D2L Inc Q4 2024 Earnings Call Transcript

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

Question: Doug Taylor - Canaccord Genuity - Analyst : Yes, thank you. Good morning, Jim, and congratulations on the progress on delivering operating leverage this year and the outlook for more. The first question, likely for Josh, ARR growth at 12% as pretty steady. You're guiding to growth in subscription and support revenue, a little shy of that at the midpoint. So perhaps I'll ask if you can maybe paint a picture of what other factors we should be taking into account here? Or is this just the D2L? Wave revenue dropping off point this year because there's is a or is there a degree of conservatism built in there?

Question: Doug Taylor - Canaccord Genuity - Analyst : And while I got you there, Josh, if I am not mistaken the guidance speaks to another potentially slight contraction or at least flat year-over-year performance for the services side of the business. Any commentary you'd like to add on that dynamic?

Question: Doug Taylor - Canaccord Genuity - Analyst : Okay. And then maybe a question for John or Steven, if your voice can handle it here. The D2L wave spin out was, you know, it's a logical move. However, it was one point of differentiation that you highlighted in your efforts to date to penetrate the the enterprise market. So maybe it's a good time for you to maybe get you to speak to your investment in the enterprise segment and what initiatives you are focused on to help capture share within that market?

Question: Doug Taylor - Canaccord Genuity - Analyst : Thank you. I'll pass the line.

Question: Christian Sgro - Eight Capital - Analyst : Hi, good morning and thanks for taking my questions. I'll follow on with the question on the corporate market and your strategy there as well. To the extent quantitatively or just qualitatively, could you compare the pace of growth you'd expect from the corporate market going forward as compared to your core academic markets?

Question: Christian Sgro - Eight Capital - Analyst : Perfect. And I ask a second question here. On the elongated sales cycles, which are quickly called out a moment ago, peers are referencing the same, no longer sales cycles today, it's been a phenomenon for quarters years now. My question would be, if you can provide color maybe around what that means, what stalls the process and then the signs you look for maybe in North America at least to show that buying activities back or to pre-pandemic levels if you could color it as slower or less robust as it was maybe two, three years ago?

Question: Christian Sgro - Eight Capital - Analyst : Thanks for the color John. Thank you for taking my questions. I'll pass the line.

Question: Daniel Chan - TD Cowen - Analyst : Hi, good morning. Another question on the market share. You've been taking market share from legacy players like Blackboard. But when I look at one of your main competitors in the higher North American hired space, they're calling for 5% organic growth next year. So your 10% suggests you're going to be taking market share from them as well. Have you been seeing a lot more of that where you guys are winning deals against them or maybe even displacing them? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. APRIL 04, 2024 / 12:30PM, DTOL.TO - Q4 2024 D2L Inc Earnings Call

Question: Daniel Chan - TD Cowen - Analyst : That's helpful, thanks. And then just digging into this, the Blackboard and Moodle displacement. Steve mentioned that they've got 70% to 80% presence in international markets. Do you think you can apply the same successful North American strategy to those international markets to win market share there? Or do you need to make product and sales strategy changes to address those?

Question: Daniel Chan - TD Cowen - Analyst : That's helpful. Maybe a final question, just on the D2L always spin out, it sounds like EBITDA margin will expand post spin out. How should we think about the EBITDA margin pre and post transaction in your full year target?

Question: Daniel Chan - TD Cowen - Analyst : Thank you.

Question: Paul Treiber - RBC Capital Markets - Analyst : Thanks very much and good morning. Just a question on the long-term structural growth rate the market in just looking at your medium-term growth outlook calls for faster growth than your '25 guidance. It looks like '25 that seeing some headwinds maybe from elongated sales cycle. But the question is just around the longer term, what gives you confidence in the long-term growth rate in the fundamental opportunity here?

Question: Paul Treiber - RBC Capital Markets - Analyst : That was really helpful. Thank you. You mentioned that digitization of education. Do you see or how impactful is generative AI as part of that trend. And you see generative AI as a tool to further improve productivity for your users. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. APRIL 04, 2024 / 12:30PM, DTOL.TO - Q4 2024 D2L Inc Earnings Call And then to what degree have you shifted your product roadmap to address generative AI? Got a couple of a couple of new features, but can you speak to what hasn't been announced to the jury that you're shifting towards generative AI?

Question: Paul Treiber - RBC Capital Markets - Analyst : Good to hear. Thanks for taking the questions.

Question: Suthan Sukumar - Stifel - Analyst : Good morning, gents, and congrats on a strong finish to the year. First question I had was really more of a follow-up on the spending environment hearing, obviously that sales cycles remain extended. But from your perspective, what may have changed in terms of buyer requirements and the potential scope of deals versus maybe a year ago?

Question: Suthan Sukumar - Stifel - Analyst : Okay, great. Thank you, thanks for the color. The next question I had was (inaudible) partners. Could you provide a quick update on your partner strategy. How are you guys thinking about the role of partners to extend the D12 platform here?

Question: Suthan Sukumar - Stifel - Analyst : Okay, great. And I guess the last question for me is just really on capital allocation. Cash balance is quite healthy and you guys are now consistently profitable and cash flow generative. How does M&A fit as part of your total growth strategy? And what would be your priorities there on that front?

Question: Suthan Sukumar - Stifel - Analyst : Okay, great. Thank you, guys, and congrats again. I'll pass the line.