D2L Inc.

For Q1 fiscal 2027, total revenue increased 8% year over year to $57.1 million, subscription and support revenue increased 10% to $52.7 million, and ARR increased 9% to $225.2 million. Adjusted gross profit increased 7% to $40.4 million, adjusted gross margin was 70.7% versus 71.3% in the prior year period, adjusted EBITDA was $8.3 million versus $9.3 million a year ago, and net income was $1.7 million versus $3.3 million last year. Cash flow used in operating activities was $16.8 million versus $1.9 million, and free cash flow was negative $16.9 million versus negative $1.8 million. Looking ahead, management reiterated fiscal 2027 guidance, saying revenue growth and adjusted EBITDA margin should improve as the year progresses, with a stronger second half than first half, and that the current K-12 churn impact is already reflected in guidance and ends in Q2.

John Baker described the quarter as a strong start to fiscal 2027, emphasizing improved execution in higher education, corporate, and international markets. He said win rates are rising, pipeline has been building for more than a year, and customers are increasingly choosing longer-term contracts as they modernize around AI and digital transformation. His tone was confident and strategic, with repeated emphasis on D2L’s competitive positioning, trust posture, and international expansion opportunity.

Josh Huff highlighted the core financials: revenue up 8% to $57.1 million, adjusted gross profit up 7% to $40.4 million, adjusted EBITDA of $8.3 million, and ARR of $225.2 million. He noted adjusted gross margin of 70.7% was pressured by the database technology migration, which he expects to materially finish by the end of Q2, with the impact in Q1 estimated at 100 to 150 basis points. He also said operating cash flow and free cash flow were unusually weak due to working-capital timing, and that the company repurchased and canceled about 444,000 shares in Q1 and close to 1.3 million over the trailing 12 months.

Analysts focused on pipeline conversion, renewal exposure, K-12 churn, margin pressure from the database migration, and how AI and the Canvas breach may affect customer behavior. Management said the pipeline has been building for over a year, but the expected rebound in RFP activity has not fully shown up yet; however, win rates remain strong and pipeline conversion is moving much faster, with recent migrations averaging about 5 weeks. On K-12, management said the prior churn issue is a one-time item that comes out of the system in Q2, while on margins and cash flow they framed Q1 as temporary timing and reiterated that free cash flow should generally track EBITDA over the year.