D2L Inc Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Doug Taylor - Canaccord Genuity - Analyst : Thank you. Good morning, everyone. Congrats on another quarter of solid execution. First question is for, I guess, either John or Stephen, with the H5P acquisition now in the fold for a couple of months, can you refresh us on your monetization plans for the expanded portfolio of interactive that you've now gotten? Perhaps maybe you could update us on the penetration rates existing for some of your modules, just to help us understand the cross-sell potential.

Question: Doug Taylor - Canaccord Genuity - Analyst : Thank you for that. The next question, the rest of world geography Eclipse Canada in terms of revenue contribution this quarter, I think, for the first time ever, which obviously demonstrates the effectiveness of your efforts to penetrate certain regions and pace to expand. So, perhaps, John, you can give us an update on how you're thinking about near-term priorities for additional markets to penetrate, assuming that you're embolden by the success that you've had to date?

Question: Doug Taylor - Canaccord Genuity - Analyst : Can I maybe beat into talking about what you think is the low-hanging fruit out there for new countries to potentially enter?

Question: Doug Taylor - Canaccord Genuity - Analyst : Okay. Maybe one last question for Josh. You referenced the purchase accounting impact. Maybe I'll ask you if you could help quantify what the impact is on your guidance and the change here versus the impact of H5P being added to the ARR. And just so everyone's understanding this right is the full amount in the ARR, but you'll have to lap some renewals to get full revenue recognition. Am I thinking about that right?

Question: Doug Taylor - Canaccord Genuity - Analyst : So, I mean, rough math, you're talking about maybe a small, maybe $1 million plus in terms of revenue impact from that?

Question: Doug Taylor - Canaccord Genuity - Analyst : Okay. Thanks so much. I'll pass the line.

Question: Gavin Fairweather - Cormark - Analyst : Hey. Good morning. Thanks for taking my questions. Maybe just to start with John, you obviously had the chance to speak with a lot of customers. Have you used any kind of further color or takeaway from those discussions on kind of their priorities or concerns or its propensity to purchase more products? Anything along that would be helpful.

Question: Gavin Fairweather - Cormark - Analyst : That's very helpful. Thank you, John. And maybe for Stephen, you cited a little bit of a shift in the pace of RFPs. I'm curious if that's just kind of timing coming on a pretty active period. Or has there been some other kind of shift in the market that you've noticed?

Question: Gavin Fairweather - Cormark - Analyst : Okay. Appreciate that. And then lastly, just on the margins. I mean the profitability certainly came in better than expected this quarter. I guess two questions. Curious if you maybe realize cost synergies a little bit earlier than you had expected. And then secondly, are you starting to eye some areas for additional investment as your margins start to trend toward those mid-teens' levels?

Question: Gavin Fairweather - Cormark - Analyst : That's it for me. Thank you so much.

Question: Paul Treiber - RBC - Analyst : Hello. Thank you so much. Good morning. Just a follow-up question on the competitive environment and your win rates. This quarter we've seen a couple of players in the space announced acquisitions that they're getting acquired. How do you think that will change the competitive environment? What have you seen in the past when it's been consolidation. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 05, 2024 / 12:30PM, DTOL.TO - Q2 2025 D2L Inc Earnings Call

Question: Paul Treiber - RBC - Analyst : And then with the profitability improving and free cash flow rising, how do you think about copper deployment here? You made the H5P acquisition, you sound quite enthusiastic on it. Do you see other opportunities to deploy capital on acquisitions like that? And how else do you think were share buybacks?

Question: Thanos Moschopoulos - BMO - Analyst : Hi, good morning. Could you speak to the opportunity for H5P in the corporate markets? And I guess, what's the current traction is and how you see that put a market potential?

Question: Thanos Moschopoulos - BMO - Analyst : Great. Looking at Canadian revenue was down year-over-year. Was that just some noise related to professional services timing? Or anything to call out there?

Question: Thanos Moschopoulos - BMO - Analyst :

Question: Thanos Moschopoulos - BMO - Analyst : Okay. Great. And then finally, just from other perspective, presumably, we should see a seasonal dip in subscription margins heading into the fall? Or should it be any different this time?

Question: Thanos Moschopoulos - BMO - Analyst : Okay. And then kind of longer term, more room as we think about the potential to expand that a bit more into '26?

Question: Thanos Moschopoulos - BMO - Analyst : Great. I'll pass the line. Thanks.

Question: Kiran Sritharan - Eight Capital - Analyst : Hey. Good morning, guys. Congratulations on the quarter and thank you for taking my questions. Can you talk to the recent growth in your ACV and how they improve attach new customers, international business or other considerations are pushing full factors here?

Question: Kiran Sritharan - Eight Capital - Analyst : Yeah. Just would like some color on the ACV and some of the pushable factors that's changed that line.

Question: Kiran Sritharan - Eight Capital - Analyst : Okay. That's good to know. And then on M&A. Your recent times have been sold in Europe. As you look at the acquisition pipe, can you compare the opportunities between North America versus abroad? And any contrast on product offerings or valuations in this would be helpful.

Question: Kiran Sritharan - Eight Capital - Analyst : Okay. Thanks, Stepehen. And then my last one here. We're seeing recent influence from governments in Canada and abroad on food and caps. Just wondering how you're looking at these developments and what your customers in those regions are saying.

Question: Kiran Sritharan - Eight Capital - Analyst : Just in the news with some recent developments from the government in Canada and abroad on student caps being implemented. Just wonder leading through into customer conversations and if there's any developments there?

Question: Kiran Sritharan - Eight Capital - Analyst : Absolutely, John. Thank you. I'll pass the line.

Question: Brian Peterson - Raymond James - Analyst : Hi. Thanks, guys. I'll keep it to one. John, historically, there have been some periods where lagging competitors have been bad actors in terms of pricing. I'm curious, as you complete the 2024 selling season, how would you characterize the higher end pricing environment in North America? And do you think price has actually become less relevant, more roman about the same in terms of ultimately impacting vendor selection? Any thoughts there? Thanks, guys. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 05, 2024 / 12:30PM, DTOL.TO - Q2 2025 D2L Inc Earnings Call

Question: Brian Peterson - Raymond James - Analyst : Appreciate the color. Thanks, John.

Question: Suthan Sukumar - Stifel - Analyst : Good morning, guys. And congrats on a nice quarter. My first question, I want to touch on the spending environment. As you guys head into the back half of the year, what changes in demand trends or priorities are you seeing as the year play out? And what are you seeing on the pipeline build relative to last year?

Question: Suthan Sukumar - Stifel - Analyst : Great. On the international momentum here, is this strength more of a function of perhaps some incremental improvements in the spending environment globally? Or is this more a function of kind of early benefits from the recent go-to-market refinements and the focus that you guys are having on key markets?

Question: Suthan Sukumar - Stifel - Analyst : Okay. Great. And then just a last one for me, guys, just on the product priority front. What are some of the top remaining kind of pain points and solution gaps that you guys are looking to address in the platform, either through internal product innovation or M&A?

Question: Suthan Sukumar - Stifel - Analyst : Thank you. Appreciate the feedback, John. Congrats again. I'll pass the line.