D2L Inc. Announces Second Quarter 2027 Financial Results

• 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 [phone] United States: 1 [phone] Access 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.

D2L INC.
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 transactions Investment 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 31,				Six months ended July 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 paid-in capital	Accumulated other comprehensive loss	Deficit	Total
	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 on       exercise of options	1,372	11,970	(11,970)	--	--	--
Issuance of Subordinate Voting Shares on      settlement 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-based      compensation	--	--	4,363	--	--	4,363
Repurchase of share capital for cancellation      under the SIB	(1,904,762)	(14,704,903)	--	--	--	(14,704,903)
Repurchase of share capital for cancellation      under the NCIB	(575,700)	(4,021,624)	--	--	--	(4,021,624)
Change in share repurchase commitment      under 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 on      exercise of options	59,863	503,316	(220,948)	--	--	282,368
Issuance of Subordinate Voting Shares on      settlement 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-based      compensation	--	--	(525,334)	--	--	(525,334)
Repurchase of share capital for cancellation      under the NCIB	(413,400)	(4,356,030)	--	--	--	(4,356,030)
Change in share repurchase commitment      under 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 cancellation under the SIB		(14,704,903)	--
	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 U.S. dollars, except for percentages)	Three months ended July 31,		Six months ended July 31,
	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:
(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 U.S. dollars, except for percentages)	Three months ended July 31,		Six months ended July 31,
	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 U.S. dollars, except for percentages)	Three months ended July 31,		Six months ended July 31,
	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:
(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 U.S. dollars)	2026	2025	2026	2025
	$	$	$	$
Total revenue for the period	55,569	54,772	112,698	107,607
Positive impact of foreign exchange rate changes over      the 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.

For further information, please contact: Craig Armitage, Investor Relations, [email protected],[phone]