-- 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
(Unaudited)
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
Loan receivable from associate -- 4,821,800
Intangible assets 15,191,384 16,577,630
Goodwill 27,066,195 27,619,673
Total assets $ 227,311,046 $ 251,923,764
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued
liabilities $ 28,989,831 $ 40,057,268
Deferred revenue 114,865,949 111,638,604
Lease liabilities 1,573,534 1,641,257
145,429,314 153,337,129
Non-current liabilities:
Deferred income taxes 3,238,339 3,487,856
Lease liabilities 9,178,323 10,118,128
12,416,662 13,605,984
157,845,976 166,943,113
Shareholders' equity:
Share capital: 345,433,955 359,412,845
Additional paid-in capital 46,348,302 49,129,311
Accumulated other comprehensive loss (5,213,865) (3,954,805)
Deficit (317,103,322) (319,606,700)
69,465,070 84,980,651
Related party transactionsInvestment in
associate
Total liabilities and shareholders'
equity $ 227,311,046 $ 251,923,764
D2L INC.
Condensed Consolidated Interim Statements of Comprehensive (Loss) Income
(In U.S. dollars, except per share amounts)
For the three and six months ended July 31, 2026 and 2025
(Unaudited)
Three months ended July Six months ended July 31,
31,
2026 2025 2026 2025
Revenue:
Subscription
and support $ 50,895,966 $50,143,298 $103,618,675 $97,878,870
Professional
services and
other 4,672,787 4,628,658 9,079,693 9,728,257
55,568,753 54,771,956 112,698,368 107,607,127
Cost of revenue:
Subscription
and support 13,177,639 12,476,278 27,026,471 24,316,698
Professional
services and
other 3,834,787 4,207,798 7,462,093 8,172,343
17,012,426 16,684,076 34,488,564 32,489,041
Gross profit 38,556,327 38,087,880 78,209,804 75,118,086
Expenses:
Sales and
marketing 16,834,937 15,846,217 32,358,312 29,514,956
Research and
development 12,421,698 12,271,521 25,498,854 23,731,235
General and
administrative 7,588,742 7,830,352 15,635,709 16,216,714
36,845,377 35,948,090 73,492,875 69,462,905
Income from
operations 1,710,950 2,139,790 4,716,929 5,655,181
Interest and
other income
(expense):
Interest
expense (204,939) (238,715) (354,810) (458,844)
Interest income 647,235 569,419 1,404,149 1,286,471
Other income 6,995 48,732 14,101 191,521
Fair value
(loss) gain on
loan receivable
from associate (4,821,800) 211,377 (4,821,800) 383,647
Foreign
exchange gain
(loss) 323,059 (122,176) 443,709 1,414,340
(4,049,450) 468,637 (3,314,651) 2,817,135
(Loss) income
before income
taxes (2,338,500) 2,608,427 1,402,278 8,472,316
Income tax
expense
(recovery):
Current 375,340 402,742 688,101 973,919
Deferred 350,476 (475,024) 2,108,822 1,549,384
725,816 (72,282) 2,796,923 2,523,303
(Loss) income
for the period (3,064,316) 2,680,709 (1,394,645) 5,949,013
Other
comprehensive
(loss) income:
Foreign
currency
translation
(loss) gain (941,415) 37,407 (1,259,060) 2,797,875
Comprehensive
(loss) income $(4,005,731) $ 2,718,116 $(2,653,705) $ 8,746,888
(Loss) earnings
per share --
basic $ (0.06) $ 0.05 $ (0.03) $ 0.11
(Loss) earnings
per share --
diluted $ (0.06) $ 0.05 $ (0.03) $ 0.11
Weighted average
number of
common shares
-- basic 54,391,595 54,869,121 54,396,705 54,780,511
Weighted average
number of
common shares
-- diluted 54,391,595 56,136,563 54,396,705 56,100,759
D2L INC.
Condensed Consolidated Interim Statements of Changes in Shareholders' Equity
(In U.S. dollars, except share amounts)
For the six months ended July 31, 2026 and 2025
(Unaudited)
Share Capital Additional Accumulated Deficit Total
paid-incapital othercomprehensive
loss
Shares Amount
Balance, January 31,
2026 54,472,285 $ 359,412,845 $ 49,129,311 $ (3,954,805) $ (319,606,700) $ 84,980,651
Issuance of Subordinate
Voting Shares
onexercise of options 1,372 11,970 (11,970) -- -- --
Issuance of Subordinate
Voting Shares
onsettlement of
restricted share units
(RSUs)and deferred
share units (DSUs) 547,462 4,735,667 (8,700,997) -- -- (3,965,330)
Stock-based compensation -- -- 5,927,595 -- -- 5,927,595
Excess tax benefit on
stock-basedcompensation -- -- 4,363 -- -- 4,363
Repurchase of share
capital for
cancellationunder the
SIB (1,904,762) (14,704,903) -- -- -- (14,704,903)
Repurchase of share
capital for
cancellationunder the
NCIB (575,700) (4,021,624) -- -- -- (4,021,624)
Change in share
repurchase
commitmentunder the
ASPP -- -- -- -- 3,898,023 3,898,023
Other comprehensive loss -- -- -- (1,259,060) -- (1,259,060)
(Loss) income for the
period -- -- -- -- (1,394,645) (1,394,645)
Balance, July 31, 2026 52,540,657 $ 345,433,955 $ 46,348,302 $ (5,213,865) $ (317,103,322) $ 69,465,070
Balance, January 31,
2025 54,653,174 $ 367,487,956 $ 48,263,266 $ (7,456,599) $ (323,548,911) $ 84,745,712
Issuance of Subordinate
Voting Shares
onexercise of options 59,863 503,316 (220,948) -- -- 282,368
Issuance of Subordinate
Voting Shares
onsettlement of
restricted share units 530,360 1,161,864 (6,981,749) -- -- (5,819,885)
Stock-based compensation -- -- 5,722,307 -- -- 5,722,307
Reduction in excess tax
benefit on
stock-basedcompensation -- -- (525,334) -- -- (525,334)
Repurchase of share
capital for
cancellationunder the
NCIB (413,400) (4,356,030) -- -- -- (4,356,030)
Change in share
repurchase
commitmentunder the
ASPP -- -- -- -- (4,815,232) (4,815,232)
Other comprehensive
income -- -- -- 2,797,875 -- 2,797,875
Income for the period -- -- -- -- 5,949,013 5,949,013
Balance, July 31, 2025 54,829,997 $ 364,797,106 $ 46,257,542 $ (4,658,724) $ (322,415,130) $ 83,980,794
D2L INC.
Condensed Consolidated Interim Statements of Cash Flows
(In U.S. dollars)
For the six months ended July 31, 2026 and 2025
(Unaudited)
2026 2025
Operating activities:
(Loss) income for the period $ (1,394,645) $ 5,949,013
Items not involving cash:
Depreciation of property and equipment 819,867 784,357
Depreciation of right-of-use assets 765,710 719,759
Amortization of intangible assets 1,117,603 1,124,520
Gain on disposal of property and equipment (1,076) (18,347)
Stock-based compensation 5,927,595 5,722,307
Net interest income (1,049,339) (827,627)
Income tax expense 2,796,923 2,523,303
Fair value loss (gain) on loan receivable
from associate 4,821,800 (383,647)
Changes in operating assets and
liabilities:
Trade and other receivables (289,196) (10,523,224)
Uninvoiced revenue 576,671 (796,828)
Prepaid expenses (394,200) 68,904
Deferred commissions 279,978 154,023
Accounts payable and accrued liabilities (5,496,435) (6,522,075)
Deferred revenue 4,008,788 15,523,834
Right-of-use assets and lease liabilities (60,603) --
Post-combination compensation payments -- (345,000) Interest received 1,394,972 1,273,829 Interest paid (93,119) (15,602) Income taxes paid (1,790,675) (1,240,128) Cash flows from operating activities 11,940,619 13,171,371 Financing activities: Payment of lease liabilities (1,066,118) (998,337) Net proceeds from sub-lease receivable 92,686 -- Proceeds from exercise of stock options -- 282,368 Taxes paid on settlement of RSUs and DSUs (3,965,330) (5,819,885) Repurchase of share capital for cancellation under the NCIB (4,021,624) (4,356,030) Repurchase of share capital for (14,704,903) -- cancellation under the SIB Cash flows used in financing activities (23,665,289) (10,891,884) Investing activities: Purchase of property and equipment (318,661) (146,289) Proceeds from disposal of property and equipment 1,076 18,347 Acquisition of business, net of cash acquired -- (222,986) Payment of contingent consideration -- (196,774) Cash flows used in investing activities (317,585) (547,702) Effect of exchange rate changes on cash and cash equivalents (725,926) 1,598,765 (Decrease) increase in cash and cash equivalents (12,768,181) 3,330,550 Cash and cash equivalents, beginning of period 119,210,190 99,184,514 Cash and cash equivalents, end of period $ 106,442,009 $ 102,515,064
Non-IFRS Financial Measures and Reconciliation of Non-IFRS Financial Measures
The information presented within this press release refers to certain non-IFRS financial measures (including non-IFRS ratios) including Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Gross Profit, Adjusted Gross Margin, Free Cash Flow, Free Cash Flow Margin, and Constant Currency Revenue. These measures are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS. Non-IFRS financial measures should not be considered in isolation nor as a substitute for analysis of the Company's financial information reported under IFRS and are unlikely to be comparable to similar measures presented by other issuers. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of the Company's results of operations, financial performance and liquidity from management's perspective and thus highlight trends in its core business that may not otherwise be apparent when relying solely on IFRS measures. The Company believes that securities analysts, investors and other interested parties frequently use non-IFRS financial measures in the evaluation of the Company. The Company's management also uses non-IFRS financial measures to facilitate operating performance comparisons from period-to-period, to prepare annual operating budgets and forecasts, and to assess our ability to meet our capital expenditures and working capital requirements.
Adjusted EBITDA and Adjusted EBITDA Margin
Adjusted EBITDA is defined as income (loss), excluding interest, taxes, depreciation and amortization (or EBITDA), adjusted for stock-based compensation, foreign exchange gains and losses, non-recurring expenses, transaction-related costs, fair value adjustment of acquired deferred revenue, income (loss) from equity accounted investee, change in fair value on the loan receivable from associate, impairment charges and other income and losses. Adjusted EBITDA Margin is calculated as Adjusted EBITDA expressed as a percentage of total revenue. For an explanation of management's use of Adjusted EBITDA and Adjusted EBITDA Margin see "Non-IFRS and Other Financial Measures -- Non-IFRS Financial Measures and Non-IFRS Financial Ratios -- Adjusted EBITDA and Adjusted EBITDA Margin" section in the Company's Interim MD&A, which section is incorporated by reference herein.
The following table reconciles Adjusted EBITDA to (loss) income for the period, and discloses Adjusted EBITDA Margin, for the periods indicated:
(in thousands of Three months ended July 31, Six months ended July 31,
U.S. dollars, except
for percentages)
2026 2025 2026 2025
$ $ $ $
(Loss) income for
the period (3,064) 2,681 (1,395) 5,949
Stock-based
compensation 2,297 2,509 5,928 5,722
Foreign exchange
(gain) loss (323) 122 (444) (1,414)
Non-recurring
expenses(1) 1,047 423 1,220 894
Transaction-related
costs(2) 21 948 67 1,388
Fair value
adjustment of
acquired deferred
revenue(3) 30 109 62 334
Change in fair value
of loan receivable
from associate(4) 4,822 (212) 4,822 (384)
Net interest income (442) (331) (1,049) (828)
Income tax expense
(recovery) 725 (72) 2,797 2,523
Depreciation and
amortization 1,338 1,331 2,703 2,629
Adjusted EBITDA 6,451 7,508 14,711 16,813
Adjusted EBITDA
Margin 11.6 % 13.7 % 13.1 % 15.6 %
Notes:
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(1) These expenses relate to non-recurring activities,
such as changes in workforce or technology whereby
certain functions were realigned to optimize operations,
and certain one-time adjustments or legal fees incurred
that are not indicative of continuing operations.
(2) These expenses include certain legal and professional
fees that are incurred in connection with other strategic
transactions. In the prior fiscal year, these expenses
include post-combination costs from the acquisition
of H5P Group AS ("H5P"), and were partially offset
by a gain recognized from the reduction in the second
anniversary payment owed to the selling shareholders
of Connected Shopping Ltd ("Connected Shopping"),
a company acquired in Fiscal 2024, which was recorded
through Other income. These expenses would not have
been incurred if not for these transactions and are
not considered to be indicative of expenses associated
with the Company's continuing operations.
(3) At the date of acquisition in Fiscal 2025, the Company
recognized a fair value adjustment on the opening
deferred revenue balance acquired as part of the H5P
acquisition as required under IFRS 3, Business Combinations.
This adjustment is not reflective of ordinary operations
and is expected to be substantially completed by the
end of Fiscal 2027.
(4) On a quarterly basis, the Company determines the fair
value of the loan advanced to SkillsWave. The adjustments
to the fair value of the loan are not reflective of
the Company's main business operations and will not
impact the Company's future results beyond the maturity
date of the loan on June 28, 2029. See "SkillsWave
-- Loan Receivable" in the "Related Party Transactions"
section of the Interim MD&A for further details.
Adjusted Gross Profit and Adjusted Gross Margin
Adjusted Gross Profit is defined as gross profit excluding related stock-based compensation expenses and amortization from acquired intangible assets, specifically acquired technology. Adjusted Gross Margin is calculated as Adjusted Gross Profit expressed as a percentage of total revenue. For an explanation of management's use of Adjusted Gross Profit and Adjusted Gross Margin see "Non-IFRS and Other Financial Measures -- Non-IFRS Financial Measures and Non-IFRS Financial Ratios -- Adjusted Gross Profit and Adjusted Gross Margin" section in the Company's Interim MD&A, which section is incorporated by reference herein.
The following table reconciles gross profit to Adjusted Gross Profit, and discloses Adjusted Gross Margin, for the periods indicated:
(in thousands of Three months ended July 31, Six months ended July 31,
U.S. dollars,
except for
percentages)
2026 2025 2026 2025
$ $ $ $
Gross profit for
the period 38,556 38,088 78,210 75,118
Stock based
compensation 143 168 415 374
Amortization from
acquired
intangible assets 439 437 879 868
Adjusted Gross
Profit 39,138 38,693 79,504 76,360
Adjusted Gross
Margin 70.4 % 70.6 % 70.5 % 71.0 %
Free Cash Flow and Free Cash Flow Margin
Free Cash Flow is defined as cash flows from (used in) operating activities excluding payments of acquisition-related compensation, less net additions to property and equipment. Free Cash Flow Margin is calculated as Free Cash Flow expressed as a percentage of total revenue. For an explanation of management's use of Free Cash Flow and Free Cash Flow Margin see "Non-IFRS and Other Financial Measures -- Non-IFRS Financial Measures and Non-IFRS Financial Ratios -- Free Cash Flow and Free Cash Flow Margin" section in the Company's Interim MD&A, which section is incorporated by reference herein.
The following table reconciles Free Cash Flow to cash flow from operating activities, and discloses Free Cash Flow Margin, for the periods indicated:
(in thousands of Three months ended July 31, Six months ended July 31,
U.S. dollars, except
for percentages)
2026 2025(1) 2026 2025(1)
$ $ $ $
Cash flow from
operating
activities 28,769 15,027 11,941 13,171
Acquisition-related
compensation -- 345 -- 345
Net additions to
property and
equipment (273) (143) (318) (128)
Free Cash Flow 28,496 15,229 11,623 13,388
Free Cash Flow
Margin 51.3 % 27.8 % 10.3 % 12.4 %
Notes:
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(1) Prior year comparatives have been restated to conform
with current year presentation by excluding the impact
of acquisition-related compensation.
Constant Currency Revenue
Constant Currency Revenue is defined as our total revenue with foreign-currency-denominated revenues translated at the historical exchange rates from the comparable prior period into our U.S. dollar functional currency. For an explanation of management's use of Constant Currency Revenue see "Non-IFRS and Other Financial Measures -- Non-IFRS Financial Measures and Non-IFRS Financial Ratios -- Constant Currency Revenue" section in the Company's Interim MD&A, which section is incorporated by reference herein.
The following table reconciles our Constant Currency Revenue to revenue, for the periods indicated:
Three months ended July 31, Six months ended July 31,
(in thousands of 2026 2025 2026 2025
U.S. dollars)
$ $ $ $
Total revenue for
the period 55,569 54,772 112,698 107,607
Positive impact of
foreign exchange
rate changes
overthe prior
period (129) -- (1,576) --
Constant Currency
Revenue 55,440 54,772 111,122 107,607
Key Performance Indicators
Management uses a number of metrics, including the key performance indicators identified below, to help us evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions. Our key performance indicators may be calculated in a manner different than similar key performance indicators used by other issuers. These metrics are estimated operating metrics and not projections, nor actual financial results, and are not indicative of current or future performance.
-- Annual Recurring Revenue and Constant Currency Annual Recurring
Revenue: We define ARR as the annualized equivalent value of subscription
revenue from all existing customer contracts as at the date being
measured, exclusive of the implementation period. Our calculation of ARR
assumes that customers will renew their contractual commitments as those
commitments come up for renewal. We believe ARR provides a reasonable,
real-time measure of performance in a subscription-based environment and
provides us with visibility for potential growth in our cash flows. We
believe that increasing ARR indicates the continued strength in the
expansion of our business, and will continue to be our focus on a
go-forward basis. We define Constant Currency Annual Recurring Revenue as
foreign-currency-denominated ARR translated at the historical exchange
rates from the comparable prior period into our U.S. dollar functional
currency.
As at July 31,
(in millions of U.S. dollars, except percentages) 2026 2025 Change
$ $ %
ARR 223.4 212.6 5.1 %
Constant Currency Annual Recurring Revenue 224.4 212.6 5.6 %
SOURCE D2L Inc.
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