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Docebo has further to run, says Laurentian Bank

Nick Agostino of Laurentian Bank Securities is still dialled into Docebo Inc (Docebo Stock Quote, Charts, Analysis, Financials, News TSX:DCBO), maintaining a “Buy” rating and target price of C$125/share for a potential return of 42.3 per cent in an update to clients on Friday.

Founded in 2005 and headquartered in Toronto, Docebo provides its proprietary, SaaS-based Docebo Learning Management System (LMS) and five supporting modules to train internal and external workforces, partners and customers in North America, Europe and the Asia-Pacific region.

Agostino’s latest analysis comes after Docebo released its third quarter financial results, headlined by $27.1 million in revenue for the quarter (all report figures in US dollars except where noted otherwise), beating the Laurentian Bank estimate of $26.1 million, as well as the consensus expectation of $26.4 million. All told, the Q3 topline represents a 68.2 per cent year-over-year increase, as well as a 5.6 per cent sequential jump.

Agostino pointed to a number of key factors in the revenue beat, including revenue from new customers (the company added 151 net new customers in the quarter), as well as successfully upselling to existing customers. Overall, the company’s ACV increased by 23.2 per cent year-over-year, jumping from approximately $31,900 to approximately $39,275.

The company also onboarded a number of new high-profile clients in the quarter including Zoom Video Communications, American luxury department store Chain Neiman Marcus, and Smiths Medical, a global manufacturer of specialty medical devices, a development Agostino is encouraged by as it relates to Docebo’s potential penetration into the biotechnology and healthcare sectors.

“Customer wins largely continue to be through displacement of incumbents,” Agostino said. “However, the company is also finding certain green space opportunities to solve learning gaps that existing LMS solutions do not tackle.”

In addition, the company expanded its agreement with Deliveroo, which specializes in on-demand food service delivery, through its Docebo Shape content generation module, as well as allowing impact measurement using Docebo Learning Impact, which Docebo acquired as part of its acquisition of forMetris last year.

Per Agostino, company management also noted positive initial traction with the launches of the Docebo Connect and Flow modules on October 5, particularly with Connect as it enables organizations to manage data across various LMS platforms / custom tech stacks, with the intent of making integration faster and more effective.

From an EBITDA perspective, Agostino noted the company to be in line with estimates after reporting a $2 million loss in the quarter, close to the Laurentian Bank projection of a $1.8 million loss and the consensus estimate of a $1.9 million loss. 

Agostino noted the company’s gross margin of 79 per cent to be the sole down point in the report in comparison to 82 per cent on a year-over-year basis on account of higher staffing costs and partner and hosting fees, though he expects the company to return to its typical 80 to 84 per cent range in upcoming quarters. 

“The momentum in our business continues to build, and while our growth remains well balanced across customers and industry verticals, the use cases are getting larger, driving further growth in average contract value as more organizations leverage Docebo as a productivity enablement tool to train their employees, partners, and customers,” said Claudio Erba, CEO and Founder of Docebo in the company’s November 11 press release.

Docebo has also undergone an executive change, as Sukaran Mehta was named the company’s interim Chief Financial Officer after the departure of Ian Kidson.

“Ian joined Docebo to help us prepare and execute our IPO and on behalf of the Company, we thank him for his contributions during a period of unprecedented progress and growth,” Erba said on September 13. “We have a great foundation today, with an experienced finance team led by Sukaran that enables this orderly transition as we position Docebo for our next phase of growth.”

Looking forward, Agostino has slightly revised his short-term and long-term financial projections, as he now projects fourth quarter revenue to be $28.8 million instead of $28.7 million, helping boost the overall 2021 revenue projection to $103.2 million from his initial $102.1 million estimate. Agostino made a similar revision to his 2022 projection, as he now forecasts revenue to be $142.8 million instead of his initial $141.3 million target.

Agostino also projects a negative EBITDA fourth quarter at a $1.5 million loss (previously a $1.3 million loss), dropping the overall EBITDA loss projection for 2021 to $7.9 million from $7.7 million. However, he expects EBITDA to take an even greater positive turn in 2022, as he now forecasts $3.7 million in positive EBITDA for a margin of 2.6 per cent in 2022 compared to his initial estimate of $2.8 million and a two per cent margin.

“DCBO continues to deliver strong organic growth, showing an acceleration in the business supported by solid KPI’s,” he said. “We remain comfortable with this level of growth augmented by growing outbound activity, increasing third-party contributions, and cross-sell potential with existing clients.”

Docebo currently has a return of 10.9 per cent for the year to date, with a high point of C$117.10/share on September 16.

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Geordie Carragher is a staff writer for Cantech Letter
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