal year by considering all customers at the beginning of a fiscal year, and dividing its 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 added to the existing base of customers during the fiscal year being measured. The Company believes that measuring the ability to retain and expand revenue generated from the existing customer base is a key indicator of the long-term value D2L provides to its customers. Net Revenue Retention Rate for the fiscal year ended January 31, 2021 was 107% (103% for the fiscal year ended January 31, 2020).

Adjusted EBITDA
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, and transaction-related expenses.

The following table reconciles Adjusted EBITDA to net income (loss), and discloses Adjusted EBITDA Margin, for the periods indicated:

(in thousands of U.S. dollars, except for percentages) Three months ended
October 31
  Nine months ended
October 31

  2021   2020     2021   2020  
Loss for the period (41,543 ) (28,081 )   (93,793 ) (30,329 )
Loss (gain) on redeemable convertible preferred shares (25,897 ) 28,661     22,028   35,061  
Stock-based compensation(1) 66,364   204     67,160   425  
Foreign exchange loss (gain) 207   650     448   (634 )
Transaction-related costs(2) (449 ) -     1,854   -  
Interest income net of interest expense (62 ) 41     92   101  
Income tax expense 58   (137 )   380   127  
Depreciation and amortization 1,031   764     2,462   2,290  
Adjusted EBITDA (291 ) 2,102     631   7,041  
Adjusted EBITDA Margin -0.7 % 6.3 %   0.6 % 7.6 %

(1)   In the three and nine month periods ended October 31, 2021, these expenses were impacted by non-cash stock-based compensation (as discussed in Note 9 of the condensed consolidated interim financial statements) which affects the year-over-year comparisons.
(2)   These expenses include professional, legal, consulting and accounting fees incurred in connection with the Company’s Offering, which closed on November 3, 2021 and related other activities, and are considered non-recurring and not indicative of continuing operations.

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.

The following table reconciles Adjusted Gross Margin to gross profit expressed as a percentage of revenue, for the periods indicated:

  Three months ended
October 31
  Nine months ended
October 31
(in thousands of U.S. dollars, except for percentages) 2021   2020     2021   2020  
Gross profit for the period 17,016   19,261     61,431   57,239  
Stock based compensation 8,109   17     8,171   55  
Adjusted Gross Profit 25,125   19,278     69,602   57,294  
Adjusted Gross Margin 64.2 % 58.1 %   63.0 % 62.0 %

Free Cash Flow and Free Cash Flow Margins

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.

The following table reconciles cash flow from operating activities to Free Cash Flow, and discloses Free Cash Flow Margin, for the periods indicated:

  Three months ended
October 31
  Nine months ended
October 31
(in thousands of U.S. dollars, except for percentages) 2021   2020     2021   2020  
Cash flow from operating activities 3,526   10,120     4,077   18,151  
Purchase of property and equipment, net of proceeds on disposal (326 ) (651 )   (700 ) (1,415 )
Free Cash Flow 3,200   9,469     3,377   16,736  
Free Cash Flow Margin 8.2 % 28.5 %   3.1 % 18.1 %

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Source: D2L