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Still more upside to Docebo, says Eight Capital


Eight Capital analyst Christian Sgro is sold on e-learning company Docebo (Docebo Stock Quote, Chart, News, Analysis, Financials TSX:DCBO), maintaining his “Buy” rating while raising his target price from C$80.00 to C$110.00/share in an update to clients on Friday.

Founded in 2005 with its headquarters in Toronto, Docebo is a cloud-based, customizable, artificial intelligence-based e-learning platform which offers end-to-end capabilities for training internal and external workforces, partners and customers along with the ability to track and certify online courses and training.

Sgro’s most recent analysis comes after Docebo reported strong second quarter financial results.

“Docebo is executing on plan, with focused innovation and product leadership driving penetration of a large and expanding TAM globally,” he said. “There is little customer concentration, deal sizes are steadily increasing, and we view the growing OEM channel strategy as augmenting this ramp. We are encouraged by management’s confidence in the business and outlook and expect Docebo to maintain this impressive pace through the medium-term.”

Docebo reported second-quarter revenue of $25.6 million for a 76 per cent year-over-year increase, which included  a $1.1 million one-time cumulative catch up of revenue related to a customer contract that previously did not meet all requirements for revenue recognition. Within the overall revenue picture, 92 per cent ($23.6 million) came from subscription revenues. Docebo also reported a negative adjusted EBITDA of $2 million compared to an $800,000 loss at the same time in 2020. Sgro had called for revenue of $22.8 million and an adjusted EBITDA loss of $1.8 million. (All figures in US dollars except where noted otherwise.)

The company also has $216 million in cash available, which Sgro notes could set Docebo up for future mergers and acquisitions.

“We are seeing balanced growth across the board from new logo sales, OEM partners, and upsell and cross sell activity. Although still early, we are also pleased with the customer reception of the launch of the Docebo Learning Suite as we expand our coverage across the entire enterprise learning lifecycle,” said Claudio Erba, CEO and Founder of Docebo, in the company’s August 12 press release.

“While the traditional LMS market has been focused on HR skills training and compliance, our customers use Docebo as a productivity enablement tool to address learning challenges enterprises have across operating departments and with their external customers and partners. This dynamic is not pandemic driven, rather it’s ROI driven, and that is why we believe the tailwinds we are seeing are both consistent and sustainable,” Erba added.

The company’s second quarter results prompted a few changes to Sgro’s financial metrics, as he now projects Docebo’s revenues to reach $100.4 million in 2021 for a 60 per cent year-over-year increase, with another forecasted jump to $135.2 million in play for 2022, producing a 35 per cent year-over-year increase.

Sgro also shifted his adjusted EBITDA expectations downward, projecting a $7.4 million loss in adjusted EBITDA for 2021 after the company reported a $2.2 million loss in 2020, though he projects a positive adjusted EBITDA of $300,000 for 2022.

Meanwhile, on EV/Revenue Sgro projects 20.2x for 2021 after reaching 32.2x in 2020, then dropping to 15x by 2022. 

Docebo experienced a busy second quarter, beginning with the launch of Docebo Community, designed to promote customer self-service, centralize help content and improve products based on customer feedback, followed by the June launch of Learning Analytics, a business intelligence tool that allows enterprise customers to retrieve, analyze, and transform the data from their learning programs into useful business insights, as well as partnering with RE/MAX to power the RE/MAX University platform, which helps provide training to brokers and agents.

Docebo has also brought in three additional OEM partnerships: WorkSpan, a California-based ecosystem business management platform, KOLABORI, a Brazil-based technology and consulting company, and orchestrateHR, a Dallas-based organization engaged in human resource technology, human resource and employee benefits consulting services. Company management notes that the new partnerships could take months to a year to drive material revenues, though the company remains bullish on growth in the OEM channel as a low-touch opportunity to drive further platform use. 

The company also underwent a shakeup in its executive team, bringing in Rudy Valdez as its new Chief Operating Officer after 16 years with Amazon Web Services, most recently as the Vice-President, Solutions Architecture and Training & Certification. Meanwhile, Martino Bagini, the company’s previous Chief Operating Officer, will become the company’s Chief Corporate Development Officer.

Overall, Sgro thinks Docebo serves as an attractive investment opportunity.

“We believe Docebo deserves to trade at a premium to high-growth SaaS peers at ~17x, given Docebo’s higher growth profile and consistent execution,” he said. “We believe that our top-line estimates may prove to be conservative which could drive further valuation upside.”

Docebo closed Monday trading at C$89.17 on the Toronto Stock Exchange, down 17 cents from its Friday closing figure of C$89.89/share. Docebo shares have been on an upward trajectory throughout the year, yielding a return of 11.53 per cent since January 1. At press time, Sgro’s new target of C$110.00 represented a projected one-year return of 28 per cent.

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Geordie Carragher is a staff writer for Cantech Letter
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