D2L (DTOL) Q1 2026 earnings summary

Executive summary

• Q1 fiscal 2026 delivered 9% total revenue growth to $52.8 million, with subscription and support revenue up 11% to $47.7 million and annual recurring revenue rising 9% to $206.8 million on a constant currency basis.

• Adjusted EBITDA reached $9.3 million (17.6% margin), more than doubling last year's Q1 margin, and adjusted gross margin improved by 360 basis points to 71%.

• Net income for the quarter was $3.3 million, up from $0.6 million in the prior year.

• The company is executing efficiently despite macroeconomic headwinds, especially in U.S. higher education, where sales cycles are elongated but pipeline and win rates remain strong.

• Customer base expanded in both education and corporate sectors, with notable new clients and industry recognitions.

Financial highlights

• Total revenue for Q1 was $52.8 million, up 9% year-over-year; constant currency revenue increased 10.5% to $53.6 million.

• Subscription and support revenue rose 11% to $47.7 million; professional services and other revenue declined 8% to $5.1 million.

• Adjusted gross margin was 71.3% (up from 67.7%); subscription and support gross margin rose to 75.2% (from 72.2%).

• Free cash flow improved to negative $1.8 million from negative $15 million year-over-year; cash balance at quarter end was $92.5 million with no debt.

• Annual Recurring Revenue (ARR) reached $206.2 million, up 8% year-over-year; constant currency ARR up 9%.

Outlook and guidance

• Annual guidance for fiscal 2026 reiterated, with expectations for continued measured investment in growth and further adjusted EBITDA margin expansion.

• Fiscal 2026 guidance maintained: subscription and support revenue of $194–196 million (7–9% growth), total revenue of $219–221 million (7–8% growth), and adjusted EBITDA of $32–34 million (15% margin).

• Macro conditions remain challenging, especially in U.S. higher education, but medium-term growth drivers and pipeline strength support a positive outlook.

• Q2 will include $1.5–$2 million in expenses for the Fusion user conference.

• Medium-term target operating model through Fiscal 2028 remains unchanged.