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D2L Inc. Announces Fourth Quarter and Fiscal Year 2022 Financial Results

03/28/2022
  • Total revenue grows 22% for Q4 to US$41.4 million and 20% for full year to US$151.9 million
  • Subscription and support revenue increases by 19% for Q4 to US$36.2 million and by 19% for full year to US$134.7 million

TORONTO, March 28, 2022 (GLOBE NEWSWIRE) --  D2L Inc. (TSX: DTOL) (“D2L” or the “Company”), a global learning technology leader, today announced financial results for its fiscal 2022 fourth quarter and year ended January 31, 2022. All amounts are in U.S. dollars and all figures are prepared in accordance with International Financial Reporting Standards (IFRS) unless otherwise indicated.

“We had a strong fourth quarter to close out an excellent year, which saw us complete our public offering, achieve our target of 20% top-line growth, add roughly $25 million in new annual recurring revenue, and significantly grow our base of customers across our key verticals,” said John Baker, President and CEO of D2L. “Our record results speak to increasing new customer momentum and the sustained tailwinds in our markets.”

Mr. Baker added: “As we look ahead to a new fiscal year, our outlook for sustained growth is supported by increasing demand for better learning experiences as evidenced by robust RFP activity both in North America and internationally. With a strong balance sheet, we are pursuing a strategy to press our advantage by making significant investments in both direct and indirect go-to-market strategies and enhancements to our platform that will bring even greater value to educators, employers, and learners.”

Fourth Quarter Fiscal 2022 Financial Highlights

  • Total revenue of $41.4 million, up 22% from the comparative period in the prior year.
  • Subscription and support revenue of $36.2 million, an increase of 19% over the prior year.
  • Annual Recurring Revenue2 increased by $25.0 million or 19% year-over-year to $154.5 million as at Jan 31, 2022, compared with $129.5 million as at January 31, 2021.
  • Continued success retaining and expanding revenue from the existing customer base, with Net Revenue Retention2 of 107% at year end, consistent with the prior year.
  • Gross Profit of $26.5 million (64.0% of revenue), an increase of 34% from Gross Profit of $19.8 million (58.5% of revenue) in the prior year.
  • Adjusted Gross Profit1 of $26.5 million (Adjusted Gross Margin1 of 64.1%), an increase of 34% from Adjusted Gross Profit of $19.9 million (Adjusted Gross Margin of 58.5%) in the prior year.
  • Adjusted EBITDA1 loss of $0.4 million, compared to Adjusted EBITDA loss of $1.0 million for the comparative period in the prior year.
  • Loss for the period decreased to $3.9 million, compared with a loss for the period of $11.2 million in the same quarter of the prior year. The year-over-year improvement was mainly attributable to an increase in gross profit and the fact the prior year period included an $8.1 million loss on redeemable convertible preferred shares.
  • Cash flow used in operating activities of $4.0 million, versus $1.3 million in the prior year, and negative Free Cash Flow1 of $4.1 million, compared with negative $1.6 million in the prior year.
  • In November 2021, completed initial public offering (IPO) for total gross proceeds of $120.1 million (C$150.0 million), $69.8 million (C$88 million) to D2L after factoring the secondary offering and underwriter commissions.
  • Strong balance sheet at year end, with cash of $114.7 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.

Fourth Quarter Business & Operating Highlights

  • D2L’s customer list grew to 1,150 at January 31, 2022 (from over 970 as at January 31, 2021) representing a broad cross-section of colleges, universities, K-12 school districts and companies in more than 40 countries.
  • Appointed seasoned technology executive Stephen Laster as Chief Operating Officer, to lead D2L’s product and services teams focusing on building an extraordinary client experience and a learning platform that helps people achieve more than they dreamed possible.
  • Built on progress with the agreement signed in fall 2021 with the State University of New York (SUNY) to make D2L Brightspace available to its full network of campuses, with 57 campuses already electing to migrate, allowing faculty and approximately 370,000 students with access to a single, flexible and streamlined learning innovation platform.
  • Signed a new customer agreement with the University of Phoenix to help support their upcoming direct-assessment, competency-based education programs.
  • Signed a new customer agreement with Pittsburgh Technical College to deliver D2L Brightspace to more than 1,500 learners across more than 30 associate, bachelor’s and certificate programs.
  • Signed a new customer agreement with University of Cape Town, the oldest higher education institution in South Africa, to deliver D2L Brightspace to nearly 29,000 students who come from over 100 countries across the globe.
  • Signed a new customer agreement with British Columbia’s Ministry of Education to help deliver D2L Brightspace’s exceptional, flexible learning experiences for up to 670,000 K-12 learners across the province. 
  • Signed a new customer agreement with the University of Florida’s Lastinger Center to improve outcomes across three K-12 education milestones and grow its US professional learning reach.
  • Renewed existing customer agreements with the University System of Georgia and Minnesota State University to continue delivering exceptional learning experiences across these systems.
  • Signed a new customer agreement with the International Sports Sciences Association, a leading fitness and exercise certification association, to train and certify professional fitness trainers, personal trainers, strength and conditioning coaches, and nutritionists.
  • Signed a new customer agreement with Supporting Families Together Association, an organization that provides services and supports to member agencies positively impacting children, parents and childcare providers, to help deliver employee training and continuing education programs.
  • Received the following awards and recognition: the Glassdoor Employees’ Choice Award, which recognizes the Best Places to Work in 2022 in Canada; the 2021 Candidate Experience Award for employers in the small employee category and the number four employer overall in North America – ahead of other major brands and companies; and named as one of Canada’s Top Employers for Young People in 2021.

Fourth Quarter and Full Year Fiscal 2022 Financial Results
        
Selected Financial Measures

                   
  Three months ended January 31,   Fiscal year ended January 31,
  2022   2021   Change Change   2022   2021   Change Change
  $ $ $ %   $ $ $ %
Subscription & Support Revenue 36,191   30,290   5,901   19.5 %   134,688   112,916   21,772   19.3 %
Professional Services & Other Revenue 5,215   3,646   1,569   43.0 %   17,192   13,456   3,736   27.8 %
Total Revenue 41,406   33,936   7,470   22.0 %   151,880   126,372   25,508   20.2 %
                   
Gross Profit 26,516   19,841   6,675   33.6 %   87,947   77,080   10,867   14.1 %
Adjusted Gross Profit 1 26,544   19,864   6,680   33.6 %   96,146   77,158   18,988   24.6 %
Adjusted Gross Margin1 64.1 % 58.5 %       63.3 % 61.1 %    
Loss for the period (3,860 ) (11,167 ) 7,307   65.4 %   (97,653 ) (41,496 ) (56,157 ) -135.3 %
Adjusted EBITDA (loss)1 (433 ) (1,021 ) 588   57.6 %   136   6,020   (5,884 ) -97.7 %
Cash Flows from (used in) Operating Activities (3,965 ) (1,343 ) (2,622 ) -195.2 %   112   16,808   (16,696 ) -99.3 %
Free Cash Flow1 (4,061 ) (1,604 ) (2,457 ) -153.2 %   (684 ) 15,132   (15,186 ) -100.4 %

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.

Financial Outlook

D2L is initiating financial guidance for fiscal 2023 (12 months ended January 31, 2023) as a supplement to the target operating model in the Management’s Discussion and Analysis for the year ended January 31, 2022, which reflects the operating levels the Company expects to achieve by fiscal 2025 and maintain thereafter. Consistent with the expectations outlined during its IPO, D2L plans to make significant growth investments in fiscal 2023, including investing in sales and marketing go-to-market activities, and product development, to capitalize on the growth opportunity available in its addressable market. Specifically, for fiscal 2023 the Company is issuing the following guidance:

  • Total revenue in the range of $179 million to $182 million, implying growth of 18% to 20% over fiscal 2022; and
  • Adjusted EBITDA loss in the range of $12 million to $14 million.

Conference Call & Webcast
D2L management will host a conference call on Tuesday, March 29, 2022 at 8:30 am ET to discuss its fourth quarter fiscal 2022 financial results.

Date:   Tuesday, March 29, 2022
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: 856621
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: 992139)
    Available until April 5, 2022

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, information regarding: new, renewed and expanded customer relationships; and the statements under the heading “Financial Outlook”.

Forward-looking information, including the Company’s guidance for fiscal 2023 total revenue and Adjusted EBITDA, 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 ability to seek out, enter into and successfully integrate acquisitions, including the acquisition of Bayfield Design Inc.; 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; 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, assumptions and other factors, including but not limited to the risks identified in the Company’s annual management’s discussion and analysis or in the subsequently-filed annual information form for fiscal 2022, in each case as filed under the Company’s profile on SEDAR at www.sedar.com. 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 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
IR@D2L.com
(416) 347-8954

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

As at January 31, 2022 and 2021

                           January 31, 2022 January 31, 2021
Assets
     
Current assets:    
  Cash and cash equivalents $ 114,675,495   $ 45,219,561  
  Trade and other receivables   26,155,906     14,620,383  
  Uninvoiced revenue   2,253,146     3,090,154  
  Prepaid expenses   7,930,462     5,355,166  
  Deferred commissions   3,711,334     3,441,396  
      154,726,343     71,726,660  
       
Non-current assets:    
  Restricted cash       84,383  
  Other receivables       207,018  
  Prepaid expenses   178,585     1,079,974  
  Deferred income taxes   139,101     237,809  
  Right-of-use assets   1,323,017     2,932,487  
  Property and equipment   2,323,708     2,917,308  
  Deferred commissions   7,510,242     6,174,607  
  Intangible assets   5,537,024     340,719  
  Goodwill   7,474,647      
     
Total assets $ 179,212,667   $ 85,700,965  
       
Liabilities and Shareholders' Deficiency
       
Current liabilities:    
  Accounts payable and accrued liabilities $ 24,340,115   $ 21,779,773  
  Deferred revenue   82,915,871     68,679,553  
  Lease liabilities   1,199,013     2,092,319  
  Provisions   3,265,449      
      111,720,448     92,551,645  
       
Non-current liabilities:    
  Deferred income taxes   418,403     232,915  
  Lease liabilities   693,921     2,021,425  
  Redeemable convertible preferred shares       178,183,535  
      1,112,324     180,437,875  
      112,832,772     272,989,520  
Shareholders' equity (deficiency):    
  Share capital   354,277,986     217,633  
  Additional paid-in capital   41,686,794     45,285,371  
  Accumulated other comprehensive loss   (3,330,708 )   (4,190,459 )
  Deficit   (326,254,177 )   (228,601,100 )
    66,379,895     (187,288,555 )
Commitments and contingencies    
Related party transactions    
Subsequent events    
       
Total liabilities and shareholders' equity (deficiency) $ 179,212,667   $ 85,700,965  

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

Years ended January 31, 2022 and 2021

      2022     2021  
       
Revenue:    
  Subscription and support $ 134,688,176   $ 112,916,372  
  Professional services and other   17,191,887     13,455,856  
      151,880,063     126,372,228  
Cost of revenue:    
  Subscription and support   43,962,815     39,284,128  
  Professional services and other   19,970,476     10,008,565  
      63,933,291     49,292,693  
       
Gross profit   87,946,772     77,079,535  
       
Expenses:    
  Sales and marketing   65,404,852     32,293,778  
  Research and development   46,599,481     30,816,826  
  General and administrative   50,656,674     12,188,037  
      162,661,007     75,298,641  
       
Income (loss) from operations   (74,714,235 )   1,780,894  
       
Interest and other income (expense):    
  Interest expense   (295,175 )   (233,998 )
  Interest income   170,143     83,121  
  Other income   -     18,732  
  Loss on redeemable convertible preferred shares   (22,028,109 )   (43,183,531 )
  Foreign exchange gain (loss)   (949,755 )   228,617  
      (23,102,896 )   (43,087,059 )
       
Loss before income taxes   (97,817,131 )   (41,306,165 )
       
Income taxes expense (recovery):    
  Current   245,446     293,848  
  Deferred   (409,500 )   (104,131 )
      (164,054 )   189,717  
       
Loss for the year   (97,653,077 )   (41,495,882 )
       
Other comprehensive income (loss):    
  Foreign currency translation income (loss)   859,751     (213,879 )
Comprehensive loss $ (96,793,326 ) $ (41,709,761 )
       
Loss per share – basic $ (2.88 ) $ (1.57 )
Loss per share – diluted $ (2.88 ) $ (1.57 )
     
Weighted average number of common shares – basic   33,918,112     26,467,458  
Weighted average number of common shares – diluted   33,918,112     26,467,458  

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

Years ended January 31, 2022 and 2021

  Share Capital Additional paid-in  Accumulated other  Deficit Total
  Shares Amount capital comprehensive loss
   
             
Balance, January 31, 2020 26,467,193 $ 204,587   $ 44,534,317   $ (3,976,580 ) $ (187,105,218 ) $ (146,342,894 )
Issuance of Class O common shares on exercise of options 1,575   13,046     (4,920 )           8,126  
Stock-based compensation       755,974             755,974  
Other comprehensive loss           (213,879 )       (213,879 )
Loss for the year               (41,495,882 )   (41,495,882 )
             
Balance, January 31, 2021 26,468,768 $ 217,633   $ 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       68,821,936             68,821,936  
Conversion of Series A and Series B Preferred shares, Class A common shares, Class O common shares and Class T shares to Subordinate Voting Shares and Multiple Voting Shares 19,381,248   266,034,420     (65,822,119 )           200,212,301  
Issuance of Subordinate Voting Shares upon IPO 5,489,757   75,069,071                 75,069,071  
Share issuance costs   (5,229,322 )               (5,229,322 )
Issuance of Subordinate Voting                                
Shares on exercise of options 29,267   253,680     (95,967 )           157,713  
                                 
Other comprehensive income           859,751         859,751  
Loss for the year             (97,653,077 )   (97,653,077 )
Balance, January 31, 2022 52,912,502 $ 354,277,986   $ 41,686,794   $ (3,330,708 ) $ (326,254,177 ) $ 66,379,895  
             

 

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

Years ended January 31, 2022 and 2021

        2022     2021  
Operating activities:    
  Loss for the year $ (97,653,077 ) $ (41,495,882 )
  Items not involving cash:    
    Depreciation of property and equipment   1,505,476     1,248,324  
    Depreciation of right-of-use assets   1,570,267     1,869,832  
    Amortization of intangible assets   423,396     17,727  
    Interest expense on lease liabilities   161,866     225,230  
    Fair value loss on redeemable convertible preferred shares   22,028,109     43,183,531  
    Stock-based compensation   68,821,936     755,974  
    Gain on disposal of property and equipment   ––     (3,331 )
    Loss on disposal of ROU assets   14,543     ––  
    Net interest income, less lease liability interest   (36,834 )   (74,353 )
    Income tax expense (recovery)   (164,054 )   189,717  
  Changes in operating assets and liabilities:    
    Trade and other receivables   (11,440,504 )   (102,621 )
    Uninvoiced revenue   881,396     (2,479,634 )
    Prepaid expenses   (4,829,078 )   (2,098,667 )
    Deferred commissions   (1,674,427 )   (2,129,580 )
    Accounts payable and accrued liabilities   2,815,053     5,899,196  
    Provisions   3,265,449    

 
    Deferred revenue   14,790,210     11,652,805  
    ROU assets and liabilities   (6,880 )   121,498  
  Interest received   170,143     83,121  
  Interest paid   (133,309 )   (8,768 )
  Income taxes paid   (397,430 )   (46,835 )
  Cash flows from operating activities   112,251     16,807,284  
         
Financing activities:    
  Payment of lease liabilities   (2,349,105 )   (2,146,651 )
  Proceeds from exercise of stock options   11,587,790     8,126  
  Borrowings on credit facility   7,000,003      
  Repayments to credit facility   (7,000,003 )    
  Proceeds from issuance of Subordinate Voting Shares upon IPO   75,069,071      
  Share issuance costs   (5,229,322 )    
  Net proceeds from Secondary Offering   42,984,983      
  Remittance of taxes withheld on Secondary Offering   (34,996,572 )    
  Secondary Offering funds applied towards Shareholder Loan on behalf of Shareholder   (7,988,411 )    
  Cash flows from (used in) financing activities   79,078,434     (2,138,525 )
         
Investing activities:    
  Purchase of property and equipment   (795,958 )   (1,676,196 )
  Issuance of shareholder loan   (16,143,854 )    
  Repayment of shareholder loan   12,290,894      
  Acquisition of business from related party   (5,566,118 )    
  Cash flows used in investing activities   (10,215,036 )   (1,676,196 )
         
Effect of exchange rate changes on cash, cash equivalents and restricted cash   395,902     843,292  
Increase in cash, cash equivalents and restricted cash   69,371,551     13,835,855  
Cash, cash equivalents and restricted cash, beginning of year   45,303,944     31,468,089  
Cash, cash equivalents and restricted cash, end of year $ 114,675,495   $ 45,303,944  

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 and non-IFRS ratios including Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Gross Profit, Adjusted Gross Margin, Free Cash Flow and Free Cash Flow Margin. These measures are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS. Non-IFRS financial measures and non-IFRS ratios 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 and key performance indicators 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), as adjusted for changes in the fair value of redeemable preferred shares, stock-based compensation, foreign exchange gains and losses, transaction-related expenses and other income and losses. Adjusted EBITDA Margin is calculated as Adjusted EBITDA expressed as a percentage of total revenue.

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
January 31
  Fiscal year ended
January 31
  2022   2021     2022   2021  
Loss for the period (3,860 ) (11,167 )   (97,653 ) (41,496 )
Loss on redeemable convertible preferred shares -   8,123     22,028   43,184  
Stock-based compensation(1) 1,662   331     68,822   756  
Foreign exchange loss (gain) 502   405     950   (229 )
Transaction-related costs(2) 737   347     2,529   347  
Other (income) loss (3) -   (19 )   -   (19 )
Interest income net of interest expense 33   50     125   151  
Income tax expense (recovery) (544 ) 63     (164 ) 190  
Depreciation and amortization 1,037   846     3,499   3,136  
Adjusted EBITDA (433 ) (1,021 )   136   6,020  
Revenue 41,406   33,936     151,880   126,372  
Adjusted EBITDA Margin -1.0 % -3.0 %   0.1 % 4.8 %

(1) In Fiscal 2022, these expenses were impacted by non-cash, stock-based compensation (as discussed in Note 15 of the Company’s consolidated audited financial statements) which affects the year-over-year comparisons.
(2) These costs include professional, legal, consulting and accounting fees incurred in connection with the IPO, which closed on November 3, 2021 and related other activities, and are not considered indicative of continuing operations. These costs did not meet the criteria for capitalization and thus were expensed in the Company’s consolidated statements of comprehensive loss. Share issuance costs that met the criteria for capitalization are described in Note 13(b) of the Company’s consolidated audited financial statements.
(3) Represents gains recognized from subleasing activities and are considered non-recurring and not reflective 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
January 31
  Fiscal year ended
January 31
(in thousands of U.S. dollars, except for percentages) 2022   2021     2022   2021  
Gross profit for the period 26,516   19,841     87,947   77,080  
Stock based compensation 28   23     8,199   78  
Adjusted Gross Profit 26,544   19,864     96,146   77,158  
Revenue 41,406   33,936     151,880   126,372  
Adjusted Gross Margin 64.1 % 58.5 %   63.3 % 61.1 %
                   

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
January 31
  Fiscal year ended
January 31
(in thousands of U.S. dollars, except for percentages) 2022   2021     2022   2021  
Cash flow (used in) from operating activities (3,965 ) (1,343 )   112   16,808  
Purchase of property and equipment,net of proceeds on disposal (96 ) (261 )   (796 ) (1,676 )
Free Cash Flow (4,061 ) (1,604 )   (684 ) 15,132  
Revenue 41,406   33,936     151,880   126,372  
Free Cash Flow Margin -9.8 % -4.7 %   -0.5 % 12.0 %
                   

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: 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. Annual recurring revenue as at January 31, 2022 was $154.5 million ($129.5 million as at January 31, 2021).
  • 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, 2022 was 107% (107% for the fiscal year ended January 31, 2021).

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