Docebo’s Earnings Call: Balancing Growth and Challenges

Docebo, Inc. ((TSE:DCBO)) has held its Q3 earnings call. Read on for the main highlights of the call.

Docebo, Inc. recently held its earnings call, revealing a balanced outlook for the company. The discussion highlighted significant achievements such as growth in Annual Recurring Revenue (ARR), success with FedRAMP, and strategic advancements in AI. However, these positives were tempered by challenges including the faster-than-expected wind down of Dayforce and the roll-off of the AWS contract. Overall, while the company is making strides, it faces hurdles that could impact its future performance.

Annual Recurring Revenue Growth

Docebo reported a 14% year-over-year growth in ARR, excluding the Dayforce business. This marks the second consecutive quarter of growth, underscoring strong business fundamentals and effective execution. The company’s ability to sustain this growth trajectory highlights its robust market position.

FedRAMP Success

The company achieved a significant milestone by securing two new federal customers shortly after its FedRAMP listing in May. This success came ahead of the original timeline, which anticipated such developments to begin in fiscal 2026, showcasing Docebo’s proactive approach and strategic foresight.

Enterprise Expansion

Docebo continued to expand its enterprise customer base, with significant wins such as Veolia and further expansion within Amazon. This growth indicates strong performance in both the enterprise and mid-market segments, reinforcing the company’s competitive edge.

AI Monetization Strategy

The introduction of an AI credit-based system for modules like AI Virtual Coach and AI Video Presenter marks a strategic move towards monetizing AI capabilities. This initiative not only strengthens Docebo’s product offerings but also opens new revenue streams.

Positive EBITDA Margin

Achieving a 20% EBITDA margin is a noteworthy accomplishment for Docebo, reflecting its operational efficiency and financial health. This milestone sets a solid foundation for future growth and profitability.

Dayforce Wind Down

The wind down of Dayforce occurred faster than anticipated, impacting ARR. Despite this, Dayforce is expected to represent 3.5% to 4.5% of total revenues by 2026 and become immaterial thereafter, suggesting a manageable transition.

AWS Contract Roll-off

The impending roll-off of the AWS contract by December 31 is expected to impact ARR by approximately $4 million. This development poses a challenge to maintaining current growth levels.

Churn and Retention Challenges

Docebo anticipates a decrease in retention metrics next quarter due to the AWS downgrade. This comes despite two consecutive quarters of improved retention, highlighting the challenges in maintaining customer loyalty amidst contract changes.

Forward-Looking Guidance

Looking ahead, Docebo provided guidance that reflects robust financial performance and strategic advancements. The company reported a sequential ARR increase of $2.5 million, with a 14% year-over-year growth excluding Dayforce. Despite the accelerated wind-down of Dayforce, Docebo maintains a positive outlook, expecting it to become immaterial by 2027. The early success with FedRAMP and the introduction of an AI credit-based system further bolster the company’s growth prospects.

In summary, Docebo’s earnings call presented a mixed yet promising picture. While the company faces challenges such as the Dayforce wind down and AWS contract roll-off, its achievements in ARR growth, FedRAMP success, and AI strategy provide a strong foundation for future growth. The positive EBITDA margin further underscores Docebo’s operational efficiency, positioning it well for continued success in the coming years.