Q2 2025 D2L Inc Earnings Call
Speaker Change: Ladies and gentlemen, thank you for standing by the C2L conference call, we'll begin in approximately two minutes time, thank you for standing by.
Speaker Change: Good morning, ladies and gentlemen, thank you for standing by.
Speaker Change: Welcome to the D2L Ink Disco 2025 second quarter results conference call. At this time, often dispense our innocent only mode following the presentation, we will conduct a question and answer session. The instructions will provide it for you at the time for questions. If anyone has difficulty, here in the conference.
Speaker Change: You may press start, zero, or operate resistance at any time.
Speaker Change: Listeners are reminded that portions of today's discussion will include statements that contain forward-looking information. Any such statements are subject to risking alternatives that could cause actual results to differ materially from a confusion forecast or projection in the forward-looking information. By that, 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 and certainty factors,
Speaker Change: and the functions as well as further information concerning forward-looking statements.
Speaker Change: Please refer to the couple's annual and interim management discussion and analysis, and most recent filed annual information for, in each case, as filed under the case profile on.
Speaker Change: at www.setarpast.com. In addition, during this call, reference will be made to various non-ISRF financial measures, including
Speaker Change: Consistent currency revenue, adjusted EBDA, adjusted growth profit, adjusted growth margin and free cash flow. These non-ISRS.
Speaker Change: Financial Mechanics, do not have any standardised meaning prescribed by the IFRS and may not be comparable to similar measures presented by other public companies.
Speaker Change: Please refer to the company's MD and a for the free and six months ending July 31, 2020.
Speaker Change: For more information about these and certain other non-ISRs financial measures, including where applicable a reconciliation of historical non-ISRs.
Operator: C2L, conference call will begin in approximately two minutes time. Thank you for standing by. .
Speaker Change: by Natural Measures to the most directly comparable IFRS.
Speaker Change: Financial Mechanics from our Financial Statement. This morning's call is being recorded on September 5, 2024 at 8 p.m. East and time. I would now let's turn to the conference call over to Mr John Baker. Keep executive officer of D2L. Please go ahead sir.
John Baker: Thank you, operator, and thank you everyone for joining us for our Q2 earnings call. We released financial results after markets closed yesterday, which you can find on the Investor Relations section on our website at d12.com. Please note that the results we're discussing today are in US dollars.
Speaker Change: I'm joined this morning by Stephen Laster of President and Josh Huff or CFO and I'm pleased to report it was another strong quarter for D2L.
Speaker Change: We achieved important milestones on our key growth pillars, and our financial results for the squarely target for our fiscal 2025.
Speaker Change: Total revenue increased 11% to 49.2 million and our South's revenue grew 12%.
Speaker Change: New Customer Growth with Strong and Importantly, adoption with existing clients continues to grow. Just recently we surpassed 20 million users on our platform evidence of our growing scale and impact.
Speaker Change: Annual recurring revenue grew 11% year over year to 198.3 million and 12% on a constant currency basis.
Speaker Change: I just needed that, in trees to 4.2 million up from a loss of a half a million in Q2 of last year.
Speaker Change: and we're seeing strong cash flow growth for the Trillions Valve Month period, free cash flow rose to 24 million, a 22 million increase from the equivalent 12 months comparative period.
Speaker Change: In short, our team continues to execute well on our plan of balancing roads and profitability and this sets us up well for the second half of the sixth clear.
Speaker Change: Review, we raised our fiscal 2025 guidance, and we have a clear pass to exiting this fiscal year with load to mid-teens adjusted to the amount of margin, and even higher free cash flow margin, which is typically several percentage points higher.
Speaker Change: In July, we held our annual Fusion Users Conference this year, Seoul V out.
Speaker Change: It was in Toronto and nearly 1500 people from across the globe joined this in person events.
Speaker Change: and additional 1800 people attended virtually. It was an inspiring opportunity to meet and connect with so many world-class experts, educators, and leaders. And to explore how we can create an even greater impact.
Speaker Change: Achieving better outcomes and deepening the human connection to learning.
Speaker Change: The conference theme was built around our learning transformation and the agenda highlighted how learning can be transformed with product innovation, improved accessibility, greater personalization, and a more human-centric approach to artificial intelligence.
Speaker Change: We unveiled exciting product announcements, including a launch of digital looming, our next gen AI key to the ability, and other new products that underscore our commitment to being a partner of choice and learning transformation.
Speaker Change: We also close our latest acquisitions and our largest-to-date with H5T, which is a leading staff learning solution and provider of interactive content creation software. Stephen's going to elaborate on this acquisition and cannibalism.
Stephen Laster: With an expanded product portfolio, we'll bring you even more value to our customers and the end users, helping them solve important challenges.
Stephen Laster: and at the same time, we're growing the addressable market and revenue opportunities for each well, positioning us for even better win rates and a higher net revenue retention as we continue to grow with our customers over time.
Stephen Laster: We're gaining market share, rapidly in higher education.
Stephen Laster: Adding these capabilities gives off new grossly cash and continues to strengthen our mode.
John Baker: Thank you, operator, and thank you everyone for joining us for our Q2 earnings call. We released financial results after markets closed yesterday, which you can find on the investor relations section of our website at d12.com. Please note that the results we're discussing today are in US dollars.
Stephen Laster: Our strong balance sheets and growing cash flows allows us to make organic and inorganic investments and products that delight customers while balancing our growth and possibility. This is a formula that we're going to continue to lean on to strengthen our leadership among our competitors and to become the clear category leader.
John Baker: I'm joined this morning by Stephen Laster, a president and Josh Huff, our CFO, and I'm pleased to report it was another strong quarter for d12. It achieved important milestones on our key growth pillars and our financial results for the squarely on target for fiscal 2025. Total revenue increased 11 percent to 49.2 million and our SaaS revenue grew 12 percent. New customer growth was strong and importantly adoption with existing clients continues to grow.
Speaker Change: and Special thanks to all of each of us for the working delivering these important milestones in Q2 and for helping us with a very successful back to school launch this fall.
Stephen Laster: was also gratifying to deepen our partnership with key customers this quarter at Fusion and all around the globe. It's clear, ACF is a key strategic partner in transforming the learning experience. And with that, I'm going to now turn over the call, Stephen. Stephen, over to you.
John Baker: Just recently we surpassed 20 million users on our platform, evidence of our growing scale and impact. Annual recurring revenue grew 11 percent year over year to 198.3 million and 12 percent on a constant currency basis. Just indeed that increased to 4.2 million up from a loss of a half a million in Q2 of last year. And we're seeing strong cash flow growth for the 3.012 month period, free cash flow rose to 24 million, a 22 million increase from the equivalent 12 months compared to the period.
Stephen Laster: Thanks, John, and good morning. I'll touch on our go to market activities and innovation highlights. He was an eventful quarter in both areas.
Stephen Laster: It was a solid period for new customer acquisition and booking despite the general macro trend of lower RFP activity.
Stephen Laster: We're sustaining high win rates in our major markets, which is supporting our growth and we're really proud of the great new clients our team has added this past quarter.
Stephen Laster: In our largest market, higher education, these include University of Texas at Rio Grande Valley, which services roughly 30,000 students.
John Baker: In short, our team continues to execute well on our plan of balancing growth and profitability and this sets us up well for the second half of the fiscal year. As Josh will review, we raised our fiscal 2025 guidance and we have a clear path to exiting this fiscal year with low to mid-teens adjusted even up margin and even higher free cash flow margin which is typically several percentage points higher.
Stephen Laster: A replacing a legacy vendor with bright space, because in their words, of its outstanding features and functionality, as well as its widespread adoption by other prominent universities.
Stephen Laster: and Stark State College in Ohio is a new customer of G2L as well. They also switched a bright base from a legacy vendor because of our track record and innovation.
Stephen Laster: Specifically in areas such as mobile responsiveness and the ability to support flexible learning and different pedagogies.
John Baker: In July, we held our annual fusion users conference this year sold out. It was in Toronto and nearly 1500 people from across the globe joined this in-person event an additional 1800 people attended virtually. It was an inspiring opportunity to meet and connect with so many world-class experts, educators and leaders and to explore how we can create an even greater impact in achieving better outcomes and deepening the human connection to learning. The conference theme was built around our learning transformation and the agenda highlighted how learning can be transformed with product innovation, improved accessibility, greater personalization, and a more human-centric approach to artificial intelligence. We unveiled exciting product announcements including the launch of Digital Looming, our next gen AI capability and other new products that underscore our commitment to being a partner of choice in learning transformation.
Stephen Laster: Our platform with an optimal choice for star state because they differentiate on offering multiple approaches to learning, including 24 fully online degrees and short non-credit and micro-credit credentials.
Stephen Laster: Internationally, we're solidifying our market leadership in key countries that just Singapore and the Netherlands, where we are now at more than 60% market share in higher education.
Stephen Laster: Building on this success, we recently added on the University of Applied Sciences, the largest University of Applied Sciences in Northern Netherlands.
Stephen Laster: In our corporate market, our team continues to expand the customer base and employ learning and training organizations.
Speaker Change: We recently won the Ontario Nurses Association to trade union representing more than 60,000 registered nurses and health professionals across Ontario. We also were selected by a large health care not for profits serving 50,000 members.
John Baker: We also closed our latest acquisition and our largest to date with H5P which is a leading SaaS learning solution and provider of interactive content creation software. Steven's going to elaborate on this acquisition in a moment. With an expanded product portfolio, we're bringing even more value to our customers and end users, helping them solve an important challenge, and at the same time, we're growing the addressable market and revenue opportunity for D-12, positioning us for even better wind rates and a higher net revenue retention as we continue to grow with our customers over time.
Speaker Change: In both cases, user experience and ease of use were critical when deemed for us. As with our approach to partnership, including our professional service offering and the openness of our platform with respect to integration.
Speaker Change: is a highly productive quarter on the innovation side, culminating in our fusion conference as John mentioned, where we launched two new product packages.
Speaker Change: D2L Looney, a powerful set of human-centric AI capabilities that function across our platform to build better content assessment and activities, and that same our educators valuable design and development time.
John Baker: We're gaining market share rapidly in higher education, adding these capabilities gives us new growth leads and continues to strengthen our mode. Our strong balance sheet and growing cash flows allows us to make organic and inorganic investments in products that delight customers while balancing our growth and profitability. This is a formula we're going to continue to lean on to strengthen our leadership among our competitors and to become the clear category leader.
Speaker Change: Early adoption stories are compelling, as you can see on our website.
Speaker Change: and we launched a achievement of plus, achievement of plus helps our customers make it easy to implement competency based learning, so that their learners advance and master the material and capabilities at a pace that suits the learner's best.
John Baker: A special thanks to all detourers for their work in delivering these important milestones in Q2 and for helping us put a very successful back-to-school launch this fall. It was also gratifying to deepen our partnership with key customers this quarter at Fusion and all around the globe. It's clear they see us as a key strategic partner in transforming the learning experience.
Speaker Change: Details gratify to have played a leadership role in confidence the base education over the past 20 years.
Speaker Change: Working in partnership with a world-class organization and with the introduction of achievement plus, we've now removed barriers, implementation, make it easier for our customers to adopt this transformational approach to learning.
John Baker: With that, I'm going to now turn over the call and see them. Stephen, over to you.
Speaker Change: and there's a lot more on our roadmap. We continue to make the right investment in product innovation, doubling down on the voice of the customer and our focus on the learning moment. At the same time, we're also focused on increasing the efficiency of our technology and our operation.
Stephen Laster: Thanks, John and good morning. I'll touch on our go-to-market activities and innovation highlights. It was an eventful quarter in both areas. There was a solid period for new customer acquisition and booking despite the general macro trend of lower RFP activities. We're sustaining high wind rates in our major markets which is supporting our growth and we're really proud of the great new clients our team has added this past quarter. In our largest market, higher education, these include University of Texas at Rio Grande Valley, which services roughly 30,000 students.
Speaker Change: John also highlighted the acquisition of H.S.I.P. in the quarter. We believe strongly in the power of helping our customers create easy to use learning experiences and providing the creation tools that allow them to evolve the learning moment.
Speaker Change: We identified the creator space as a strategically important area with the release of the creator-plus product. And this acquisition propels our offering and rudiment towards considerably.
Stephen Laster: They're replacing a legacy vendor with bright space because in their words, but it's outstanding features and functionality as well as its widespread adoption by other prominent universities. And Stark State College in Ohio is a new customer of Q2L as well. They also switched to bright space from a legacy vendor because of our track record and innovation, specifically in areas such as mobile responsiveness and the ability to support flexible learning and different pedagogies.
Speaker Change: We had best in class suite of over 60 interactive content types, and more importantly, add a talented team to the D2L community that is enabling us to double down on this strategy.
Speaker Change: We've integrated it with H5 to you for many years and witness how I loved their products are.
Speaker Change: Now with the support of our go to market engine, we're excited to put the full capabilities of H5P and the hands of more users around the world, and the strength and our leadership position in the growing interactive learning space.
Stephen Laster: Our platform was an optimal choice for Stark State because they differentiate on offering multiple approaches to learning including 24 fully online degrees and short non-credit and micro-credit credentials. Internationally, we're solidifying our market leadership in key countries such as Singapore and the Netherlands, where we are now at more than 60% market share in higher education. Building on this success, we recently added Hans' University of Applied Sciences, the largest University of Applied Sciences in Northern Netherlands.
Speaker Change: The customer response to this acquisition has been highly encouraging and we've had early success selling H5T's enterprise product to several by space customers.
Speaker Change: As you all know, it's back to school time for many of our customers around the world. And we're seeing strong increase in the association by those customers as learners return to their learning environments and campuses.
Speaker Change: and we're seeing healthy adoption and positive customer satisfaction with our service offerings.
Speaker Change: from our Learning Services Teams, the Technical Account Managers, to end user support. We want to give a big thank you to our Services Support and Cloud Teams, that have partnered with customers to make this back to school highly successful.
Stephen Laster: In our corporate market, our team continues to expand the customer base in employee learning and in training organizations. We recently won the Ontario Nurses Association, the Trade Union representing more than 60,000 registered nurses and health professionals across Ontario. We also were selected by a large healthcare not-for-profit serving 50,000 members. In both cases, user experience and ease of use were critical wind themes for us, as was our approach to partnership, including our professional service offering and the openness of our platform with respect to integrations.
Speaker Change: Our people continue to be the most important part of differentiating D2L and we can't thank them enough for their persistence, their patience, and their commitment to our customers.
Speaker Change: I will now turn the call over to Josh for an expanded discussion of the financial.
Josh Huff: Thanks, Stephen, and good morning. As John highlighted, our Q2 results demonstrate a balance of solid top line growth, with a significantly improved profitability.
Josh Huff: Total revenue for Q2 was 49.2 million and 11% increase over the same period last year.
Stephen Laster: It was a highly productive quarter on the innovation side, culminating in our fusion conferences, John mentioned, where we launched two new product packages, D-12 Loomy, a powerful set of human-centric AI capabilities that function across our platform to build better content, assessment, and activities, and that save our educators valuable design and development time. Early adoption stories are compelling, as you can see on our website. And we launched Achievement Plus. Achievement Plus helps our customers make it easy to implement competency-based learning so that their learners advance and master the material and capabilities at a pace that suits the learner's best.
Speaker Change: Growth was led by subscription and support revenue, which was up 12% in Q2 to 44 million.
Speaker Change: Our professional services and other revenue was modestly ahead of the prior year as 5.2 million in the quarter.
Speaker Change: and it was a solid quarter for new bookings which help drive annual recurring revenue up 11% year over year, or roughly $20 million to $198.3 million.
Speaker Change: I will also highlight that Concerncy ARR rose by 12% to 206 million.
Speaker Change: There were several components to the ARR growth this period relative to the Q1 balance.
Stephen Laster: Detail is gratified to have played a leadership role in competency-based education over the past 20 years, working in partnership with the world-class organization, and with the introduction of Achievement Plus, we've now removed barriers to implementations, make it easier for our customers to adopt this transformational approach to learning. And there's a lot more on our roadmap. We continue to make the right investment in product innovation, doubling down on the voice of the customer and our focus on the learning moments. At the same time, we're also focused on increasing the efficiency of our technology and of our operations.
Speaker Change: We added roughly 4 million of net ARR from the core business.
Speaker Change: and we added another roughly 4 million ARR met of the acquisition of H5P and the best-a-term Shieldslave.
Speaker Change: Looking at gross profits and gross margin, Q2 gross profit increased by 12% to 33.4 million and gross margin for Q2 came in at 67.9% up from 66.7% in Q2 of last year.
Speaker Change: Subscription and Support gross profit grew 12% in Q2 and subscription gross margin rose to 72.9%.
Speaker Change: and Q2 from 72.5% in the prior year based on ongoing cost optimization efforts in our cloud technology delivery.
Stephen Laster: So I've also highlighted the acquisition of H5P in the quarter. We believe strongly in the power of helping our customers create easy-to-use learning experiences and providing the creation tools that allow them to evolve the learning moment. We identify the creator's space as a strategically important area with the release of the Creator Plus product. And this acquisition propels our offering and roadmap forward considerably. We add best-in-class suite of over 60 interactive content types, and more importantly, add a talented team to the D2L community that is enabling us to double down on this strategy.
Speaker Change: A few quick comments on operating expenses.
Speaker Change: Operating expenses for the second quarter were 34.9 million, flat year over year.
Speaker Change: As a percentage of revenue, total opx was 71% this quarter versus 78% of revenue in last year's Q2. A 700 basis point improvement in operating leverage.
Speaker Change: I remind you that expenses are elevated in the second quarter each year due to our annual fusion conference which through record attendance this year and offers a strong opportunity to connect with existing customers and prospective customers.
Stephen Laster: We've integrated with H5P for many years and witnessed how well-loved their products are. Now with the support of our go-to-market engine, we're excited to put the whole capability of H5P in the hands of more users around the world and the strength and our leadership position in the growing interactive learning space. The customer response to this acquisition has been highly encouraging, and we've had early success selling H5P's enterprise product to several bright-space customers.
Speaker Change: The two largest expense categories, sales and marketing in R&D, were lower year over year, and have benefited from productivity and efficiency games.
Speaker Change: I would note that we expect fewer non-recurring expenses and Q3 and Q4 with the way of an H5 P-transactions completed and Q2.
Speaker Change: We're pleased with our ability to generate double digit revenue growth while driving operating efficiency, helping us make substantial progress on both top of the ability and cash flow.
Stephen Laster: As you all know, it's back to school time for many of our customers around the world, and we're seeing strong increased utilization by those customers as learned as a return to their learning environment and campuses. And we're seeing from our Learning Services teams to technical account managers to end user support. We want to give a big thank you to our services, support, and cloud teams that have partnered with customers to make this back to school highly successful. Our people continue to be the most important part of differentiating D2L and we can't thank them enough for their persistence, their patience, and their commitment to our customers.
Speaker Change: We reported adjusted EBDA of 4.2 million, or 8.6% margin in Q2, up from adjusted EBDA of negative 0.5 million, or negative 1.2% margin last year.
Speaker Change: This represents the 980 basis point increase in margin year over year.
Speaker Change: Looking at our profitability improvement over the first half of this year, an 8.2 million in a Jocce Dividet is more than we generated over the full 12 months in fiscal 2024. And represents a 600 basis point increase in margin year to date over the prior year.
Speaker Change: As John highlighted, our outlook calls for a meaningful lift in the back half of this year with an exit rate of low to mid-teen adjusted EBITDA margin as we recognize further operating scale in our business.
Josh Huff: I will now turn the call over to Josh for an expanded discussion of the financial. Thanks, Stephen, and good morning. As John highlighted, our Q2 results demonstrate a balance of solid top line growth with significantly improved profitability. Total revenue for Q2 was 49.2 million and 11% increase over the same period last year. Growth was led by subscription and support revenue which was up 12% in Q2 to 44 million. Our professional services and other revenue was modestly ahead of the prior year at 5.2 million in the quarter.
Speaker Change: Laws for the period improved to 0.3 million, compared with a law of 4.8 million for the same period of the prior year.
Speaker Change: We reported free cash flow of 31.2 million in Q2, an improvement of close to 11 million from the same period in the prior year.
Speaker Change: A reminder, cash flows from operations historically have each seasonal low in the first quarter each year and a seasonal high in the second quarter each year. Based on this seasonality, it's also helpful to look at trailing 12 months results.
Josh Huff: And it was a solid quarter for new bookings which helped drive annual recurring revenue up 11% year over year, or roughly 20 million dollars to 198.3 million. I will also highlight that constant currency ARR rose by 12% to 200.6 million. There were several components to the ARR growth this period relative to the Q1 balance. We added roughly 4 million of net ARR from the core business. And we added another roughly 4 million to ARR net of the acquisition of H5P and the Investiture of Shieldswave.
Speaker Change: Free cash flow for the 12 month period, ended July 31, 2024, was 24.4 million, up 22 million from 2.1 million for the comparable period in the prior year.
Speaker Change: We're pleased with our progress, even improving our efficiency of operations and cash low generation while making the right investments for growth.
Speaker Change: Additionally, this seasonly strong, free cash flow generation enabled us to maintain a healthy cash balance of 98 million at quarter-end, offsetting the initial purchase price from the acquisition of H5P.
Josh Huff: Looking at gross profit and gross margin, Q2 gross profit increased by 12% to 33.4 million. And gross margin for Q2 came in at 67.9% up from 66.7% in Q2 of last year. Subscription and support gross profit grew 12% in Q2 and subscription gross margin rose to 72.9% in Q2 from 72.5% in the prior year based on ongoing cost optimization efforts in our cloud technology delivery. A few quick comments on operating expenses.
Speaker Change: Lastly, with the Q2 results, we increased our fiscal 2025 guidance.
Speaker Change: reflecting a combination of continued progress in balancing top line growth.
Speaker Change: with the operating efficiency improvements, as well as the partial year contribution in the third and fourth quarter from the acquisition of H5P group, inclusive of the effects of fair value business combination accounting.
Speaker Change: Subscribe and support revenue is now expected to be in the range of 178 million to 181 million and increase of a million dollars at the midpoint from previously issued guidance.
Josh Huff: Operating expenses for the second quarter were 34.9 million flat year over year. As a percentage of revenue total effects was 71% this quarter versus 78% of revenue in last year's Q2 at 700 basis point improvement in operating leverage. A reminder that expenses are elevated in the second quarter each year due to our annual fusion conference which drew record attendance this year and offers a strong opportunity to connect with existing customers and prospective customers.
Speaker Change: We are expecting total revenue in the range of $199 million to $200 and $2 million, an increase of $1.5 million at the midpoint from previously issued guidance.
Speaker Change: and adjusted EBITDA's expected to be in the range of 22 million to 24 million, an increase of 1 million at the midpoint from previously issued guidance.
Speaker Change: In closing, we're really impressed with how the team is executing our balance growth and profitability strategies.
Speaker Change: Our strong balance sheet and growing cash flow affords us the financial flexibility to make discipline and investments for support future growth and deliver strong customer experiences.
Josh Huff: The two largest expense categories sales and marketing in R&D were lower year over year and have benefited from productivity and efficiency gains. I would note that we expect fewer non-recurring expenses in Q3 and Q4 with the wave and H5T transactions completed in Q2. We're pleased with our ability to generate double-digit revenue growth while driving operating efficiency, helping us make substantial progress on both profitability and cash flow. We reported adjusted EBITDA of 4.2 million or 8.6% margin in Q2 up from adjusted EBITDA of negative 0.5 million or negative 1.2% margin last year.
Speaker Change: With that, we'd be happy to take your questions. Operator.
Speaker Change: Thank you. If you would like to register a question, please press star for the 911 on your telephone keypad in sure in that you are unmuted locally. If you'd like to withdraw your question at any time, you can do so by pressing star, followed by two.
Speaker Change: Our first question, come from the line of Doug Taylor, of CannaCord, John and Newety. Your line is open, please go ahead.
Doug Taylor: Yeah, thank you. Good morning everyone and you've got on on another quarter of solid execution.
Doug Taylor: First question, I guess you're the John or Stephen, you know, with the H5P acquisition, you know, now in the fold for a couple of months, can you?
Josh Huff: This represents a 980 basis point increase in margin year over year. Looking at our profitability improvement over the first half of this year, the 8.2 million in adjusted EBITDA is more than we generated over the full 12 months in fiscal 2024 and represents a 600 basis point increase in margin year to date over the prior year. As John highlighted, our outlook calls for a meaningful lift in the back half of this year, with an exit rate of low to mid-teen adjusted EBITDA margin as we recognize further operating scale in our business.
Speaker Change: You know, refresh us on your monetization plans for the expanded portfolio of interactive that you've now gotten.
Speaker Change: Perhaps maybe you could update us on the penetration rates existing for some of your modules just to help us understand the cross-helped potential.
Speaker Change: Good morning Doug, and I'm great to speak with you again. We're quite excited about each FIP acquisition.
Speaker Change: For us, we saw great evidence that our tweeter plus strategy in terms of improving the learning experience through fielding interactives and practices and engagement right on the page is a very big step function improvement in the learning moment.
Josh Huff: Laws for the period improved to 0.3 million compared with the loss of 4.8 million for the same period of the prior year. We reported free cash low of 31.2 million in Q2 and improvement of close to 11 million from the same period in the prior year. A reminder cash flows from operations historically have a seasonal low in the first quarter each year and a seasonal high in the second quarter each year.
Speaker Change: for some of the requirements we've now got efficacy studies showing the number students getting aids and bees going significantly up in a controlled trial comparison group. We've also seen a client demonstrate almost a tripling of completion rates and tough bottleneck courses.
Speaker Change: It was a real impact on the quality of the experience and that's what we're trying to do here at D2L is build better learning experiences to support a client.
Josh Huff: Based on this seasonality, it's also helpful to look at trailing 12 month results. Free cash flow for the 12 month period ended July 31, 2024 was 24.4 million up 22 million from 2.1 million for the comparable period in the prior year. We're pleased with our progress in improving our efficiency of operations and cash flow generation while making the right investments for growth. Additionally, this seasonally strong free cash flow generation enabled us to maintain a healthy cash balance of 98 million at quarter-end offsetting the initial purchase price from the acquisition of H5P.
Speaker Change: H5P is a reminder that enables us to now have dozens of more interactive and ways to engage students in great learning experiences. So it pulls our roadmap forward significantly on that strategy, but that product, along which we do with creator plus. So for us.
Speaker Change: It's about enhancing that roadmap so that we can actually do more things with creator plus with our clients beyond just building the interactives and creator experiences.
Speaker Change: and so that's going to be a huge opportunity for us to increase our win rate with existing clients, driving better adoption of the technology and the touch rate. We're seeing good touch rate there now with with with with with with that product.
Josh Huff: Lastly, with the Q2 results, we increased our fiscal 2025 guidance reflecting a combination of continued progress in balancing top line growth with operating efficiency improvements as well as the partial year contribution in the third and fourth quarter from the acquisition of H5P group, inclusive of the effects of fair value business combination accounting. Subscription and support revenue is now expected to be in the range of 178 million to 181 million an increase of a million dollars at the midpoint from previously issued guidance.
Speaker Change: and I think with H5T I think we're going to continue to see that accelerate the early feedback from clients has been phenomenal.
Speaker Change: We've got a number of our key markets already buying the enterprise agreement of H5G. Now that this come on board as a part of D2L.
Speaker Change: and we see no reason why every university in college or even companies around the world that are using H5P technology today, it's open and free.
Speaker Change: for the not to upgrade to the enterprise version. So we see a tremendous opportunity as our go-to-market teams really engage to bring a better solution to the whole industry.
Josh Huff: We are expecting total revenue in the range of 199 million to 202 million an increase of 1.5 million at the midpoint from previously issued guidance and adjusted EBITDA is expected to be in the range of 22 million to 24 million an increase of 1 million at the midpoint from previously issued guidance. In closing, we're really impressed with how the team is executing our balanced growth and profitability strategy. Our strong balance sheet and growing cashflow affords us the financial flexibility to make discipline investments to support future growth and deliver strong customer experiences.
Speaker Change: All right, thank you for that.
Speaker Change: The next question, the rest of World Geography, Clips Canada in terms of revenue contribution in the score. I think for the first time, obviously, demonstrates the effectiveness of fear.
John Baker: Your efforts to penetrate certain regions and use the base to expand. So perhaps, John, you know, you can give us an update on how you're thinking about near-term priorities, core additional markets to penetrate assuming that you've, you know, you're in bold and bad success that you've had today.
John Baker: Thanks Doug, I think we're again international and corporate or two of our fastest-growing markets.
John Baker: With that, we'd be happy to take your questions. Operator? Thank you.
Speaker Change: We see in the National's a tremendous opportunity long term as more and more folks attend higher education globally That should be a good tailwind for us to continue to accelerate our growth as we look forward
Operator: If you would like to register a question, please press star for the first one on your telephone keypad and cure in that you are unmuted locally. If you'd like to enjoy your question at any time, you can do so by pressing star, followed by two.
Speaker Change: And as you point out, we're doing a very good job going into the key markets. I think we articulated as Josh pointed out, over 60% market share now in Netherlands and Singapore and other markets around the world where we're taking sort of a number one position with top tier one institutions.
Doug Taylor: Our first question comes from the line of Doug Taylor of Canacord Genonuity. Your line is open. Please go ahead. Yeah, thank you. Good morning, everyone, and you grasp on another quarter of solid execution.
Speaker Change: and so it's time for us to now take a look at going even deeper with additional adjacencies, whether it's into K12 and the corporate with some of those markets where we're seeing great adoption.
John Baker: First question to, I guess either John or Steve, 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 got? Perhaps maybe you could update us on the penetration rates existing for some of your modules just to help us understand the cross-help potential. Good morning, Doug, and great to speak with you again. We're quite excited about the H5P acquisition.
Speaker Change: but also to now branch out into other countries.
Speaker Change: to take the next steps in growing our corporate and also higher education strategy globally.
Speaker Change: So, as a reminder, in our core market higher education, more than 70% of the markets still legacy technologies, old on-prem software.
Speaker Change: that we want to replace very quickly in many of these countries around the world. And so the team is right now going to the exercise of identifying key next markets for us to jump into. While at the same time, expanding the markets to where we're already strong.
John Baker: For us, we saw great evidence that our Creator Plus strategy in terms of improving the learning experience through building interactive and practices and engagement right on the page is a very big step-function improvement in the learning moment. For some of our students getting A's and B's going significantly up in a controlled trial comparison group, we've also seen a client demonstrate almost a tripling of completion rates in tough bottleneck courses. It was a real impact on the quality of the experience, and that what we're trying to do here at T2L is build better learning experiences to support a client.
Speaker Change: Can I maybe bait you in the talking about what you think are a little hanging fruit out there for new countries to potentially enter?
Speaker Change: So what we've tried to do is really zero in on key gateway countries and we're still in expansion phase with those gateway countries, whether it's India or Mexico
Speaker Change: or in the cases of, like, aezo would be Singapore. I'm actually making a trip to Singapore later this month, also the Hong Kong.
Speaker Change: of the market globally, to try to figure out how to continue to expand in those particular regions, but also to take the next steps with other countries in the surrounding area.
John Baker: H5P as a reminder enables us to now have dozens of more interactive ways to engage students in great learning experiences. It pulls our roadmap forward significantly on that strategy for that product launch we do with Creator Plus. For us, it's about enhancing that roadmap so that we can actually do more things with Creator Plus with our clients beyond just building the interactive and creator experiences. That's going to be a huge opportunity for us to increase our win rate with existing clients, driving better adoption of the technology and attach rate.
Speaker Change: We're already seeing some of that success playing out in Asia, where we're expanding out from Singapore into Philippines, into Malaysia, into Indonesia, and we do think there's an opportunity for us to double down on that strategy as we continue to win market.
Speaker Change: Okay, maybe one last question for Josh. You referenced the purchase accounting impact, maybe LAPA if you could.
Josh Huff: I'll quantify what the impact is on your guidance.
LAPA: and the change here versus the impact of H5P being added to the ARR and just so everyone's understanding that's right. The full amount in the ARR, but you'll have to lap some renewals to get the full revenue recognition of my thinking about that right.
John Baker: We're seeing good attach rates there now with that product, and I think with H5P I think we're going to continue to see that accelerate. The early feedback from clients has been phenomenal. We've got a number of our key market clients already buying the enterprise agreement of H5P. Now that they've come on board as a part of T2L, and we see no reason why every university in college or even companies around the world that are using H5P technology today that's open and free for them not to upgrade to the enterprise version. We see a tremendous opportunity as our go-to-market teams really engage to bring a better solution to the whole industry. Thank you for that.
LAPA: Yeah, thanks Doug. Yeah, see you right, the annual recurring revenue has sort of the annual cash value of these contracts.
Speaker Change: As you know, from a gap perspective on business combination.
Speaker Change: There's a fair value adjustment to deferred revenue, which is what you're alluding to. And so that takes about half of what would otherwise be the revenue from H5P out of our sort of gap of revenue in the back out of the year.
Doug Taylor: The next question, the rest of world geography, it clips 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 use it based to expand.
Speaker Change: So I mean if you're rough maps, you're talking about maybe a small, you know, a million, maybe a million plus in terms of revenue impact from that.
Speaker Change: Yeah, and it's all part of the right neighborhood.
John Baker: 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 in bold bites. Success that you've had to date. Thanks, Doug. I think we're, again, international and corporate are two of our fastest-growing markets. We see international as a tremendous opportunity, long-term, as more and more folks attend higher education globally. That should be a good tailwind for us to continue to accelerate our growth as we look forward.
Speaker Change: Thank you.
Speaker Change: The next question, come from the line of gabbing the bear web art of a core mark, your line is open, please go ahead
Speaker Change: Oh, hey, good morning. Thanks for taking my questions. Maybe just to start with John, you know, obviously the chance to speak with a lot of customers. If you use any kind of further color or take away from those discussions on kind of their priorities or concerns or expense of the propensity to purchase more products, anything along that would be helpful.
John Baker: And as you point out, we're doing a very good job going into key markets. I think we articulated, as Josh pointed out, over 60% market share now in Netherlands and Singapore. In other markets around the world, we're taking sort of a number one position with top tier one institutions. And so it's time for us to now take a look at going even deeper with additional agencies, whether it's into K-12 and to corporate in some of those markets, where we're seeing great adoption, but also to now branch out into other countries to take the next steps in growing our corporate and also higher education strategy globally.
Speaker Change: Out Fusion was a delight that we saw there that mean events, all of the events conference.
John Baker: I think one of the things that's did it for me is clients saw the launches of new products saw the deep dive, spend a lot of time doing demos
Speaker Change: and then one of the next steps that's hardly by this now and get it implemented.
Speaker Change: You know, that's velocity of new launch to wanting to roll it out with their faculty, with their students. I've not seen that in the past. I think that really speaks to the trust the team has built by delivering really solid products that really hit the mark with the clients.
John Baker: So as a reminder, in our core market higher education, more than 70% of the markets still legacy technologies, old on-prem software, that we want to replace very quickly in many of these countries around the world. And so the teams right now going through the exercise of identifying key next markets for us to jump into while at the same time expanding the markets are already strong.
Speaker Change: You know, in terms of concerns, I think there was an initial reaction to the H5T acquisition, you know, wanting to understand what does it mean for folks that are not rice-based users.
Speaker Change: So there were a number of prospects that were there that were big fans of H5P and just one of the make sure that we weren't taking away their tools and we reassured the market that we continued expand. We will continue to expand H5P even for folks that are using our competitors learning platforms.
John Baker: Can I maybe bait you into talking about what you think is a low hanging fruit out there for new countries to potentially enter? So what we've tried to do is really zero in on key gateway countries. And we're still in expansion phase with those gateway countries, whether it's India or Mexico or in the cases of Asia would be Singapore. I'm actually making a trip to Singapore later this month, also the Hong Kong, other markets globally have to try to figure out not only how to continue to expand in those particular regions, but also take the next steps with other countries in the surrounding area.
Speaker Change: and so that could those concerns to rest. And I think we'll help us strengthen our ability to win those clients long term because we're really delivering the tools and strengthening the tools, the faculty and these organizations really love to use.
Speaker Change: You know, I think whether you're talking about corporate, we saw a huge increase in number of folks that were coming in from the corporate market over 400 folks attended fusion.
Speaker Change: from our corporate clients. That was fantastic to see these. I'm really engaging in thinking of a new ways to doing upskilling.
Speaker Change: We had a number of our big higher education clients committed to doing further code development with these wells to really shape the future of a product and roadmap of our technology.
John Baker: We're already seeing some of that success playing out in Asia, where we're expanding out from Singapore into Philippines, into Malaysia, into Indonesia. And we do think there's an opportunity for us to double down on that strategy as we continue to to win market.
Speaker Change: That was really telling. I think we've become a very strategic partner for many of these organizations around the world.
Doug Taylor: Okay, maybe one last question for Josh. You referenced the purchase accounting impact, maybe a Latvia if you could quantify what the impact is on your guidance and the change here versus the impact of the 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 the full revenue recognition. Am I thinking about that right?
Speaker Change: And I think the general excitement around how we hit the mark with AI being very thoughtful around how to do this in a way to keep the human and the loop that engages the faculty that helps them as a productivity tool was really well received by the market.
Speaker Change: I continue to see us being a key partner for many of these organizations around the world.
Speaker Change: and that building of connection and engagement that event, I think it's going to strengthen our ability to build a really significant pipeline post fusion, most growing adoption of new products, but also to be so deeper with the ones that they have.
Doug Taylor: Yeah, thanks Doug. Yeah, so you're right. The annual recurring revenue has sort of the annual cash value of these contracts. As you know, from a gap perspective on business combination, there's a fair value adjustment to deferred revenue, which is what you're alluding to. And so that takes about half of what would otherwise be the revenue from H5P out of our sort of gap rub wreck in the back half of the year.
Gavin: and I note, Gavin, one of the things that we're seeing as we return back to school for a lot of the clients is we are seeing a very significant uptake in terms of adoption for many of our largest clients, Dilguelman, majority of your seeing a very significant increase in the usage of our technology to solve.
Gavin: and so all that is a good sign that our technology is becoming more and more important on these campuses around the world.
Doug Taylor: So I mean, if you know rough math, you're talking about maybe a small, you know, a million, maybe a million plus in terms of revenue impact from that. Yeah, in the right neighborhood. Yeah, okay, thanks. I'll pass the line. Thank you.
Stephen Laster: That's a very helpful thing for that, John, and maybe for Stephen, you started a little bit of a shift in the pace of RFP, and of course, that's just kind of timing, coming off a pretty active period, or as there being some other kind of shift in the market that you've noticed.
Speaker Change: Now we're not seeing any significant market shifts, obviously there's a lot of uncertainty in the world that's had a little bit of impact on RFP activity.
Gavin Fairweaver: The next question comes from the line of Gavin Fairweaver of Cornmark, your line is open. Please go ahead. Oh, hey, good morning. Thanks for taking my questions. Maybe just to start with John, obviously the chance to speak with a lot of customers. If you use any kind of further color or takeaways from those discussions on kind of their priorities or concerns or a propensity to purchase more products, anything along that would be helpful.
Speaker Change: So it's more timing than anything we believe, but mostly we're really excited by our win rate.
Speaker Change: So we're doing very well on competing within the market, you're seeing that in our growth, you're seeing that in our activity going to 20 million users.
Speaker Change: So the market tends to be a little bit lower than we had hoped, we're still having...
Speaker Change: Great Success in gaining market share within this market and growing.
Gavin Fairweaver: Oh, Fusion was a delight this year. We sold out the main event, sold out the exact conference. I think the one thing that stood out for me is Client saw the launches of new products, saw the deep dives, spent a lot of time doing demos, and then one of the next steps of how to buy this now and get it implemented. That velocity, new launch to wanting to roll it out with their faculty, with their students.
Speaker Change: Okay, I appreciate that and then lastly, just on the margins, I mean the profitability certainly came in better than expected this quarter or curious. I guess two questions, curious if you may be realizing the cost of energy is a little bit earlier than you.
Speaker Change: And then secondly, are you starting to I, you know, some areas for additional investment as your margins start to trend towards those mid-teens levels.
Gavin Fairweaver: I've not seen that in the past. I think that really speaks to the trust the team is built by delivering really solid products that really hit the mark with the client. In terms of concerns, I think there was an initial reaction to the H5P acquisition. Mornings understand what does it mean for folks that are not bright space users. So there were a number of prospects that were there that were big stands of H5P and just one of the mixture that we weren't taking away their tools and we reassured the market that we continue to expand.
Speaker Change: Yeah, thanks Gavin Good question. You're right. We're pleased with sort of the operating efficiency we're seeing. We mentioned 700 basis point improvement in operating leverage, which is nice to see. And it's yeah, really executing well on our plans. Some of the efficiency work that we had planned for the year. We are actually able to implement a little bit earlier than anticipated, which was nice.
Speaker Change: and as we look forward to the back half of the year, as we've discussed, we see low to mid-T&E and even margins and so really the benefit of the work we've been doing over the past 12 months starting to really show itself in the back half of the year through increased profitability.
Gavin Fairweaver: We will continue to expand H5P even for folks that are using our competitors' learning platforms. That put those concerns to rest. I think we'll help us strengthen our ability to win those clients long term because we're really delivering the tools and strengthening the tools, the faculty and these organizations really love to use. I think whether you're talking about corporate, we saw a huge increase in number of folks that were coming in from the corporate market over 400 folks that tended fusion from our corporate clients.
Speaker Change: and then as we plan for next year, we are absolutely looking at areas of growth investment. Of course, being disciplined and measured with those investments, but looking for opportunities to grow the business.
Speaker Change: Thanks so much.
Speaker Change: Thank you.
Gavin Fairweaver: That was fantastic to see. I'm really engaging in thinking about new ways to doing upskilling. We had a number of our big higher education clients committed to doing further co-development with D12 to really shape the future of our products and roadmaps of our technology. That was really telling. I think we've become a very strategic partner for many of these organizations around the world. I think the general excitement around how we hit the mark with AI, being very thoughtful around how to do this in a way that keeps the human in the loop that engages the faculty that helps them as a productivity tool was really well received by the market.
Speaker Change: The next question comes from the line of Paul Triber of RBC, your line is so open. Please go ahead.
Paul Triber: Oh, thanks very much, good morning. Just a follow-up question on a competitive environment and your win rates, you know, this quarter would seem, you know, a couple of players in the space, and now it's acquisitions, or if they're going to have a card. The, how do you think that will change the competitive environment and what have you seen in the past when it has been consolidation?
Speaker Change: Yeah, thank you very much for the question, Paul. It's not new for us. We've definitely seen our competitors go through this type of transformation in the past. We do see creating uncertainty for competitors' clients, and we see that as an opportunity to pick up momentum with new prospective clients.
Gavin Fairweaver: I continue to see us being a key partner for many of these organizations around the world and that building of connection and engagement at that event, I think it's going to strengthen our ability to build a really significant pipeline post fusion, both growing adoption of new products, but also to do deeper with the ones that they have. I know Gavin, one of the things that we're seeing as we return back to school for a lot of the clients is we are seeing a very significant uptick in terms of adoption for many of our largest clients.
Speaker Change: Deachwell being very committed in maintaining our public markets home.
Speaker Change: As a differentiator, we're doubling down on our innovation and client experience.
Speaker Change: Now that's a winning combination for continuing to grow or win rates in the markets that we're competing in globally.
Gavin Fairweaver: The overwhelming majority are seeing a very significant increase in the usage of our technology this fall and so all that is a good sign that our technology is becoming more and more important on these campuses around the world. That's very helpful. Thanks, John. And maybe for Stephen, you cited a little bit of a shift in the pace of RFPs. Curious if that's just kind of timing coming off a pretty active period, or has there been, you know, some other kind of shift in the market that you've noticed?
Speaker Change: and as we build new products that open up new addressable markets for us, we see this as a tremendous opportunity to continue to grow market share through new client logo ads.
Speaker Change: Well, at the same time, picking up our work on that, that revenue retention through adding you products to take to existing clients to solve even more important problems with them.
Speaker Change: So I think we're in a very healthy spot relative to a competitor's in terms of workability to invest to grow and to drive better winter-range.
Gavin Fairweaver: No, we're not seeing any significant market shifts. We think obviously there's a lot of uncertainty in the world that's had a little bit of impact on our activity. So it's more timing than anything we believe, but mostly we're really excited by our win rate. So we're doing very well on competing within the market, you're seeing that in our growth, you're seeing that in our activity going to 20 million users. So the market tends to be a little bit lower than we had hoped.
Speaker Change: We're highly focused, we've never been more differentiated and I think that that product innovation strategy along with a better customer experience is going to help us win a lot more in the market in the years ahead.
Speaker Change: and then was with profitability of the growing and free cash flow rising. How do you think about the top of the deployment here, you may be, H.
Speaker Change: P. Iquisition is simply busy as to go on it. Do you see other offers opportunities to plug out on acquisitions like that, and how else do you think we'll share by-barks?
Gavin Fairweaver: We're still having great success in gaining market share within this market and growing. 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 and cost energies 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 towards those mid teens levels?
Speaker Change: Yeah, I think I'll split that with Josh, you know, we definitely are weighing our options in terms of scapula deployments. As we've seen good growth in terms of cash flow over the course of the last 12 months, now more than 22 million year over year.
Speaker Change: We will continue to see that cash flow continues to increase next year so we will be looking to deploy that capital.
Gavin Fairweaver: Yeah, thanks Gavin. Good question. You're right. We're pleased with sort of the operating efficiency we're seeing. We mentioned 700 basis point improvement in operating leverage, which is nice to see. And it's yeah, really executing well on our plans. Some of the efficiency work that we had planned for the year. We were actually able to implement a little bit earlier than anticipated, which was nice. And as we look forward to the back half of the year, as we've discussed, we see low to mid teen EBITDA margins.
Speaker Change: in ways that are really going to help cement us as a market leader in the space. Some of it will probably continue to go towards the MCIB. As you can imagine, we're recruiting today's not reflective of the real value of D2L.
Speaker Change: and we see that as a good return on the couple that we would deploy in that particular area.
Speaker Change: But we're also going to continue to look at different opportunities for acquisition in the space through a lot of problems. That clouds are trying to tackle and if you can find great product screen teams that can help us build world-class products that solve some of these challenges, they would make a natural fit here at D2L so...
Gavin Fairweaver: And so really the benefit of the work we've been doing over the past 12 months starting to really show itself in the back half of the year through increased profitability. And then as we plan for next year, we are absolutely looking at areas of growth investment. Of course, being disciplined and measured with those investments, but looking for opportunities to grow the business. That's it for me. Thanks so much.
Speaker Change: Again, we'll be very measured in terms of how we make those investment decisions. We want to make sure that we're doing the right things in terms of supporting our clients, but also making sure that we're balancing our growth and public ability.
John Baker: Thank you.
Speaker Change: Yeah, I think Paul John hit it on the head. I think the only thing I might add is obviously the acquisition of H5T as we've talked about.
Paul Treiber: The next question comes from the line of all driver of RBC. Your line is open. Please go ahead. Oh, thanks very much. Good morning. Just a follow up question on the competitive environment and your win rate. The, you know, this quarter we've seen, you know, couple of players in the space. Announce acquisitions that they're going to require. The, how do you think that will change the competitive environment? What have you seen in the past when it's being consolidation?
Speaker Change: Alright, thanks for taking the questions.
Speaker Change: Thank you.
Speaker Change: The next question comes from the line of Anna's moshapollah of BMO, your line is so open, please go ahead.
Anna's moshapolla: Hi, good morning. Could you speak to the Opportunity for H5P and the corporate markets? And I guess what's the current traction is and how you see that put it more potential.
Paul Treiber: Yeah. Thank you very much for the question, Paul. It's not new for us. We've definitely seen our competitors go through this type of transformation in the past. We do see it creating uncertainty for our competitors clients and we see that as an opportunity to pick up momentum with new prospective clients. D12 being very committed to maintaining our public markets home as a differentiator. We're doubling down on our innovation and client experience.
Speaker Change: Yeah, so we see a slightly incorporate as a tremendous opportunity of going ahead.
Speaker Change: [inaudible]
Speaker Change: Yeah, I was just going to say that in corporate we see a tremendous opportunity for age-five be as our corporate partners and customers are focused on engaging and efficient learning to help shape their workforce.
Paul Treiber: That's a winning combination for continuing to grow or win rates in the markets that we're competing in globally. And as we build new products that open up a new addressable markets for us, we see this as a tremendous opportunity to continue to grow market share through new client logo ads. Well, at the same time picking up our work on that revenue retention through adding new products to take to existing clients to solve even more important problems with them. So I think we're in a very healthy spot relative to competitors in terms of our ability to invest to grow and to drive better win rate. You know, we're highly focused. We've never been more differentiated.
Speaker Change: The integration of age 5C with greater plus and bright space, really results in a market leading easy to use instead of capabilities to rapidly design courseware. That's right targeted for corporate learning as well as higher education in K-12.
Speaker Change: and we're seeing a good response to the introduction of that into our corporate learning market. Done?
Speaker Change: Yeah, I think just building on that is, you know, if you talk to anyone in the corporate space, my and large, when you ask them a simple question, do you like?
John Baker: And I think that that product innovation strategy along with a better customer experience is going to help us win a lot more in the market in the years ahead, and then with a possibility of improving and free cash flow rising, how do you think about proper deployment here? You made the HIP acquisition standpoint enthusiastic on it. Do you see other opportunities to deploy capital on acquisitions like that, and how also do you think we're sure buybacks?
Speaker Change: The Learning Experience delivered by your learning platform, they all laugh, it's incredible. You do not like the learning experience. Most of the standards or ways of building content rely on standards from 20 years ago.
Speaker Change: Very bad content creation experiences and most of our competitors solutions in corporate.
Speaker Change: We see this as a tremendous opportunity to go in with a step-function improvement in the quality of the learning experience for companies around the world.
Scrains: and I can tell you the creator of Scrains.
Speaker Change: Combined with H5P, we'll have a major impact in improving the satisfaction range for employees around the world that use this new experience to do everything from compliance training to onboarding to leadership development to other types of upscaling. It will have a big impact in improving the quality of learning for many companies around the world.
John Baker: I'll split that with Josh. We definitely are weighing our options in terms of capital deployments. You've seen good growth in terms of cash flow over the course of the last 12 months, up now more than 22 million year over year. We will continue to see that cash flow continue to increase next year, so we will be looking to deploy that capital in ways that are going to help cement us as a market leader in this space.
Speaker Change: and so I can't wait to get into the hands of more and more companies. I think the companies that are already embracing these two health technologies today are seeing a significant impact in terms of quality of experience for the people and I see this as a big opportunity for us to grow much faster in the corporate space.
John Baker: Some of them will probably continue to go towards the NCIB. As you can imagine, where we're trading today is not reflective of the real value of D2L, and we see that as a good return on the capital that we would deploy in that particular area, but we're also going to continue to look at different opportunities for acquisition in the space. There are a lot of problems in the clouds are trying to tackle.
Speaker Change: Great. Looking at the Canadian revenue, it was down your rear, was that just some noise related to national services timing or anything's called out there?
John Baker: If we can find great products, great teams that can help us build world-class products that solve some of these challenges, they would make a natural fit here at D2L. Again, we'll be very measured in terms of how we make those investment decisions. We want to make sure that we're doing the right things in terms of supporting the clients, but also making sure that we're balancing a growth and profitability. Yeah, I think Paul John headed on the head.
Speaker Change: Sorry, Dan, I thought that was Canadian revenue.
Dan: Yeah, was that the one I just down at that sort of year? Yeah.
Speaker Change: Yeah, largely professional services and I think as we talked about in the past, like we look at the North America market as sort of one and so seeing, you know, North America being around that 10%.
Mark: Mark is sort of how we think about it in North America education, but yeah, largely professional services and then also a little bit of foreign exchange pressure on the Canadian dollar in the first half of the year.
John Baker: I think the only thing I might add is obviously the acquisition of H5P, as we've talked about, is highly strategic for us. And so in the near term, we're really focused on getting the value to our customers from H5P and integrating H5P as well as we possibly can. All right, thanks for taking the questions.
Speaker Change: Okay, great. And then finally, just from modern perspective, presumably, she's seen it at the typical, the season will dip in subscription margins, heading into the fall, or she can be any different this time.
Speaker Change: Yeah, we see like in history as we see in the fall when there's some Esther Starred and Greater Utilization of the platform. We'll see a bit of an impact on Gross Mergin, but by and large the team has done some fantastic work to improve the scalability of the platform. And so relative to the summer you'll see a bit of a change, but pretty minor at this point then oh.
Stephen Laster: Thank you. The next question comes from the line of finance, Mochapolla of the MO. Your line is so open. Please go ahead. 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 do you see that put them on for potential? Yeah, so we see H5P in corporate as a tremendous opportunity. No, you see them go ahead as well.
Speaker Change: and then kind of longer term, more room, as you think about the potential to expand that a bit more into the 26th.
Speaker Change: Yeah, on the gross margin side, we continue to focus here. We've shown some pretty significant improvement over the past two years.
Stephen Laster: I'm glad to get out that on. Yeah, I was just going to say that in corporate, we see a tremendous opportunity for H5P as our corporate partners and customers are focused on engaging and efficient learning to help shape their workforce. The integration of H5P with Creative Plus and Brightspace really results in a market leading, easy to use, set of capabilities to rapidly design coursewear. That's right, targeted for corporate learning as well as higher education in K-12.
Speaker Change: Expanning our gross margin, and you'll recall it's not always linear, and so these are sort of engineered optimizations, and so the team is busy working on more of those, and we're pleased with the progress, and we expect.
Speaker Change: and Opportunity to improve further as we scale as we look forward.
Speaker Change: Great to have so long thanks.
Stephen Laster: And we're seeing a good response to the introduction of that into our corporate learning market. Done? Yeah, yeah, thanks, Stephen. I think just building on that is, you know, if you talk to anyone in the corporate space, by and large, when you ask them a simple question, do you like their learning experience delivered by your learning platform? They all laugh. It's incredible. They do not like the learning experience. Most of the standards or ways of building content rely on standards from 20 years ago, very bad content creation experiences and most of their competitor solutions in corporate.
Speaker Change: The next question comes from the line of Dan Chan of DDT, the Cow in your line of soap, please go ahead
Justin: Hey, this is Justin on for Dan. Thanks for taking my questions. So, it's still early days, but has there been any initial customer feedback with Loomi and, you know, AI capabilities in general, how is customer adoption trending there?
Justin: [inaudible]
Speaker Change: So, customer adoption is good, and you know, we don't limit partnership with early adopter, early adopting customers.
Stephen Laster: We see this as a tremendous opportunity to go in with a step function improvement in the quality of the learning experience for companies around the world. And I can tell you, the creator experience combined with H5P will have a major impact in improving the satisfaction rates for employees around the world that use this new experience to do everything from compliance training to onboarding to leadership development to other types of upscaling. It will have a big impact in improving the quality of learning for many companies around the world.
Speaker Change: and we're pleased with our results we're seeing, we're limited applied, we're saving customers' time in their course development course management task.
Speaker Change: We're staying high quality courseware as a result with our human and the loop approach to AI.
Speaker Change: and we're, you know, the first phase of Lumi was how to make things easier on the delivery of education.
Speaker Change: Future Faces of living with me will continue on really helping students succeed.
Stephen Laster: And so I can't wait to get into the hands more and more companies. I think the companies that are already embracing D12 technology today are seeing a significant impact in terms of quality of experience for their people. And I see this as a big opportunity for us to grow much faster in the corporate space.
Speaker Change: But the core of Lumi is really human in the loop and we're hearing from our customers and our development partners that this is the writer approach and they're seeing good success with it. So we're very excited for Lumi's progress at this point and the roadmap is rich and we're excited for future deliveries.
Speaker Change: That's great to hear. And then just kind of thing on the AI trend. There's been any, you know, regulatory pushback from educators kind of incorporating Gen AI into their workflow, their hesitancy from, you know, other education educators.
Thanos Moschopoulos: Great. Looking at Canadian revenue was down year over year. Was that just some noise related to national services timing or anything to call out there? Sorry, Thanos, that was Canadian revenue. Yeah. Was that the question just down that year over year? Yeah. Yeah, largely professional services. And I think as we talked about in the past, like we look at the North America market as sort of one. And so seeing, you know, North America being around that 10%.
Speaker Change: Yeah, I think one of the things that distinguishes B2L and it's to go ahead, Josh.
Speaker Change: You got to see what's going on. Thank you.
Josh Huff: Yeah, one of the things that distinguishes all of our product development at D2L is we do develop our technologies and partnership with leading educators and learning providers in corporate in higher ed in K-12.
Thanos Moschopoulos: America is sort of how we think about it in North America education. But yeah, largely professional services. And then also a little bit of foreign exchange pressure on the Canadian dollar in the first half of the year. Okay, great.
Josh Huff: and as part of that development process, we've been very cognizant of the value and power of AI but using it in ways that really not only just regulatory but pedagogy and teaching and learner success.
Josh Huff: And then finally, just from a lot of perspective, presumably you should see the same typical seasonal dip in subscription margins heading into the fall or should be any different this time. Yeah, we see like in history, we always see in the fall when there's semester started in later utilization of the platform. We'll see a bit of an impact on gross margin, but by and large, the team has done some fantastic work to improve the scalability of the platform. And so relative to the summer, you'll see a bit of a change, but pretty minor at this point, Thanos. Okay.
Josh Huff: and so the capabilities that you've seen us deliver are square in that neighborhood.
Speaker Change: and we really have taken our approach as ensuring that we're helping, that we're propelling access to education, that we're making it more efficient, more engaging easier to deliver and easier to consume. And for those reasons, we're seeing very positive uptake in the capabilities that we've delivered.
Pastor Lynn: Good to hear, thanks so much to all. I'm Pastor Lynn.
Josh Huff: And then kind of longer term, more room as we think about potential to expand a bit more into 26. Yeah, on the gross margin side, we continue to focus here. We've shown some pretty significant improvement over the past two years, expanding our gross margin. And you'll recall, it's not always linear. And so these are sort of engineered optimizations. And so the teams busy working on more of those. And we're pleased with the progress. And we expect an opportunity to improve further as we scale, as we look forward.
Speaker Change: Thank you.
Speaker Change: The next question comes from the line of clearance suffering of 8 to capital, your line is open, please go ahead.
Speaker Change: Good morning guys, congratulations on the call and thanks for taking my questions. Another starter, can you talk to the recent growth in your FVB and how you'd improve it naturally? It's a new customer's international business or other considerations that are push and pull factors here.
Speaker Change: So, are you hearing kids just repeat that?
Speaker Change: Yeah, just we'd like to color on the ACV and some of the push-and-pulse factors that let's change that line
Thanos Moschopoulos: Great job, that's the line, thanks.
Speaker Change: Yes.
Speaker Change: Sure, yeah, so ACB meeting sort of the average deal size. So we've seen it be relatively steady but moving up to the right a little bit as we bring more products to the market and attach more products.
Operator: Thank you.
Justin: The next question comes from the line of Dan Kahn of CDT-D Cowan, your line is open, please go ahead. Hey, this is Justin on for Dan, thanks for taking my questions. So still early days, but has there been any, you know, initial customer feedback with Lumi, and you know, AI capabilities in general, how is the customer adoption trending there? So customer adoption is good. As you know, we built Lumi in partnership with early adopter, early adapting customers, and we're pleased with the results we're seeing where Lumi has applied, we're saving customers time in their course development, course management task, we're seeing high quality courseware as a result with our human and aloof approach to AI, and we're, you know, this first phase of Lumi was how to make things easier on the delivery of education.
Speaker Change: with New Customers as well as existing customers. So I would say, you know, by and large, we're seeing it up to the right in sort of a trend that we would have expected. So yeah, nothing too new or notable to report there.
Speaker Change: Okay, that's the good to know. And then on...
Speaker Change #100: On the Internet, you know, you know, the recent targets have been done in southern Europe. But as you look at the acquisition pipes, can you compare the opportunities between North America, with the broad, and any contrast on productive offerings or valuations in this region will be helpful.
Speaker Change #101: So our thesis Remene as we've said before is really, you know, our focus on helping to drive access, to learning, and really delivering the tools and technologies.
Justin: Future phases of Lumi will continue on really helping students succeed, but the core of Lumi is really human and aloof, and we're hearing from our customers and our development partners that this is the right approach, and they're seeing good success with it.
Speaker Change #101: That accelerate the design and the delivery of world-class courseware and learning environment. Globally, we are very aware and actively in evaluating M&A opportunities. We don't speak to specific targets.
John Baker: So we're very excited for Lumi's progress at this point, and the roadmap is rich, and we're excited for future deliveries. That's great to hear. And then just kind of thing on the AI trend, has there been any, you know, regulatory pushback from educators kind of incorporating Gen AI into their workflows or hesitancy from, you know, other other education educators? Yeah, I think one of the things that distinguishes D2L, and that's, or go ahead, Gen. You got to do it.
Speaker Change #101: I would also tell you that we're very focused currently on creating maximum values for our past M&A H5P, but we continue to be involved with and evaluating opportunities.
Speaker Change #101: with the design and the delivery of learning based on the needs and goals and problems we can solve for our current and future customers within the learning moment.
John Baker: Go ahead. Thank you. Yeah, you know, one of the things that distinguishes all of our product development at D2L, is we do develop our technologies and partnership with leading educators and learning providers in corporate, in higher ed, NK12. And as part of that development process, we've been very cognizant of the value and power of AI, but using it in ways that really fit not only just regulatory, but pedagogy and teaching and learner success.
John Baker: And so the capabilities that you've seen us deliver are square in that neighborhood, and we really have taken approach of ensuring that we're helping, that we're propelling access to education, that we're making it more efficient, more engaging, easier to deliver, and easier to consume. And for those reasons, we're seeing very positive uptake in the capabilities that we've delivered. Great to hear.
Speaker Change #102: Not having a big impact in terms of overall enrollment or utilization of our platform, but as I look at the numbers for this back to back to school season, we're seeing significant increases in utilization increases in the number of users across the overwhelming majority of our largest clients.
Speaker Change #102: And so we're not seeing it have an impact on the clients that we're serving today, but.
Speaker Change #102: But I think anytime that we're putting a cap on access to higher education anywhere in the world, It's not a great outcome.
Justin: Thanks so much, D2L. Thank you, that's a line.
Operator: Thank you.
Speaker Change #102: I do think that it's short term challenges, but if you look at the broad trend youre going to see an increase in higher education globally year over year over year as we open up access to great learning experiences to more and more people I think it's good for good for the globe to really embrace.
Kirin: The next question comes from the line of keyrun suffering of eight capital. Your line is open. Please go ahead.
John Baker: Take good morning guys. Congratulations on the corner and thank you for taking my questions. Another starter. Can you talk to the recent growth in your SAP and how they improve retouch rates, new customers, international business, or other considerations that are pushing forward? Thank you, thank you. Sorry, Kirin, can you just repeat that? Yeah, just we'd like to color on the ACV and some of the push and pull factors that that that's changed that line.
Speaker Change #102: Education.
Speaker Change #103: Absolutely Jon Thank you I'll pass the line.
Jon: Yes, good question.
Speaker Change #105: Thank you. The next question comes from the line of Brian Peterson with Raymond James Your line is now open. Please go ahead.
John Baker: Sure, yeah. So ACV meaning sort of the average deal size. So we've seen it, you know, be relatively steady but moving up to the right a little bit as we, you know, bring more products to the market and attach more products with new customers as well as existing customers. So I would say, you know, by and large, we're seeing it up to the right in sort of a trend that we would have expected.
Brian Peterson: All right. Thanks, guys I'll keep it to one John historically, there have been some periods were lagging competitors have been bad actors in terms of pricing I'm curious as you complete the 'twenty 'twenty four selling season, how would you characterize the higher red pricing environment in North America, and do you think pricing has actually become less relevant more relevant about the same.
Speaker Change #107: Jim in terms of ultimately impacting vendor selection and any thoughts there. Thanks guys.
Jim: I think it really depends on the client some clients wait pricing pretty aggressively but overall I'd say pricing is less of an issue today than it has been in the past.
Speaker Change #109: Largely because of the differences between our competitors and us are so stark.
John Baker: So yeah, nothing too, too new or novel to report there. Okay, that's good to know. And then on, on, on a minute, you know, your recent targets have been coming out in Europe. As you look at the acquisition price, can you compare the opportunities between North America with the broad and any contrast on product offerings or valuations in this way? So our thesis for M&A, as we've said before, is really, you know, our focus on helping to drive access to learning, on really delivering the tools and technologies that accelerate the design and the delivery of world-class courseware and learning environment.
Speaker Change #110: You've got <unk>, you've got to make choices on total cost of ownership.
Speaker Change #110: I remember when one of our legacy players was offering to give our clients free access for five years to their technology and the client said no because.
Speaker Change #110: They simply wouldn't.
Speaker Change #110: The improved outcomes.
Speaker Change #110: Looking for in terms of improving retention, which would save them tens of millions so by selecting a lower cost option and that actually would cost them more in the long term.
Speaker Change #110: So I think clients have become more sophisticated as they look to these types of technology supporting all these different modalities of learning.
Speaker Change #110: On campus online workforce Upskilling staff development.
Speaker Change #110: And when you look at improving retention and saving and institution. Many many millions far more than the cost attached to the actuals.
John Baker: Globally, we are very aware and actively in evaluating M&A opportunities. We don't speak to specific targets. I would also tell you that we're very focused currently on creating maximum value for our past M&A H5P, but we continue to be involved with and evaluating opportunities for the design and the delivery of learning based on the needs and goals and problems we can solve for our current and future customers within the learning moment.
Speaker Change #110: Solution that we're providing.
Speaker Change #110: There is a significant reason to avoid just simply looking at price and focus on ROI and total cost of ownership.
Speaker Change #110: I appreciate the color thanks John.
Brian Peterson: Youre welcome Brian.
Thank you.
Speaker Change #111: The next question comes from the line of Stefan Sukow Tequila.
Stifel. Your line is now my son, Please go ahead.
Speaker Change #111: Yes.
Speaker Change #112: Good morning, Gents and congrats on a nice quarter asking my first question I want to touch on the spending environment as you as you guys head into the back half of the year.
John Baker: Okay, thanks, David. And then my last one here, we've seen recent influence from development and Canada and abroad on student caps, just wondering how you're looking at these developments and what your customers in those regions are seeing. Thanks. So I care, I didn't quite catch the question there. Could you repeat again, sorry? Maybe we just have a deadline. Just in the news, with some recent developments from government in Canada and abroad on student caps, being implemented, just wondering, okay, leading through into customer conversations, and it doesn't have any developments there, hopefully.
Speaker Change #113: Changes in demand trends or priorities are you seeing as the as the year play out.
Speaker Change #114: What are you seeing on the pipeline build relative to last year.
Susan: Great question Susan.
Susan: So.
Speaker Change #116: And Brian <unk>, our CFO and CMO are doing an excellent job building a great strategy on the go to market side, that's resulting in a very healthy pipeline, you'll see variability month over month, but overall, we're very happy with how they're producing pipe for the future.
John Baker: I think it's a concern, not having a big impact in terms of overall enrollment or utilization of our platform, because I look at the numbers for this fact of back to school season, we're seeing significant increases in utilization increases in the number of users across the overwhelming majority of our largest clients. And so we're not seeing it have an impact in the clients that we're serving today, but I think anytime that we're putting a cap on access to higher education anywhere in the world, it's not a great outcome.
Speaker Change #116: One was a great example, I don't think I've ever seen a more excitement around the new products that we're launching or.
Speaker Change #116: More prospect pipeline being influenced at that event.
Speaker Change #116: I did this year.
Speaker Change #117: So I think the team did a fantastic job executing in what still remains to be tough macro conditions for the whole industry broadly speaking.
Speaker Change #117: If we can continue to focus on customer experience and the innovation.
Speaker Change #117: And that drives our win rates I'm very happy with how we're going to perform in the back half of the year if current trends continue to persist.
John Baker: I do think it's short-term challenges, but if you look at the broad trend, you're going to see an increase in higher education globally year over year over year, as we open up access to great learning experiences to more and more people, I think it's good for the globe to really embrace education.
Speaker Change #117: Great.
Speaker Change #117: On the international.
Speaker Change #118: I'll mention here is the strength more of a function of.
Speaker Change #118: Perhaps some incremental improvements in the spending environment globally or.
Or was this more a function of kind of really benefits from the recent go to market refinements and focus that you guys are having on key markets.
Brian Peterson: Absolutely, John. Thank you. I'll pass the line. Yes, welcome. Thank you. Good question. Thank you. The next question, I have on the line of Brian Peterson of Raymond James, your line is open. Please go ahead. 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 ed pricing environment in North America?
Speaker Change #119: I think why we're seeing success globally as these technologies are becoming more strategic more mission critical for the organizations we're selling into.
Speaker Change #120: So in the past they could've gotten by with a minimum viable solution just to support some basic use cases.
Speaker Change #120: But those use cases are becoming far more sophisticated as they try to support online programs on campus Sports horse Upskilling staff development.
Speaker Change #120: There's a lot more use cases that are in demand and that's that's going to spark a long term growth for us in many many markets around the world.
Brian Peterson: And do you think price has actually become less relevant, more relevant about the same in terms of ultimately impacting vendor selection in any cost there? Thanks, guys. I think it really depends on the client. Sometimes weight pricing pretty aggressively, but overall, I'd say pricing is less of an issue today than has been in the past, largely because the differences between our competitors and us are so stark. You've got to make choices on total cost of ownership.
And for Us.
Speaker Change #120: For folks that benefited a little bit from the stimulus funding.
Speaker Change #120: This funding.
Speaker Change #120: That's it for us because in some countries like India. As an example, they have subsidized other competitor solutions for learning.
Speaker Change #120: Those subsidies are not coming out which is making our technology look more attractive.
Speaker Change #120: And so I actually think the.
Brian Peterson: I remember one of our legacy players was offering to give a client free access for five years to their technology and the client said no because they simply wouldn't have the improved outcomes that they're striving for in terms of improving retention, which would save them tens of millions. So by selecting a lower cost option and that actually would cost them more in the long term. And so I think clients have become more sophisticated as they look to these types of technologies supporting all these different modalities of learning on campus, online, workforce upskilling, staff development.
Speaker Change #120: Conditions and current adoption rates with our clients the usage of the platform by clients all good indicators that.
Speaker Change #120: The long term demand globally will continue to increase.
Speaker Change #121: Okay great.
Speaker Change #122: And then just last one for me guys just on the product Party front Hum.
Speaker Change #123: Some of that comp or mainly.
Speaker Change #124: Pain points and switching gaps that you guys are looking to.
Speaker Change #124: Addressing the platform either through internal product innovation or for M&A.
Brian Peterson: And when you look at improving retention and saving and institutions, many, many millions, far more than the cost attached to the actual solution that we're providing, there's a significant reason to avoid just simply looking at price and focus on ROI and total cost of ownership. Appreciate the color. Thanks, Sean. You're welcome, fam. Thank you.
Speaker Change #124: I actually really I think the team making right now.
Speaker Change #124: Oh, sorry, we must say, there's a bit of a lag between myself and Steven So I apologize I'll take it first and then I'll pass it over to you.
Steven: I really like what the team is doing in terms of executing on our roadmap today.
Steven: The things that are big drivers for a lot of our clients are around engagement.
Steven: And so the solutions that we're bringing to market with greater plus an H five T are great. Examples of how we can build.
Suthan Sukumar: The next question comes from the line of southern Sukkuma of Stifle. Your line is open. Please go ahead.
Steven: Better engagement inspiration for students better feedback mechanisms that really leads to the persistence and better outcomes for students and giving them a more modern learning experience that come to expect.
John Baker: Good morning, Jens. I'm from the rest of the nice quarter. My first question, I want to touch on the spending environment. As you get into the back half of the year, what changes in demand trends or priorities are you seeing as the year play out in? What do you see on the pipeline build relative to last year? Great question, Susan. Leigh and Brian, our CRO and CMO are doing an excellent job building a great strategy on the go-to-market side that's resulting in a very healthy pipeline.
Steven: Doubling down on that strategy as it is important for us.
Steven: I also think AI is going to be another driver for our long term growth and ability to differentiate in the market.
Steven: And the team's doing an excellent job working with clients to deliver exactly what theyre looking for and we will continue.
Steven: To evolve and grow new tools around AI to broaden that portfolio to support clients in new and innovative ways. We.
Speaker Change #126: We don't need to go off and solve a whole bunch of new problems I think the problems that we're working on right now are the most important problems that our clients are trying to solve today that will have the biggest impact on the learning experience.
John Baker: You'll see variability over months, but overall we're very happy with how they're producing pike for the future. Fusion was a great example. I don't think I've ever seen more excitement around the new products that we're launching or more prospect pipeline being influenced at that event that I did this year. I think the team's doing a fantastic job executing in what still remains to be tough macro conditions for the whole industry broadly speaking.
Speaker Change #127: As you see other opportunities to sort of engage.
M&A side to round out the solution that will take a hard look at.
Speaker Change #127: Great teams that are trying to solve really important problems that will have a big impact on that.
Steven: Student experience Steven.
Steven: Stephen I'm, sorry, I didn't mean to cut you off to you if you want to add anything to that.
Stephen Laster: No I think that was really well said John the only thing I would add is we're particularly pleased with our increasing rate of delivery capabilities and so building on what John said the way. We're operating day, we've never been more closely aligned with our current and future customers that co development, we're doing the input.
John Baker: If we can continue the focus on customer experience and the innovation and that drives our win rates, I'm very happy with how we're performing the back half of the year if current trends continue to persist. Great. On the international momentum here, is this strength more of a function of, in a perhaps some incremental improvements in the spending environment globally, or is this more a function of an early benefits from when the recent go-to-marker refinements and the focus that you guys are having on key markets?
Speaker Change #128: We're getting isn't necessarily helpful from our leading customers and as you saw in infusion our ability to really innovate and deliver quickly has never been better and are very excited about the progress that we're making.
Speaker Change #128: Okay.
John Baker: Appreciate that I appreciate the feedback.
Speaker Change #129: Congrats again on all platforms.
Keith: Thanks Keith.
John Baker: I think why we're seeing success globally is these technologies are becoming more strategic, more mission critical for the organizations we're selling into. So in the past, they could have gotten by with a minimum viable solution just to support some basic use cases, but those use cases are becoming far more sophisticated as they try to support online programs, on-campus, workforce upskilling, staff development. Now, there's not more use cases that are in demand, and that's going to spark a long-term growth for us in many, many markets around the world, and for folks that benefit their little bit from stimulus funding, as that stimulus funding is specific for us, because in some countries like India as an example, they have subsidized other competitor solutions for learning those subsidies are now coming out, which is making our technology look more attractive. And so I actually think the current conditions and current adoption rates with our clients, the usage of the platforms, buy clients, all good indicators that the long-term demand globally will continue to increase. Okay, great.
Speaker Change #131: As there are no additional questions at this time I'd like to hand, the conference Buckeye over to Mr. Jim Baker for closing remarks.
Jim Baker: Thank you everyone for joining us on today's call. We are looking forward to updating you. Following our Q3 results and if we don't see and then I have a great day and enjoy the back to school season. Thank you everybody.
Speaker Change #133: Ladies and gentlemen, thank you for joining today's call you may now disconnect your line.
Speaker Change #133: Yeah.
[music].
John Baker: And just a last one for me, guys, it's on the product party front. What is the top remaining and the pain points and solution gaps that you guys are looking to address in the platform, by either through internal product innovation or M&A? I actually really like the team that's doing right now. Oh, sorry, there's a bit of a leg between myself and Steven, so I apologize. I'll take it first, Steven, and I'll pop it over to you.
John Baker: I really like what the team is doing in terms of executing on the roadmap today. The things that are big drivers for a lot of our clients are around engagement. And so the solutions that we're bringing to market with Creator Plus and H5 PD are great examples of how we can build better engagement, inspiration for students, set of feedback mechanisms that really lead to the persistence and better outcomes for students and give them a more modern learning experience that they come to expect.
John Baker: Doubling down on that strategy is important for us. I also think AI is going to be another driver for our long-term growth and ability to differentiate in the market. And the team's doing an excellent job working with clients to deliver exactly what they're looking for and will continue to evolve and grow new tools around AI to broaden that portfolio to support clients in new and innovative ways. We don't need to go off and solve a whole bunch of due problems.
John Baker: I think the problems that we're working on right now are the most important problems that our clients are trying to solve today that will have the biggest impact on the learning experience. But as we see other opportunities to engage on the M&A side to round out the solutions, we'll take a hard look at great teams that are trying to solve really important problems that will have a big impact on the student experience.
John Baker: Stephen Forgione, I didn't mean to touch you off, but I'll continue if you want to add anything to that. No, I think I was really well said, John. The only thing I would add is we're particularly pleased with our increasing rate of delivery of capabilities. And so building on what John said, you know, the way we're operating today, we've never been more closely aligned with our current and future customers. The co-development we're doing, the input we're getting is immensely helpful for our leading customers.
John Baker: And as we saw in Fusion, our ability to really innovate and deliver quickly has never been better and very excited about the progress that we're making. Thank you. Appreciate the feedback, Jens. I'll go back again. I'll pass the last. Thank you.
Operator: As there are no additional questions, wait at this time.
John Baker: I'd like to hand the comments back over to Mr. John Baker, the closing remarks. Thank you, everyone, for joining us on today's call. We're looking forward to updating you following our Q3 results.
John Baker: And if you don't see them, have a great day and enjoy the back to school season. Thank you, everybody.
Operator: Ladies and gentlemen, thank you for joining today's call.
Operator: You may now disconnect your line.