Docebo downgraded at ATB Capital

Docebo (Docebo Stock Quote, Chart, News, Analysts, Financials TSX:DCBO) is under scrutiny following its Q1 2025 earnings report.

Despite reporting revenue of $57.3-million, slightly above expectations, the company lowered its full-year guidance, citing macroeconomic uncertainty and the impending loss of Amazon Web Services (AWS) as a client. The announcement prompted ATB Capital Markets analyst Martin Toner to downgrade Docebo from “Outperform” to “Sector Perform” and reduce his price target from $75.00 to $45.00.

Toner raised concerns about Docebo’s ability to return to 20%+ revenue growth, highlighting six consecutive quarters of decelerating Annual Recurring Revenue (ARR) and the AWS non-renewal, which accounted for about 1.8% of ARR.

“We are no longer confident that Docebo can reaccelerate revenue growth back to the 20%+ range and have lowered our long-term revenue growth estimates. At a valuation of ~18x EV/EBITDA, we believe Docebo is too expensive for most value investors and is no longer an attractive growth stock. When compared to other profitable mid-cap North American SaaS names, Docebo appears relatively fairly valued,” he said.

On May 9, Toner had maintained his rating and target, saying he would look for more details from management during the earnings call. By May 11, he concluded the stock was no longer a compelling investment.

“Subscription revenue growth of 13.1% was down from 16.1% last quarter, while Professional Services revenue was down 11.4%,” Toner noted. “ARR of $225.1mm (+11.9% y/y) marked the sixth consecutive quarter of deceleration in growth. SG&A expenses were 51% of revenue, up from 46% last quarter and 48% in Q1/24. We note that Q1 SG&A was impacted by $3.9mm of employee severance costs, largely expected to be settled by the end of Q2. We continue to see long-term operating leverage inherent in the business, which we expect to drive adj. EBITDA margins higher over time.”

“Management noted customers with >$100,000 ARR grew 15-16% y/y, down from 18% last quarter, reflecting a slowdown in enterprise deals. Management also cited ’a solid pace year-over-year’ in terms of new ACV growth. We continue to believe that ACV growth outpacing customer growth will likely be the norm as the company looks to move upmarket, implying fewer customers at longer lead cycles and significantly larger contract values.”

Toner now forecasts Docebo will generate $39.7-million in adjusted EBITDA on $238.2-million in revenue in fiscal 2025. He expects those numbers to improve to $49.3-million in adjusted EBITDA on $255.1-million in 2026. These revised estimates reflect a downgrade of $3-million and $5.8-million, respectively, due to slower expected contract growth and lower renewal activity.

Docebo guided for Q2 revenue between $59.0-million and $59.2-million and an adjusted EBITDA margin of 14.5% to 15%, slightly below consensus. It now expects full-year subscription revenue growth of 10% to 11% (down from 11.5% to 12.5%), total revenue growth of 9% to 10% (from 11% to 12%) and an adjusted EBITDA margin of 17% to 18% (from 18% to 19%).

“On the call, management noted that the lowered FY25 guidance was driven by cautious assumptions for new logo growth in H2 due to macro uncertainties, particularly in retail, manufacturing, and automotive sectors impacted by tariffs,” Toner said.

He downplayed the long-term impact of AWS’s decision not to renew its Skills Builder contract, calling the move “unfortunate, but not systemic.” “The decision reflects AWS’s strategic preference for in-house development, not a shift to a competing vendor,” Toner said.

Docebo also addressed several executive changes, including the departure of its Chief Product Officer and Chief Revenue Officer, and the appointments of a permanent CFO and new Chief Marketing Officer. “Management has emphasized that these changes are strategic, aimed at aligning the leadership team with the company’s future growth objectives, and are not a reflection of instability or underperformance,” Toner said.

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