Docebo (NASDAQ:DCBO) said its underlying growth accelerated for a second consecutive quarter as the company gains traction with larger enterprise customers, expands its artificial intelligence product portfolio and begins integrating its recent skills-intelligence acquisition.
Speaking at Canaccord’s 46th Annual Growth Conference in Boston, Chief Executive Officer Alessio Artuffo said the learning-platform provider has spent the past several years increasing its enterprise focus. That work has begun to show results through accelerating pipeline activity, larger customer contracts and new product releases, he said.
ARR Growth Expected to Reaccelerate
Chief Financial Officer Brandon Farber said reported annual recurring revenue grew 9.5% in the second quarter. The company’s core ARR, which excludes foreign exchange effects, acquired ARR and the wind-down of its Dayforce business, rose 13.9%.
Farber said Docebo expects reported ARR growth to begin converging with core ARR growth during the second half as the company laps prior churn from Dayforce and Amazon Web Services. Dayforce represented about $19.5 million in ARR roughly a year earlier and about $16.5 million at the time of the conference, according to Farber. He said the company faced approximately $5 million of Dayforce churn in the third quarter of the prior year, followed by approximately $4 million of AWS churn in the fourth quarter, in addition to Dayforce churn.
Management cited enterprise momentum, steady mid-market performance and improving international business as drivers of the acceleration. Farber also said Docebo is seeing enterprise sales cycles compress, though he noted that several factors can affect deal timing. He identified go-to-market execution as the largest controllable contributor, alongside improved product positioning and the addition of skills capabilities.
Skills Acquisition Broadens Enterprise Opportunity
Earlier this year, Docebo acquired French skills-intelligence platform 365Talents and AI-native enterprise-search company Zive. Artuffo said the company began seeing results from the 365Talents integration in the second quarter, with some large customers adopting the combined skills-and-learning offering.
Farber said the skills component has helped raise contract value and has opened opportunities that Docebo may not have won previously as a standalone learning-management-system vendor. In two recently discussed deals involving a large telecommunications company and an automotive company, skills capabilities were a key requirement, he said.
The company also expects its FedRAMP business to contribute to the second half. Farber said the company typically excludes individual deals with more than $1 million in ARR from its guidance, while noting that FedRAMP opportunities are often large and can be uneven in timing. Docebo’s second quarter was its strongest quarter for state, local and education, or SLED, business, he said, adding that FedRAMP certification has also improved the company’s credibility in that market.
AI Products Set for October Launch
Artuffo said generative AI is increasingly embedded throughout Docebo’s platform. The company’s AI role-play technology, which enables customers to configure virtual-avatar training scenarios and assessment rubrics, has seen significant adoption and usage growth, he said.
Docebo plans to launch two additional AI-focused products in October: Enterprise Knowledge and AgentHub. Enterprise Knowledge is intended to connect enterprise knowledge sources, including CRM systems, document-management tools, Notion and Google Drive, with Docebo’s learning platform. Artuffo said users will be able to search and retrieve organizational knowledge and convert it into learning assets.
AgentHub is designed to automate workflows and business processes associated with internal and external training. Artuffo said Docebo is testing the products through private betas and intends to work closely with larger customers to build personalized workflows that could later be generalized for other customers.
He said the company’s system-of-record role in learning provides valuable data for regulated and enterprise use cases, including records of employee certifications, course completions and learning activity.
Healthcare Investment and Capital Priorities
Docebo plans to enter healthcare more aggressively, an industry Artuffo estimated represents a $2 billion to $3 billion market for the company’s space. The company has already won about $10 million of ARR in healthcare without a dedicated sales organization, he said.
Management expects to invest approximately $1 million to $1.5 million in annualized costs across go-to-market, product and staffing to establish a healthcare-focused function, with plans to be live in January. Artuffo said several healthcare customers are already among Docebo’s top 20 customers and that the company sees an opportunity to improve win rates through specialized sales coverage and targeted product enhancements.
Farber said Docebo generated about $55 million of EBITDA and expects EBITDA-to-free-cash-flow conversion to be close to 100% for the next couple of years because it is not paying taxes during that period. The company ended the quarter with approximately $45 million in cash and $90 million in debt, or about $45 million in net debt, he said.
Docebo announced a $70 million substantial issuer bid, potentially funded with $60 million in debt and $10 million in cash. Farber said acquisitions are not a primary focus for the next 12 months as the company concentrates on integrating 365Talents and Zive. He said share repurchases remain a priority because management believes the stock is undervalued.
The company continues to target roughly 2 percentage points of EBITDA-margin expansion per year, Farber said. Docebo expects to hold general and administrative spending relatively stable, seek efficiency gains in sales and marketing, and continue investing in research and development as it expands its AI and forward-deployment capabilities.
About Docebo (NASDAQ:DCBO)
Docebo is a cloud-based learning management system (LMS) provider that offers enterprise organizations a comprehensive platform for employee, customer and partner training. The company’s software is designed to streamline learning and development with features such as AI-powered content recommendations, automated learning paths and social collaboration tools. Docebo’s platform supports multiple languages and integrates with a variety of third-party applications, enabling businesses to deliver training at scale across different departments and regions.
Founded in 2005 and headquartered in Toronto, Canada, Docebo has expanded its footprint to serve customers in North America, Europe, the Middle East and the Asia Pacific region.
