Online learning company D2L files for IPO

The Kitchener, Ont.-based online learning company D2L Corp. filed to list on the Toronto Stock Exchange Tuesday, making it the latest in a rash of Canadian tech companies and global online-learning platforms to join public markets this year.

The company formerly known as Desire2Learn filed a prospectus with regulators on Tuesday, applying for the ticker DTOL, but did not list a target share price. TD Securities and BMO Capital Markets are leading the offering; other underwriters include RBC Dominion Securities, Canaccord Genuity, Raymond James, National Bank Financial and Eight Capital.

D2L has benefited from the pandemic shift to digital learning, and says it had a 200-per-cent boost in new bookings in the early months of the pandemic over 2019 levels. It counts a multimillion-dollar deal with the New York City Department of Education among its new major contracts for online and hybrid learning services.

“D2L’s mission has never been more vital,” chief executive officer and founder John Baker wrote in a letter to investors in Tuesday’s filing. Citing a June, 2020, World Bank report that suggested pandemic-related learning loss could deprive the next generation of at least US$10-trillion in lost earnings, the CEO added that, “I believe D2L can help students achieve more and enable effective upskilling and reskilling of the work force. … Now is the time to move away from the old industrial era model of learning that assumes everyone progresses at the same pace.”

Though D2L did not say how much it expected to raise in the initial public offering, three sources told The Globe and Mail last month the company expected to raise a nine-figure sum to reach a value of more than US$1-billion. (The Globe is not identifying the sources as they are not authorized to speak on the matter.)

The company said Tuesday that about $20-million of its IPO proceeds would be directed to cover a loan it had made to a holding company affiliated with Mr. Baker in March, 2021. According to the prospectus, the initial loan was intended to cover $16.6-million in outstanding income tax liabilities in connection with a 2012 share distribution that included three of Mr. Baker’s siblings, following a 2016 Canada Revenue Agency audit. It is also intended to help Mr. Baker’s siblings pay $3.6-million related to exercising D2L share options.

The company revealed Tuesday that it took in US$138-million in revenue during the year that ended on July 31, up 21 per cent from the year prior. Its annual recurring revenue for the same period rose 23 per cent, to US$144-million.

In D2L’s most recent fiscal year, which ended in January, it reported a comprehensive loss of US$41.7-million, which grew more than sixfold from US$5.7-million a year earlier. Its revenue rose 15 per cent to US$126-million in the same period.

Mr. Baker founded the company in 1999 while a student at the University of Waterloo. It was bootstrapped until 2012, when it raised an then-eye-popping $80-million venture financing round. The company boasts that more than half of Canada’s universities and colleges and numerous U.S. schools use its Brightspace learning platform.D2L also provides training services for companies and industry associations.

It’s been a banner year for IPOs on the Toronto Stock Exchange, in which more than a dozen tech companies have listed or filed to list publicly, ranging from fellow Waterloo Region scale-up Magnet Forensics Inc., which makes cybersecurity software, to Vancouver’s Thinkific Inc., whose software helps people create and sell online courses.

The online learning space has also seen a global race to public markets, with Coursera Inc., Duolingo Inc. and PowerSchool Holding Inc. among the sector leaders that have listed publicly this year.

With a report from Sean Silcoff

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