D2L (DTOL) Q3 2026 earnings summary

Executive summary

• Subscription and support revenue grew 6% year-over-year to $49.4 million, with ARR up 6% to $213.4 million, driven by new customers and upsell expansion, partially offset by higher churn in the U.S. K-12 market.

• Total revenue was $54.1 million, flat year-over-year, as a decline in professional services revenue offset subscription growth.

• Adjusted EBITDA for the quarter was $7.9 million (14.7% margin), down from $10.4 million (19.2% margin) a year ago; year-to-date Adjusted EBITDA rose 33%.

• Strong ARR bookings in higher education and corporate markets, with international ARR growth exceeding 15% year-over-year.

• Cash and cash equivalents stood at $110.5 million with no debt at quarter end.

Financial highlights

• Subscription and support revenue increased 6% to $49.4 million; professional services revenue declined 38% to $4.7 million due to a prior-year true-up and cautious U.S. spending.

• Adjusted gross margin was 67.8%, down from 69.9% last year, impacted by database migration costs.

• Gross profit margin for subscription and support was 71.1% (down from 72.7%), and for professional services was 20.4% (down from 45.2%).

• Operating expenses were $32.5 million, flat year-over-year; OpEx as a percentage of revenue decreased by 320 basis points.

• Free cash flow for Q3 was $18.8 million, up 66.5% year-over-year; year-to-date free cash flow grew 15% to $32.2 million.

Outlook and guidance

• Full-year guidance: subscription and support revenue of $198–$199 million (10% growth), total revenue of $217–$218 million (6% growth), and adjusted EBITDA of $32–$33 million (15% margin).

• Pipeline generation remains strong, with the healthiest pipeline in over three years.

• Confident in achieving medium-term operating model targets, including an 18–20% adjusted EBITDA margin by fiscal 2028.

• Guidance reflects higher churn in U.S. K-12 and continued decline in professional services due to cautious U.S. Higher Education spending.