Docebo has 180 per cent upside, says ATB Capital

ATB Capital Markets analyst Martin Toner reported on the latest from Canadian cloud-based learning platform Docebo (Docebo Stock Quote, Charts, News, Analysts, Financials TSX:DCBO) on Thursday, saying the company’s third quarter earnings represent a watershed moment on account of a turn to profitability.

Docebo shares rose a full 19 per cent on Thursday after the company reported its Q3 financials, showing revenue up 37 per cent year-over-year to $37.0 million and adjusted EBITDA came in at $0.6 million compared to a loss of $2.0 million a year earlier. (All figures in US dollars except where noted otherwise.)

Docebo said its platform is now used by 3,245 customers compared to 2,636 a year earlier, while Average Contract Value (ACV) also rose year-over-year from $39,275 to $44,561.

“Consistent execution resulted in strong revenue growth and delivered positive adjusted EBITDA a full quarter ahead of schedule. Docebo continues to drive positive learning outcomes for customers, which enable them to increase their productivity and compete more effectively in today’s challenging macroeconomic climate,” said Claudio Erba, Founder and CEO, in a press release.

Docebo’s Q3 topline was a beat of ATB’s forecast, with the $37.0 million coming out ahead of ATB’s $34.7 million estimate while arriving in-line with the consensus call at $37.1 million. Adjusted EBITDA at $0.6 was a beat of both ATB’s estimate at negative $0.3 million and the Street’s $0.0 million.

Toner noted the company’s annual recurring revenue (ARR) at $144.6 million, which was up 40 per cent year-over-year and driven by increasing ACV. Commenting on Docebo’s ACV, Toner said adding new customers who are considerably larger than the historical average continues to be a big part of the company’s growth story. 

“While Q3/22 marked a second consecutive revenue miss, currency headwinds impacted revenue and ARR by five percent, and despite macroeconomic headwinds, Docebo continues to increase its recurring revenue, and it turned EBITDA positive for the quarter,” Toner wrote.

“The Company has emphasized cost discipline and margin inflection driven by gross profit growth overwhelming operating expenses. Currency had a material impact on incremental ARR of $6.4 million, and we estimate constant currency incremental ARR was ~$9.5mm, a strong result but below Q3/21. According to the Company, enterprise caution, given the uncertain macro environment, is elongating sales cycles and is responsible for slowing growth on a constant currency basis,” he said.

With the update, Toner reiterated an “Outperform” rating on DCBO and C$90.00 price target, which at the time of publication represented a projected one-year return of 179.5 per cent.