D2L Inc. Announces Third Quarter 2026 Financial Results

D2L Inc. Announces Third Quarter 2026 Financial Results Canada NewsWire TORONTO, Dec. 10, 2025 Subscription and support revenue grew 6% for the quarter to US$49.4 million and 10% year to date Annual Recurring Revenue ("ARR")2 of US$213.4 million, up 6% over the prior year Total revenue was relatively unchanged year-over-year at US$54.1 million Adjusted EBITDA1 was US$7.9 million (14.7% Adjusted EBITDA Margin1), versus US$10.4 million (19.2% Adjusted EBITDA Margin) in the prior year; year-to-date Adjusted EBITDA increased 33% to $24.8 million Income for the period was US$4.4 million, versus US$5.5 million for the comparative period of the prior year Strong balance sheet at quarter end, with cash and cash equivalents of $110.5 million and no debt TORONTO, Dec. 10, 2025 /CNW/ - D2L Inc. (TSX: DTOL) ("D2L" or the "Company"), a leading global learning technology company, today announced financial results for its Fiscal 2026 third quarter ended October 31, 2025. All amounts are in U.S. dollars and all figures are prepared in accordance with International Financial Reporting Standards ("IFRS") unless otherwise indicated. "While Q3 proved more challenging than anticipated due to higher churn among U.S. K-12 clients, we remain on track to meet our full-year guidance for SaaS revenue and Adjusted EBITDA," said John Baker, CEO of D2L. "We're encouraged by strong indicators in ARR bookings and better-than-expected pipeline generation, which reinforce our confidence heading into Q4 and the year ahead. Our global competitive position has never been stronger, and we're accelerating adoption of new innovations in our learning platform – including our AI solution, Lumi, and Creator+." Third Quarter Fiscal 2026 Financial Highlights Subscription and support revenue of $49.4 million, an increase of 6% over the same period of the prior year, reflecting revenue from new customers coupled with strong upsell expansion from existing customers, and was partially offset by higher-than-typical churn within the U.S. K-12 market. Professional services and other revenue decreased by 38% to $4.7 million, reflecting a $1.2 million a one-time revenue true-up adjustment included in the prior year and a generally cautious spending environment in the U.S. market due to current macroeconomic conditions. Total revenue of $54.1 million, relatively unchanged from the same period in the prior year. ARR2 as at October 31, 2025 increased by 6% year-over-year, from $201.7 million to $213.4 million. Continued strength in ARR bookings from the Company's global Higher Education and Corporate markets was partially offset by churn in the U.S. K-12 market. Excluding the K-12 market, ARR increased by 10% from the comparative period in the prior year. Adjusted Gross Profit1 decreased by 3% to $36.7 million (67.8% Adjusted Gross Margin1) from $38.0 million (69.9% Adjusted Gross Margin) in the same period of the prior year. Gross Profit Margin for subscription and support revenue decreased to 71.1% from 72.7% in the same period of the prior year. The decrease mainly reflects additional costs for the planned migration of a database technology, which had a roughly 200 basis point impact on margins. The Company expects these additional costs to scale down over the course of Fiscal 2027 and for this technology change to create incremental margin benefits in Fiscal 2028 and beyond. Adjusted EBITDA1 decreased to $7.9 million, from $10.4 million for the comparative period in the prior year. Income for the period was $4.4 million, versus $5.5 million for the comparative period of the prior year. Cash flows from operating activities was $17.2 million, versus $11.4 million during the same period in the prior year, and Free Cash Flow1 was $18.8 million, compared to Free Cash Flow of $11.3 million in the same period in the prior year. Strong balance sheet at quarter end, with cash and cash equivalents of $110.5 million and no debt. During the quarter ended October 31, 2025, the Company repurchased and canceled 223,500 Subordinate Voting Shares under its normal course issuer bid ("NCIB"), bringing the total for the fiscal year to 636,900 Subordinate Voting Shares as of October 31, 2025. Subsequent to quarter end, the Company announced that the Toronto Stock Exchange has accepted the Company's notice to launch a new NCIB, commencing on December 12, 2025. 1  A non-IFRS financial measure or non-IFRS ratio. Refer to "Non IFRS Financial Measures" section of this press release.  2 Refer to "Key Performance Indicators" section of this press release. Third Quarter Fiscal 2026 Financial Results – Selected Financial Measures (in thousands of U.S. dollars, except for percentages) Three months ended October 31   Nine months ended October 31   2025 2024 Change Change 2025 2024 Change Change $ $ $ % $ $ $ % Subscription & Support Revenue 49,389 46,752 2,637 5.6 % 147,268 133,723 13,545 10.1 % Professional Services & Other Revenue 4,679 7,547 (2,868) (38.0 %) 14,407 18,240 (3,833) (21.0) % Total Revenue 54,068 54,299 (231) (0.4 %) 161,675 151,963 9,712 6.4 % Constant Currency Revenue1 54,075 54,299 (224) (0.4 %) 162,132 151,963 10,169 6.7 % Gross Profit 36,070 37,390 (1,320) (3.5 %) 111,188 103,441 7,747 7.5 % Adjusted Gross Profit 1 36,657 37,964 (1,307) (3.4 %) 113,017 104,439 8,578 8.2 % Adjusted Gross Margin1 67.8 % 69.9 % 69.9 % 68.7 % Income for the period 4,386 5,547 (1,161) (20.9 %) 10,335 5,857 4,478 76.5 % Adjusted EBITDA1 7,941 10,420 (2,479) (23.8 %) 24,754 18,652 6,102 32.7 % Cash Flows From Operating Activities 17,241 11,420 5,821 51.0 % 30,412 28,037 2,375 8.5 % Free Cash Flow1 18,812 11,296 7,516 66.5 % 32,200 27,912 4,288 15.4 % 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. 2 Refer to "Key Performance Indicators" section of this press release. Third Quarter Business & Operating Highlights D2L continued to grow its customer base in global education, adding the University of Central Arkansas, St. Ambrose University, Oregon Health & Science University, and the University of the West of Scotland. D2L expanded its corporate customer portfolio, adding Florida Center for Nursing, along with a leading global banking institute and one of the largest nursing unions and professional bodies. Welcomed Kevin Capitani to D2L as SVP of Employee Training and Strategic Initiatives to lead the Company's Corporate market growth and expansion in employee training. Announced a first-of-its-kind partnership with 1EdTech, streamlining joint certification access for D2L partners. Jointly received eight Brandon Hall Group HCM Excellence Awards in collaboration with valued customers. Received two Tech & Learning Awards of Excellence: Back to School 2025 for D2L Brightspace and Accessibility+. Named on the 2026 GSV 150 list as one of the Most Transformational Growth Companies in Digital Learning and Workforce Skills. Released its latest AI in Education survey revealing how U.S. higher education professionals perceive and use AI in their careers. Financial Outlook The Company is updating its financial guidance for the year ended January 31, 2026 as follows: Subscription and support revenue in the range of $198 million to $199 million, implying growth of 10% over Fiscal 2025, versus previously issued guidance of $198 million to $200 million; Total revenue in the range of $217 million to $218 million, implying growth of 6% over Fiscal 2025, versus previously issued guidance of $219 million to $221 million; and Adjusted EBITDA in the range of $32 million to $33 million, implying an Adjusted EBITDA margin of 15%, versus previously issued guidance of $32 million to $34 million. This outlook reflects the Company's continued emphasis on balancing growth and profitability. The anticipated revenue growth rates are informed by the current macroeconomic and geopolitical environment and its impact on our selling activities, inclusive of a general slowness in activity within the U.S. Higher Education market. The updated subscription and support revenue guidance reflects higher-than-typical churn this fiscal year, particularly in our U.S. K-12 market. The updated total revenue guidance reflects both the reduction in subscription and support guidance driven by U.S. K-12 churn and a continued decline in the contribution of professional services revenue due to the more cautious spending environment, particularly for curriculum advisory services in the U.S. Higher Education market. The Company presented a Medium Term Target Operating Model that we expect to achieve by Fiscal 2028 in the Company's Annual MD&A. This Medium Term Target Operating Model remains unchanged as of October 31, 2025. For additional details on the Company's outlook and Medium Term Target Operating Model, including the principal underlying assumptions and risk factors regarding achievement, refer to the "Financial Outlook" section of the Company's Annual MD&A, as well as the "Forward-Looking Information" section therein and in the Company's MD&A for the three months ended October 31, 2025 (the "Interim MD&A"). Conference Call & Webcast D2L management will host a conference call on Thursday, December 11, 2025 at 9:00 am ET to discuss its third quarter Fiscal 2026 financial results. Date: Thursday, December 11, 2025 Time: 9:00 am (ET) Dial in number: Canada: 1 (833) 950-0062 United States: 1 (833) 470-1428 Access code: 056574 Webcast: A live webcast will be available at ir.d2l.com/events-and-presentations/events/ The webcast will also be archived 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, including the acquisition of H5P Group AS ("H5P"); 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; 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 Interim 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 K-12, higher education and business at www.D2L.com. For further information, please contact: Craig Armitage, Investor Relations [email protected] (416) 347-8954 D2L INC. Condensed Consolidated Interim Statements of Financial Position (In U.S. dollars) As at October 31, 2025 and January 31, 2025 (Unaudited) October 31, 2025 January 31, 2025 Assets Current assets: Cash and cash equivalents $    110,454,708 $    99,184,514 Trade and other receivables 20,923,640 26,430,586 Uninvoiced revenue 3,477,381 2,756,998 Prepaid expenses 7,720,645 7,564,837 Deferred commissions 5,179,955 5,106,976 147,756,329 141,043,911 Non-current assets: Other receivables 311,073 422,589 Prepaid expenses 427,666 308,235 Deferred income taxes  15,728,822 18,115,730 Right-of-use assets 7,235,246 7,450,545 Property and equipment 6,628,788 7,125,272 Deferred commissions 7,008,174 6,909,439 Loan receivable from associate 9,674,620 9,123,399 Intangible assets 16,471,270 17,135,529 Goodwill 26,607,669 25,286,222 Total assets $   237,849,657 $    232,920,871 Liabilities and Shareholders' Equity Current liabilities: Accounts payable and accrued liabilities $    30,157,206 $    30,504,085 Deferred revenue 105,537,445 97,454,306 Lease liabilities 1,520,183 1,201,604 Contingent consideration — 4,927,193 137,214,834 134,087,188 Non-current liabilities: Deferred income taxes 3,614,403 4,110,030 Lease liabilities 9,509,437 9,977,941 13,123,840 14,087,971 150,338,674 148,175,159 Shareholders' equity: Share capital: 362,842,377 367,487,956 Additional paid-in capital 47,930,726 48,263,266 Accumulated other comprehensive loss (5,526,550) (7,456,599) Deficit (317,735,570) (323,548,911) 87,510,983 84,745,712 Related party transactions Investment in associate Subsequent event Total liabilities and shareholders' equity $   237,849,657 $    232,920,871 D2L INC. Condensed Consolidated Interim Statements of Comprehensive Income (Loss) (In U.S. dollars) For the three and nine months ended October 31, 2025 and 2024 (Unaudited) Three months ended October 31, Nine months ended October 31, 2025 2024 2025 2024 Revenue: Subscription and support $ 49,389,054 $ 46,751,998 $ 147,267,924 $ 133,723,027 Professional services and other 4,679,098 7,547,470 14,407,355 18,239,685 54,068,152 54,299,468 161,675,279 151,962,712 Cost of revenue: Subscription and support 14,275,420 12,777,133 38,592,118 36,651,859 Professional services and other 3,722,465 4,132,232 11,894,808 11,870,394 17,997,885 16,909,365 50,486,926 48,522,253 Gross profit 36,070,267 37,390,103 111,188,353 103,440,459 Expenses: Sales and marketing 14,068,857 12,806,266 43,583,813 40,302,476 Research and development 11,806,300 11,139,920 35,537,535 35,294,478 General and administrative 6,601,265 8,651,729 22,817,979 25,231,988 32,476,422 32,597,915 101,939,327 100,828,942 Income from operations 3,593,845 4,792,188 9,249,026 2,611,517 Interest and other income (expense): Interest expense (168,141) (235,892) (626,985) (550,438) Interest income 753,537 870,355 2,040,008 2,899,093 Other income (expense) 168,174 (122,043) 743,342 (122,000) Gain on SkillsWave disposal transaction   —   —   —   917,395 Foreign exchange gain 923,498 224,145 2,337,838 307,859 1,677,068 736,565 4,494,203 3,451,909 Income before income taxes 5,270,913 5,528,753 13,743,229 6,063,426 Income tax expense (recovery): Current 276,760 246,162 1,250,679 602,830 Deferred 607,925 (264,457) 2,157,309 (396,134) 884,685 (18,295) 3,407,988 206,696 Income for the period 4,386,228 5,547,048 10,335,241 5,856,730 Other comprehensive (loss) gain: Foreign currency translation (loss) gain (867,826) 137,532   1,930,049 (2,335,326) Comprehensive income $ 3,518,402 $ 5,684,580 $ 12,265,290 $ 3,521,404 Earnings per share – basic $         0.08 $           0.10 $           0.19 $           0.11 Earnings per share – diluted $         0.08 $           0.10 $           0.18 $          0.10 Weighted average number of common shares – basic 54,827,899 54,453,244 54,796,488 54,282,281 Weighted average number of common shares – diluted 56,094,770 56,032,694 56,066,842 55,828,067 D2L INC. Condensed Consolidated Interim Statements of Changes in Shareholders' Equity (In U.S. dollars) For the three and nine months ended October 31, 2025 and 2024 (Unaudited) Share Capital Additional paid-in capital Accumulated other comprehensive loss Deficit Total Shares Amount 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 on exercise of options 190,351 1,301,022 (634,604) — — 666,418 Issuance of Subordinate Voting Shares on settlement of restricted share units 552,972 1,178,458 (7,290,160) — — (6,111,702) Stock-based compensation — — 7,786,922 — — 7,786,922 Reduction in excess tax benefit on stock-based compensation — — (194,698) — — (194,698) Repurchase of share capital for cancellation under the NCIB (636,900) (7,125,059) — — (22,122) (7,147,181) Change in share repurchase commitment under the ASPP — — — — (4,499,778) (4,499,778) Other comprehensive income — — — 1,930,049 — 1,930,049 Income for the period — — — — 10,335,241 10,335,241 Balance, October 31, 2025 54,759,597 $  362,842,377 $  47,930,726 $  (5,526,550) $  (317,735,570) $  87,510,983     Balance, January 31, 2024 53,978,085 $  364,830,884 $  47,485,107 $  (4,998,317) $  (350,437,401) $  56,880,273 Issuance of Subordinate Voting Shares on exercise of options 410,397 3,443,979 (1,804,429) — — 1,639,550 Issuance of Subordinate Voting Shares on settlement of restricted share units 374,307 1,416,155 (4,602,395) — — (3,186,240) Stock-based compensation — — 7,111,782 — — 7,111,782 Repurchase of share capital for cancellation under the NCIB (306,880) (2,402,141) — — — (2,402,141) Change in share repurchase commitment under the ASPP — — — — (859,724) (859,724) Other comprehensive loss — — — (2,335,326) — (2,335,326) Income for the period — — — — 5,856,730 5,856,730 Balance, October 31, 2024 54,455,909 $  367,288,877 $  48,190,065 $  (7,333,643) $  (345,440,395) $  62,704,904 D2L INC.  Condensed Consolidated Interim Statements of Cash Flows (In U.S. dollars) For the nine months ended October 31, 2025 and 2024 (Unaudited) 2025 2024 Operating activities: Income for the period $    10,335,241 $  5,856,730 Items not involving cash: Depreciation of property and equipment 1,186,384 1,285,970 Depreciation of right-of-use assets 1,090,408 945,223 Amortization of intangible assets 1,704,825 723,100 Gain on disposal of property and equipment (18,817) (51,476) Stock-based compensation 7,786,922 7,111,782 Net interest income (1,413,023) (2,348,655) Income tax expense 3,407,988 206,696 Gain on SkillsWave disposal transaction — (917,395) Fair value gain on loan receivable from associate (551,221) (120,885) Loss from equity accounted investee — 416,850 Changes in operating assets and liabilities: Trade and other receivables 7,694,586 3,784,969 Uninvoiced revenue (646,394) (37,023) Prepaid expenses (79,076) 3,503,610 Deferred commissions 135,685 296,245 Accounts payable and accrued liabilities (4,943,216) (6,065,785) Deferred revenue 6,371,799 11,573,770 Right-of-use assets and lease liabilities — (44,962) Post-combination compensation payments (2,220,000) (345,000) Interest received 2,021,647 2,878,878 Interest paid (15,531) (19,343) Income taxes paid (1,436,071) (596,646) Cash flows from operating activities 30,412,136 28,036,653   Financing activities: Payment of lease liabilities (1,520,184) (1,344,625) Proceeds from exercise of stock options 666,418 1,639,550 Taxes paid on settlement of restricted share units (6,111,702) (3,186,240) Repurchase of share capital for cancellation under the NCIB (7,147,181) (2,402,141) Lease incentive received — 103,128 Cash flows used in financing activities (14,112,649) (5,190,328)   Investing activities: Purchase of property and equipment (450,798) (521,775) Proceeds from disposal of property and equipment 18,817 51,476 Acquisition of business, net of cash acquired (222,986) (22,308,927) Payment of contingent consideration (5,103,665) (249,436) Transfer of cash on disposal of SkillsWave — (1,483,357) Proceeds from sale of majority ownership stake in SkillsWave — 809,038 Issuance of loan to SkillsWave — (5,000,000) Cash flows used in investing activities (5,758,632) (28,702,981) Effect of exchange rate changes on cash and cash equivalents 729,339 (2,834,512) Increase (decrease) in cash and cash equivalents 11,270,194 (8,691,168) Cash and cash equivalents, beginning of period 99,184,514 116,943,499 Cash and cash equivalents, end of period $  110,454,708 $  108,252,331 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 income to Adjusted EBITDA for the period, and discloses Adjusted EBITDA Margin, for the periods indicated: (in thousands of U.S. dollars, except for percentages) Three months ended October 31, Nine months ended October 31, 2025 2024 2025 2024 $ $ $ $ Income for the period 4,386 5,547 10,335 5,857 Stock-based compensation 2,065 2,195 7,787 7,112 Foreign exchange gain (923) (224) (2,337) (308) Non-recurring expenses(1) 315 305 1,209 2,171 Transaction-related costs(2) 580 1,249 1,968 2,072 Fair value adjustment of acquired deferred revenue(3)   32   500   366   639 Loss from equity accounted investee — 320 — 417 Change in fair value of loan receivable from associate(4)   (167)   (121)   (551)   (121) Net interest income (585) (634) (1,413) (2,348) Income tax expense (recovery) 885 (18) 3,408 207 Depreciation and amortization 1,353 1,301 3,982 2,954 Adjusted EBITDA 7,941 10,420 24,754 18,652 Adjusted EBITDA Margin 14.7 % 19.2 % 15.3 % 12.3 % Notes: (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 legal fees incurred that are not indicative of continuing operations. (2) These expenses include certain legal and professional fees that were incurred in connection with other strategic transactions, combined with post-combination compensation costs from previous acquisition transactions. In the prior fiscal year, these expenses included certain legal and professional fees that were incurred in connection with acquisition and other strategic transactions, including the disposal of our majority ownership stake in SkillsWave and our acquisition of H5P. These expenses were net of a gain of $0.9 million recognized for the period ended October 31, 2024 on the disposal of our majority ownership stake in SkillsWave. 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, 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 2026. (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. 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 U.S. dollars, except for percentages) Three months ended October 31, Nine months ended October 31, 2025 2024 2025 2024 $ $ $ $ Gross profit for the period 36,070 37,390 111,188 103,441 Stock based compensation 147 147 521 442 Amortization from acquired intangible assets 440 427 1,308 556 Adjusted Gross Profit 36,657 37,964 113,017 104,439 Adjusted Gross Margin 67.8 % 69.9 % 69.9 % 68.7 % 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 cash flow from operating activities to Free Cash Flow and discloses Free Cash Flow Margin, for the periods indicated: (in thousands of U.S. dollars, except for percentages)  Three months ended October 31,  Nine months ended October 31,  2025 2024(1)  2025 2024(1)  $ $ $ $ Cash flow from operating activities  17,241 11,420 30,412 28,037 Acquisition-related compensation   1,875 — 2,220 345 Net addition to property and equipment  (304) (124) (432) (470) Free Cash Flow  18,812 11,296 32,200 27,912 Free Cash Flow Margin  34.8 % 20.8 % 19.9 % 18.4 % Note: 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 revenue to Constant Currency Revenue for the periods indicated: Three months ended October 31, Nine months ended October 31, (in thousands of U.S. dollars) 2025 2024 2025 2024 $ $ $ $ Total revenue for the period 54,068 54,299 161,675 151,963 Negative impact of foreign exchange rate changes over the prior period   7   —   457   — Constant Currency Revenue 54,075 54,299 162,132 151,963 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. ARR 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 reflects the continued strength of our business and the successful execution of our strategy. Increasing ARR 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 October 31, (in millions of U.S. dollars, except percentages) 2025 2024 Change $ $ % ARR 213.4 201.7 5.8 % Constant Currency Annual Recurring Revenue 213.2 201.7 5.7 %   SOURCE D2L Inc. View original content to download multimedia: http://www.newswire.ca/en/releases/archive/December2025/10/c1887.html