D2L Inc.

Total revenue increased 2% to $55.6 million. Subscription and support revenue increased 2% to $50.9 million, and professional services and other revenue was $4.7 million, flat year over year. ARR increased 5% to $223.4 million, or 6% in constant currency. Adjusted gross margin was 70.4% versus 70.6% in the prior year period. Adjusted EBITDA was $6.5 million, or 11.6% of revenue, versus $7.5 million, or 13.7%, last year. Net loss was $3.1 million versus net income of $2.7 million a year ago, driven mainly by a $4.8 million non-cash fair value loss on the SkillsWave loan receivable. Cash flow from operating activities was $28.8 million and free cash flow was $28.5 million; cash and cash equivalents ended at $106.4 million with no debt. For fiscal 2027, D2L now expects subscription and support revenue of $211 million-$213 million and total revenue of $228 million-$231 million, compared with prior ranges of $212 million-$214 million and $231 million-$234 million, respectively. Adjusted EBITDA guidance was maintained at $33 million-$35 million. Looking beyond this year, management reiterated its fiscal 2028 target operating model of 10%-15% revenue growth and 18%-20% adjusted EBITDA margin.

John Baker framed the quarter as a mix of strong core execution and a temporary K-12 headwind. He emphasized competitive wins in higher education, expanding international momentum, and growing traction for Creator+ and D2L Lumi, saying the company is seeing more practical AI adoption and a stronger value proposition with customers. His tone was confident and forward-looking, with repeated references to an improving second half and a long-term opportunity to displace legacy learning platforms.

Josh Huff focused on the mechanics behind the quarter’s lower growth and the path to margin recovery. He said the quarter included the final tranche of U.S. K-12 churn, a $0.8 million delayed go-live impact on subscription/support revenue, and pressure from foreign exchange, but noted core ARR excluding K-12 grew 10% year over year. He highlighted adjusted gross margin of 70.4%, $28.5 million of free cash flow, $106.4 million of cash, no debt, and continued share repurchases of about 2 million shares in Q2, while reiterating that full-year EBITDA guidance stayed intact because lower revenue is being offset by COGS optimization and operating efficiencies.

Analysts focused on the size and timing of the U.S. K-12 churn, the delayed customer implementation, and whether softer professional services demand was cyclical or structural. Management said the K-12 decline was expected, that retention should normalize starting in Q3, and that the delayed go-live was specific to one large account with a complex implementation and custom development. On services, management said the weakness was mainly in advisory work rather than implementations and did not view it as a major trend, while also reiterating that AI and broader platform value are helping win deals and should drive a stronger replacement cycle.