D2L, Inc. ((TSE:DTOL)) has held its Q2 earnings call. Read on for the main highlights of the call.
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D2L, Inc. recently held its earnings call, revealing a slightly positive sentiment driven by strong SaaS revenue growth and profitability improvements. Despite challenges in professional services revenue and churn in the U.S. K-12 market, the company showcased robust financial performance and new customer acquisitions, contributing to an overall optimistic outlook.
Strong SaaS Revenue Growth
D2L reported a total revenue increase of 11% to $54.8 million, with subscription and support revenue rising by 14% to $50.1 million. This growth has led to an upward revision in the company’s full-year guidance, highlighting the strength of its SaaS offerings.
Improved Profitability
The company’s adjusted EBITDA rose to $7.5 million, with an adjusted EBITDA margin of 13.7%, marking a significant increase of 510 basis points from the previous year’s second quarter. This improvement underscores D2L’s enhanced operational efficiency.
AI and Product Innovation
D2L continues to enhance its core products with a focus on AI, which has resulted in increased customer adoption. The growing list of AI experiences in D2L Lumi is a testament to the company’s commitment to innovation.
New Customer Acquisitions
The company successfully added several notable new customers, including the University of the People, Red Deer Polytechnic, JIS Group, SASTRA University, and Northwest University, expanding its customer base and market reach.
Recognition and Awards
D2L was named one of Canada’s Best Managed Companies for the 13th consecutive year and won the Overall Learning Management System Solution Provider of the Year in the 2025 EdTech Breakthrough Awards, reinforcing its reputation in the industry.
Decreased Professional Services Revenue
Professional services and other revenue saw a decline of 10% in the second quarter to $4.6 million, attributed to reduced demand among U.S. higher education customers.
Higher-than-Normal Churn in U.S. K-12 Market
The company’s annual recurring revenue was partially offset by higher-than-normal churn in the U.S. K-12 market, presenting a challenge to its otherwise strong performance.
Temporary Gross Margin Impact
A planned migration of back-end technology is expected to create a 200 basis point impact on subscription gross margin, which is anticipated to moderate by fiscal 2027.
Forward-Looking Guidance
D2L’s forward-looking guidance is optimistic, with total revenue projected to grow by 11% to $54.8 million and subscription and support revenue expected to rise by 14% to $50.1 million. The company has raised its annual SaaS revenue guidance to $198-$200 million, reflecting a 10-11% growth over fiscal 2025. This guidance underscores D2L’s confidence in its strategic initiatives and market position.
In conclusion, D2L’s earnings call presented a slightly positive sentiment, driven by strong SaaS revenue growth, profitability improvements, and strategic customer acquisitions. Despite facing challenges in the professional services sector and the U.S. K-12 market, the company’s forward-looking guidance remains optimistic, highlighting its commitment to innovation and market expansion.