-- Subscription and support revenue of US$50.9 million, up 2% year-over-year
impacted by previously disclosed U.S. K-12 churn
-- Annual Recurring Revenue $(ARR)$1 of US$223.4 million, up 5%
year-over-year; excluding the K-12 market, ARR grew by approximately 10%
year-over-year
-- Adjusted EBITDA2 was US$6.5 million, versus US$7.5 million in the prior
year
-- Significant share buyback activity with approximately 2 million
Subordinate Voting Shares repurchased in the quarter
TORONTO, Sept. 9, 2026 /CNW/ -- D2L Inc. (TSX: DTOL) ("D2L" or the "Company"), a leading global learning technology company, today announced financial results for its Fiscal 2027 second quarter ended July 31, 2026. All amounts are in U.S. dollars and all figures are prepared in accordance with International Financial Reporting Standards ("IFRS") unless otherwise indicated.
"Our second-quarter results reflect both a solid bookings quarter and the impact of the previously disclosed U.S. K-12 customer churn. As we move through the balance of the fiscal year, our outlook calls for increased revenue growth, expanding gross margins, and meaningful Adjusted EBITDA margin expansion," said John Baker, Founder and CEO of D2L. "Importantly, we continue to strengthen our position in the global higher education and corporate markets, supported by strong competitive win rates and the increasing value of AI across our platform. Excluding the K-12 market, ARR grew by over 10% year-over-year, reflecting solid bookings across our core markets. This marks the fourth consecutive quarter of double-digit ARR growth in these markets, which account for more than 90% of our revenue."
Mr. Baker added: "In addition to new customer acquisition, we are increasing the value of customer relationships through broader adoption of solutions such as D2L Lumi, our AI product offering, which surpassed US$5 million of ARR during the quarter. We are seeing strong demand for these capabilities from both new and existing customers as organizations increasingly incorporate AI into their learning strategies. Combined with a flagship higher education win early in the third quarter, these results reinforce our confidence in D2L's competitive position and long-term growth opportunity as organizations increasingly turn to us as a trusted partner to navigate an evolving learning landscape."
Second Quarter Fiscal 2027 Financial Highlights
-- Subscription and support revenue was $50.9 million, an increase of 2%
over the same period of the prior year, reflecting growth from new
customers and expansion with existing customers, offset by the impact of
previously disclosed churn from the U.S. K-12 market.
-- Annual Recurring Revenue1 ("ARR") as at July 31, 2026 increased by 5%
year-over-year, from $212.6 million to $223.4 million, and Constant
Currency Annual Recurring Revenue1 increased 6% to $224.4 million.
Excluding the K-12 market, ARR increased by 10% over the same period of
the prior year and Constant Currency ARR grew by almost 11% over the same
period of the prior year.
-- Adjusted Gross Profit2 increased by 1% to $39.1 million (70.4% Adjusted
Gross Margin2) from $38.7 million (70.6% Adjusted Gross Margin) in the
same period of the prior year. The previously disclosed database
technology work was completed during the second quarter, concluding the
associated incremental costs incurred over the past 12 months.
-- Adjusted EBITDA2 of $6.5 million (11.6% Adjusted EBITDA Margin2),
compared with $7.5 million (13.7% Adjusted EBITDA Margin2) in the same
period of the prior year.
-- Income for the period was negative $3.1 million, versus positive $2.7
million in the prior year, largely due to a non-cash fair value
adjustment of $4.8 million on the loan receivable from SkillsWave
Corporation.
-- Cash flows from operating activities were $28.8 million, compared with
$15.0 million for the same period in the prior year, and Free Cash
Flow2 was $28.5 million, compared to $15.2 million in the same period in
the prior year. The year-over-year increase in cash flows was primarily
attributable to working capital movement, including differences in the
timing of collections from customers.
-- Free Cash Flow2 for the trailing 12 months show a more representative
view of year-over-year progress with quarter-to-quarter working capital
movements normalized. For the trailing 12-month period, Free Cash
Flow2 was $42.7 million versus $24.1 million in the comparable trailing
12-month period.
-- During the second quarter, the Company repurchased and cancelled 131,400
(2025 -- 244,600) Subordinate Voting Shares under its Normal Course
Issuer Bid ("NCIB").
-- On July 17, 2026, the Company completed a substantial issuer bid ("SIB"),
which was fully subscribed, resulting in the repurchase and cancellation
of 1,904,762 Subordinate Voting Shares for an aggregate purchase price of
US$14.7 million. For the trailing 12-month period ended July 31, 2026,
the Company has repurchased and cancelled 3,059,762 Subordinate Voting
Shares (2025 -- 576,600) under the SIB and NCIB, representing the
cancellation of 11.2% (2025 -- 2.1%) of the opening Subordinate Voting
Shares outstanding.
-- Strong balance sheet at July 31, 2026, with cash and cash equivalents of
$106.4 million and no debt, inclusive of the share repurchases completed
during the quarter.
(1) Refer to "Key Performance Indicators" section
of this press release.
(2) A non-IFRS financial measure or non-IFRS ratio.
Refer to "Non IFRS Financial Measures" section of
this press release.
Second Quarter Fiscal 2027 Financial Results -- Selected Financial Measures
(in thousands of U.S. dollars, except for percentages)
Three months ended July 31 Six months ended July 31
2026 2025 Change Change 2026 2025 Change Change
$ $ $ % $ $ $ %
Subscription
& Support
Revenue 50,896 50,143 753 1.5 % 103,618 97,879 5,739 5.9 %
Professional
Services &
Other
Revenue 4,673 4,629 44 1.0 % 9,080 9,728 (648) (6.7 %)
Total Revenue 55,569 54,772 797 1.5 % 112,698 107,607 5,091 4.7 %
Constant
Currency
Revenue(1) 55,440 54,772 668 1.2 % 111,122 107,607 3,515 3.3 %
Gross Profit 38,556 38,088 468 1.2 % 78,210 75,118 3,092 4.1 %
Adjusted
Gross Profit
(1) 39,138 38,693 445 1.2 % 79,504 76,360 3,144 4.1 %
Adjusted
Gross
Margin(1) 70.4 % 70.6 % 70.5 % 71.0 %
(Loss) income
for the
period (3,064) 2,681 (5,745) (214.3 %) (1,395) 5,949 (7,344) (123.4 %)
Adjusted
EBITDA(1) 6,451 7,508 (1,057) (14.1 %) 14,711 16,813 (2,102) (12.5 %)
Cash Flows
From
Operating
Activities 28,769 15,027 13,742 91.4 % 11,941 13,171 (1,230) (9.3 %)
Free Cash
Flow(1) 28,496 15,229 13,267 87.1 % 11,623 13,388 (1,765) (13.2 %)
(1) A non-IFRS financial measure or non-IFRS ratio. Refer
to the "Non-IFRS Financial Measures and Reconciliation
of Non-IFRS Financial Measures" section of this press
release for more details.
Second Quarter Business & Operating Highlights
-- D2L continued to grow its customer base in North American education, including the additions of Brown University School of Professional Studies, Golden Gate University and Southwestern Michigan College. -- D2L continued to grow its customer base in global education, including the additions of University of Leeds Continuing Professional Development (CPD), Van Lang University and Centro de Educação Superior de Brasília (IESB) in the second quarter. Subsequent to quarter end, the Company announced that UNSW Sydney, a top 20 ranked university globally, selected D2L Brightspace. -- D2L's new corporate customers included Public Service Alliance of Canada, American Society of Safety Professionals and Royal College of Anaesthetists. -- Welcomed more than 1,100 attendees at D2L Fusion 2026, where the Company announced new AI-powered innovations and platform enhancements across D2L Lumi, D2L Brightspace, D2L Creator+ and H5P, reinforcing D2L's leadership in trusted, personalized learning. -- Released its annual Sustainability Report highlighting its commitment to transforming education worldwide and contributing to a sustainable future. -- D2L was named one of Canada's Best Managed Companies for 2026 and was recognized with 15 awards across G2's Summer 2026 Reports.
Financial Outlook
The Company is updating its previous financial guidance for the year ended January 31, 2027 as follows:
-- Subscription and support revenue in the range of $211 million to $213
million, implying growth of 6-7% over Fiscal 2026, versus previously
issued guidance of $212 million to $214 million;
-- Total revenue in the range of $228 million to $231 million, implying
growth of 5-6% over Fiscal 2026, versus previously issued guidance of
$231 million to $234 million; and
-- Adjusted EBITDA in the range of $33 million to $35 million, implying an
Adjusted EBITDA Margin of 15% at the midpoint, unchanged from previously
issued guidance.
The Company has revised its revenue outlook for Fiscal 2027 to reflect softer demand within the Company's advisory professional services, as well as the timing impact of a delayed go-live of a new customer deployment and the corresponding impact to subscription and support revenue in the current fiscal year. These pressures on revenue in the current fiscal year are being offset by continued optimization of cost of goods sold and operating efficiency, allowing the Company to maintain its Adjusted EBITDA guidance.
These changes do not impact the Company's view of demand across its core higher education and corporate markets, where bookings activity and ARR growth remain strong. The Company continues to expect revenue growth and profitability to improve in the second half of the fiscal year. This updated financial outlook represents an increase in our second half performance relative to second quarter performance. At the mid-point of our full year guidance, this represents a 7% subscription revenue growth rate and 16% Adjusted EBITDA Margin in the second half of the fiscal year.
For additional details on the Company's outlook, including the principal underlying assumptions and risk factors regarding achievement, refer to the "Financial Outlook" section of the Company's MD&A for the year ended January 31, 2026 (the "Annual MD&A"), as well as the "Forward-Looking Information" section therein and in the Company's MD&A for the three months ended July 31, 2026 (the "Interim MD&A").
Q2 Conference Call & Webcast
D2L management will host a conference call on Thursday, September 10, 2026 at 9:00 am ET to discuss its second quarter Fiscal 2027 financial results.
Date: Thursday, September 10, 2026
Time: 9:00 am (ET)
Dial in number: Canada: 1 (365) 657-4084United States: 1 (833)
461-5787Access code: 809367662
Webcast: A live webcast will be available at
ir.d2l.com/events-and-presentations/events/The webcast will
also be archived for replay.
Forward-Looking Information
This press release includes statements containing "forward-looking information" within the meaning of applicable securities laws. In some cases, forward-looking information can be identified by the use of forward-looking terminology such as "plans", "expects", "budget", "scheduled", "estimates", "outlook", "target", "forecasts", "projection", "potential", "prospects", "strategy", "intends", "anticipates", "seek", "believes", "opportunity", "guidance", "aim", "goal" or variations of such words and phrases or statements that certain future conditions, actions, events or results "may", "could", "would", "should", "might", "will", "can", or negative versions thereof, "be taken", "occur", "continue" or "be achieved", and other similar expressions. Statements containing forward-looking information are not historical facts, but instead represent management's expectations, estimates and projections regarding future events or circumstances.
This forward-looking information relates to the Company's future financial outlook and anticipated events or results and includes, but is not limited to, statements under the heading "Financial Outlook" and information regarding: the Company's financial position, financial results, business strategy, performance, achievements, prospects, objectives, opportunities, business plans and growth strategies; expected improvements in gross margin; the Company's budgets, operations and taxes; judgments and estimates impacting the financial statements; the markets in which the Company operates; industry trends and the Company's competitive position; expansion of the Company's product offerings; the anticipated impacts of future acquisitions; trends in research and development expenses, sales and marketing expenses, and general and administrative expenses, each as a percentage of revenue; planned expenditures in sales and marketing and research and development activities; the timing and pace for achieving scalability; expectations regarding the growth of the Company's customer base, revenue, and revenue generation potential and expectations regarding costs, including as a percentage of revenue; and the Company's equity investment in, and loan to, SkillsWave Corporation ("SkillsWave").
Forward-looking information is based on certain assumptions, expectations and projections, and analyses made by the Company in light of management's experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, including the following: the Company's ability to win business from new customers and expand business from existing customers; the timing of new customer wins and expansion decisions by existing customers; the Company's ability to generate revenue and expand its business while controlling costs and expenses; the Company's ability to manage growth effectively; the Company's assumptions regarding the principal competitive factors in our markets; the Company's ability to hire and retain personnel effectively; the effects of foreign currency exchange rate fluctuations on our operations; the ability to seek out, enter into and successfully integrate acquisitions; business and industry trends, including the success of current and future product development initiatives; positive social development and attitudes toward the pursuit of higher education; the Company's ability to maintain positive relationships with its customer base and strategic partners; the Company's ability to adapt and develop solutions that keep pace with continuing changes in technology, education and customer needs, including demand for AI; the Company's ability to predict future learning trends and technology; the ability to patent new technologies and protect intellectual property rights; the Company's ability to comply with security, cybersecurity and accessibility laws, regulations and standards; the assumptions underlying the judgments and estimates impacting on financial statements; certain accounting matters, including the impact of changes in or the adoption of new accounting standards; the Company's ability to retain key personnel; the factors and assumptions discussed under the "Financial Outlook" section of the Annual MD&A; and that the list of factors referenced in the following paragraph, collectively, do not have a material impact on the Company.
Although the Company believes that the assumptions underlying such forward-looking information were reasonable when made, they are inherently uncertain and are subject to significant risks and uncertainties and may prove to be incorrect. The Company cautions investors that forward-looking information is not a guarantee of the future and that actual results may differ materially from those made in or suggested by the forward-looking information contained in this press release. Whether actual results, performance or achievements will conform to the Company's expectations and predictions is subject to a number of known and unknown risks, uncertainties and other factors, including but not limited to the risks identified in our Annual MD&A, including "Summary of Factors Affecting Our Performance" or in the "Risk Factors" section of the Company's most recently filed annual information form, in each case filed under the Company's profile on SEDAR+ at www.sedarplus.com. If any of these risks or uncertainties materialize, or if assumptions underlying the forward-looking information prove incorrect, actual results might vary materially from those anticipated in the forward-looking information.
Given these risks and uncertainties, investors are cautioned not to place undue reliance on forward-looking information, including any financial outlook. Any forward-looking information that is contained in this press release speaks only as of the date of such statement, and the Company undertakes no obligation to update any forward-looking information or to publicly announce the results of any revisions to any of those statements to reflect future events or developments, except as required by applicable securities laws. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless specifically expressed as such, and should only be viewed as historical data.
About D2L Inc. (TSX: DTOL)
D2L is transforming the way the world learns, helping learners achieve more than they dreamed possible. Working closely with customers all over the world, D2L is on a mission to make learning more inspiring, engaging and human. Find out how D2L helps transform lives and delivers outstanding learning outcomes in higher education, corporate and K-12 at www.D2L.com.
Condensed Consolidated Interim Statements of Financial Position
(In U.S. dollars)
As at July 31, 2026 and January 31, 2026
July 31, 2026 January 31, 2026
Assets
Current assets:
Cash and cash equivalents $ 106,442,009 $ 119,210,190
Trade and other receivables 26,573,414 26,446,779
Uninvoiced revenue 2,769,951 3,365,404
Prepaid expenses 8,989,364 8,929,070
Deferred commissions 5,824,704 6,046,380
150,599,442 163,997,823
Non-current assets:
Other receivables 175,962 274,542
Prepaid expenses 557,563 480,900
Deferred income taxes 13,746,113 16,447,851
Right-of-use assets 7,087,257 7,879,566
Property and equipment 6,036,329 6,712,449
Deferred commissions 6,850,801 7,111,530