D2L Inc Q2 2026 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Gavin Fairweather - Cormark Securities Inc - Analyst : Congrats on the strong quarter. Nice to hear a good expansion momentum quarter in Q2 here. Curious as you've kind of continued to enhance your add-ons, including with AI and socialize them more with the base down at your user conference, if your excitement or views on the expansion potential on the base are evolving at all as this has progressed. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 11, 2025 / 12:30PM, DTOL.TO - Q2 2026 D2L Inc Earnings Call

Question: Gavin Fairweather - Cormark Securities Inc - Analyst : It's great to hear. And then maybe for Josh. You referenced the cloud migration there, which is going to be coming through in the back half of the year. So should we expect a 200 basis points impact evenly over the back half of the year? Will that be completely done this fiscal year? And are there any kind of offsets that we should think about as you're continuing to optimize your cloud hosting?

Question: Doug Taylor - Canaccord Genuity Corp - Analyst : I'll just pick up on that last line of questioning as it relates to the cloud migration here first. I mean you've talked about the 200 basis points gross margin near-term impact. Maybe you could expand upon the economics of that initiative longer term in reference to your overall gross margin objectives over your medium-term model that you've provided? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 11, 2025 / 12:30PM, DTOL.TO - Q2 2026 D2L Inc Earnings Call

Question: Doug Taylor - Canaccord Genuity Corp - Analyst : Okay. And so what I'm hearing there is that there are cost savings, and that's one of the factors here. But part of this is also product leadership and building upon that as well, is that a fair assessment?

Question: Doug Taylor - Canaccord Genuity Corp - Analyst : Okay. I appreciate that extra color. Maybe moving back to the revenue line and the environment. You did flag some pressure in the K-12 market in some of your churn metrics. I just want to understand that dynamic a bit more. I think we all understand the budget pressure. But how exactly is that manifesting in relation to your ARR? Is there a temporary turning off of certain features or models? Or is it student numbers being reduced? Maybe you could help us understand that and how transitory that impact might be?

Question: Doug Taylor - Canaccord Genuity Corp - Analyst : Okay. And then maybe one last question for you, John. It's been now a little over a year since the last meaningful M&A with H5P, and you've articulated that tuck-ins are going to be a more consistent part of the strategy here. I just want to understand, is the macroeconomic conditions that you've been seeing generally, is that impacting the M&A strategy, the market, the pipeline, asking prices and valuations and things like that?

Question: Erin Kyle - CIBC World Markets Corp - Analyst : Maybe I just want to start on the demand environment there. I know you talked about it a bit, but subscription growth was solid in the quarter and then the ARR build in the quarter was a bit ahead of our expectations as well. So maybe you could just expand a little bit more on what you've been seeing there? Are you seeing customers make decisions and the typical decision-making time line period this summer? Or are they still a little bit elongated? What do sales cycles look like right now?

Question: Erin Kyle - CIBC World Markets Corp - Analyst : That's helpful there on the demand environment. I actually want to switch gears a little bit, still sticking to demand, but just on the international growth. The revenue growth for international looks like it decelerated a little bit in the quarter, and it's bit below the historical 15% to 20% range you've been putting out in recent quarters. So you announced some international wins this quarter. Maybe you can just comment on how that go-to-market international is going and if we should expect to see the growth there start to return to double digits? Or just what demand looks like from an international perspective?

Question: Suthan Sukumar - Stifel Canada - Analyst : Congrats on a nice print here. My first question, I just wanted to double-click on the macro. It's good to hear that your pipeline build continues to play out consistently here despite the headwinds that you're seeing in the market. I'm just kind of curious, what's -- what would you call out as having changed the most in your prospect conversations? I mean you mentioned AI is still not really having a meaningful presence in the RFPs that you're seeing. But how important is AI in the conversation that you are having? And how is that playing into the size and structure deals and the pricing leverage that you may have?

Question: Suthan Sukumar - Stifel Canada - Analyst : That's helpful color. On corporate learning, can you provide us with an update on some of the progress that you're making here with respect to some of the product initiatives that you've been working on? I mean from a go-to-market standpoint, it sounds like you're still having pretty good success securing large wins. But just kind of curious on sort of the progress that you're making on both the product and go-to-market front. And I know it's been an area of investment for you guys.

Question: Suthan Sukumar - Stifel Canada - Analyst : Perfect. And just last one for me. Just on the H5P business, on some of the synergies that you're seeing here. From an upsell standpoint, this appears to be -- it seems to gain traction. It just feels that it's a very natural value prop that you bring into your basin. But from a -- I guess, from a cross-sell and sort of the longer-term growth opportunity, any update on sort of what the opportunity looks like in terms of tapping into their user base, their global user base and potentially displacing some of the other LMS' that customer base is using?

Question: Thanos Moschopoulos - BMO Capital Markets - Analyst : Regarding the PS business, should we expect margins to remain at a similar level near term? Or are there some early indications that PS demand might start to ramp up -- ramp back up heading into the fall?

Question: Thanos Moschopoulos - BMO Capital Markets - Analyst : Great. In terms of using AI internally to drive efficiency, is it early days, or is that helping drive contributors to the margin improvement that we're seeing?

Question: Brian Peterson - Raymond James Ltd. (Canada) - Analyst : It was great to see you guys out in Savannah. So just one for me, and I don't know if it's John or Josh, who wants to take this. But as the business diversifies into corporate, and we hear things like early renewals, I don't know how common that will be, I'd love to understand how we should be thinking about the seasonality of incremental ARR. I know historically, that's been in the summer months, maybe international is a little different on that. But as we think about how to sequence the quarterly additions to ARR, any help on seasonality would be helpful.