D2L Inc Q4 2025 Earnings Call Transcript

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

Question: Doug Taylor - Canaccord Genuity - Analyst : The challenges that you reference here with the US higher education market, understanding some of this is related to the Department of Education changes that are being contemplated, I just want to dig into that a bit deeper so investors have a better picture of what's happening. You see this as mostly about decision making and distraction in your customer base versus how the budget for LMS solutions might actually impact as some of the funding mechanisms move around. Any additional color there I think would be helpful.

Question: Doug Taylor - Canaccord Genuity - Analyst : We've been in a period for a couple of years now where I think you've consistently referenced the level of RFP activity being below what you'd consider normal. Are you starting to see that level of activity slow down further in the short, medium-term pipeline? Is that evident here as well?

Question: Doug Taylor - Canaccord Genuity - Analyst : Maybe one last question for me. You've referenced some pockets of strength in other areas. I mean, Creator+, but also in international markets. I guess when you get situations like what you're seeing right now in one of your markets, can you talk about your philosophy, John, on how you would adjust or reprioritize your resources, hiring, or otherwise spend in response to the evolving dynamics here?

Question: Gavin Fairweather - Cormark Securities Inc. - Analyst : Maybe just to start in the higher ed business, you talked about how your competitive positioning is strengthening. Maybe you can update us on what you're seeing in the market in terms of win rates, selling prices, and how your competitors are acting as their bases renew.

Question: Gavin Fairweather - Cormark Securities Inc. - Analyst : That's very helpful. Maybe we can check in on the corporate side. I mean, a lot of work that went into the product over the course of fiscal '25. Curious where you think you are on that journey in terms of just continually improving the product to make it more and more competitive in that big market, both for memberships and then upscaling within corporates as well.

Question: Gavin Fairweather - Cormark Securities Inc. - Analyst : Great. And then lastly for me, maybe for Josh, just on EBITDA margins. I mean, they certainly surprised and more like the high teens in the back half of your fiscal year, and yet you've provided your guidance for about 15% for fiscal '26. Maybe just walk us through the puts and takes in terms of seasonality, FX, incremental spending that you guys are planning on making on growth to help reconcile that EBITDA margin going forward.

Question: Paul Treiber - RBC Capital Markets - Analyst : Just a follow-up question just in regards to EBITDA margins, but just looking out to 2028. When you look at the slope of margin expansion from '26 to '28, why wouldn't there be more operating leverage coming off revenue growth? Do you see those investments that you're making in '26 being sustained through '27 and '28?

Question: Paul Treiber - RBC Capital Markets - Analyst : And in regards to cost, you mentioned AI as a product opportunity. Do you anticipate or have you seen to date AI improve productivity in product development? Or are you looking at it from a customer support perspective? Do you see opportunities to improve productivity internally in the company?

Question: Paul Treiber - RBC Capital Markets - Analyst : And then just lastly for me, one of your competitors had a fairly high profile security breach, and there's been a lot of news around it. They're more in the K-to-12 space, but has that opened the door to discussions with customers across higher ed and other end markets, just in terms of migrating from legacy platforms to something more modern? And how does that counter -- or how does that relate to what's going on in terms of the broader environment in terms of the uncertainty from a macro perspective out there?

Question: Thanos Moschopoulos - BMO Capital Markets - Analyst : John, maybe just to clarify a point, the US higher ed market is predominantly a replacement market. So I think that would imply that the budget is already there and being spent on an existing LMS. So just obviously, a lot of budget uncertainty. But from your perspective, it's just all this noise causing customers to delay decisions, even though presumably, they shouldn't be spending any incremental budgets on your solution versus what they're already spending on their existing LMS.

Question: Thanos Moschopoulos - BMO Capital Markets - Analyst : Great. And just in terms of international, maybe just expand as far as the geographies in which you're most optimistic about over the next year and to what extent you're seeing a macro impact in some of those markets as well.

Question: Brian Peterson - Raymond James Ltd. (Canada) - Analyst : And congrats on the strong win rates. So John, I know you mentioned AI-first learning as a catalyst for change, and that's even bigger than cloud. I'm curious, just given your expertise and time in the industry, how do you see that unfolding? When would you think that installed base that is largely on cloud today could look at AI as a shift to transition to a new LMS? Any perspective there?

Question: Brian Peterson - Raymond James Ltd. (Canada) - Analyst : Appreciate the color. And Josh, maybe just one follow up. As we're thinking about the medium-term targets, how big of a contribution could M&A be there or is that largely an organic number?

Question: Suthan Sukumar - Stifel Nicolaus and Company, Incorporated - Analyst : For the first question, I want to touch on the international growth. This has been pretty durable over the past several quarters. You mentioned you're leading in, given the evidence in the US. Can you speak a little bit about how your strategy might be involving in your focus markets here? And how do you see win rates and deal sizes trending from here?

Question: Suthan Sukumar - Stifel Nicolaus and Company, Incorporated - Analyst : On NRR, this continues to improve. And it sounds like you still see opportunity for that to expand. Looking ahead, can you speak to the opportunity for upsell, cross-sell of Lumi and Creator+ and some of the other modules within the US higher ed base, just given all the macro noise there?

Question: John Shao - National Bank Financial - Analyst : I have a similar question to Brian on your fiscal 2028 growth target. So could you maybe give us a breakdown of how much of that growth acceleration is tied to a recovery in macro versus your OpEx investments and potential M&As?

Question: John Shao - National Bank Financial - Analyst : And given your FX exposure, would you ever consider hedging your currency risk on the top line when it comes to OpEx structure? Just want to make sure you still have a natural hedge to protect your EBITDA from the volatilities.