D2L (DTOL) Q1 2027 earnings summary

Executive summary

• Subscription and support revenue grew 10% year-over-year to $52.7 million, with ARR up 9% to $225.2 million, driven by new and expanding customers, partially offset by churn in the U.S. K-12 market.

• Total revenue increased 8% year-over-year to $57.1 million in Q1.

• Adjusted EBITDA was $8.3 million (14.5% margin), down from $9.3 million (17.6%) last year, mainly due to a database migration.

• Net income was $1.7 million, down from $3.3 million in the prior year.

• Strong customer growth in North America and internationally, with high win and renewal rates across higher education, corporate, and international segments.

Financial highlights

• Subscription and support revenue: $52.7 million (+10.4% YoY); Professional services & other: $4.4 million (-13.6% YoY).

• Adjusted gross profit rose 7% to $40.4 million; adjusted gross margin was 70.7%, down from 71.3% last year.

• Adjusted EBITDA: $8.3 million (14.5% margin), down from $9.3 million (17.6%) YoY.

• Free cash flow was -$16.9 million, primarily due to timing-related working capital movements.

• Cash and cash equivalents at quarter end: $95.7 million; no debt.

Outlook and guidance

• Fiscal 2027 guidance reiterated: revenue growth and adjusted EBITDA margin expected to improve as the year progresses, with stronger performance in the second half.

• Subscription and support revenue guidance: $212–214 million (+7–8% YoY); total revenue expected at $231–234 million (+6–8% YoY); adjusted EBITDA of $33–35 million (15% margin).

• Margin impact from database migration expected to conclude by end of Q2, with gross margin improvements anticipated in the back half of the year.

• Free cash flow margin expected to mimic adjusted EBITDA margin for the full year.

• Management expects operating cash flow to improve in Q2 and Q3, consistent with historical seasonality.