Docebo Inc. (DCBO) Q3 2026 Earnings Call Transcript

Understanding of the extent that you can go to the broader knowledge work of the enterprise, and you're going to be targeting, obviously, CROs and CCOs, which are a very different sale process than just the traditional training folks. So how are you teeing up for that in terms of the sales process, and what sort of ARPU do you look for as a benefit to the broadening of the organization?

Thank you, George. Let me take a step back and go back to circa 2016, 2017, which is when Docebo started to identify the need in the market that went well beyond compliance training as we know of it today, and we embraced the need in the market to… Have learning become a more GTM, monetization-based project as well. We did that, and over the years now, more than 50% of our customers use Docebo not only for internal purposes, but for external use cases. And the point being, those external use cases already are served. By, supported by, budgeted with the office of the CRO and the office of the CCO. We have built, over time, a capability to go after buyers and address buyers that are not L&D. I would say that gene has already been built in the company. Now, where we're taking it next and why it applies to knowledge. What we've seen over the past few years, and particularly, I would say, highlighted by AI, is that learning and knowledge are blending, meaning buyers are telling us that their users don't just want to learn in the sense of taking structured courses, but they want to be in the flow of information. They want to have information available to them upon request. And certainly, the ChatGPT era has opened the consumers to new expectations. So, what did we do? We took the opportunity to extend the concept of learning to knowledge by opening up effectively what we can have access to, to a much broader set of data, the enterprise data as opposed to the learning data. You can think of the LMS as a big database, and that database, up until yesterday, contained learning information only. But learning is created out of a much broader set of knowledge. Now we're connecting directly to it. Now we're enabling the enterprise to be able to reach into their SharePoint information, their Salesforce information, their Confluence information, their Notion information, their Google Drive information, something that wasn't possible until not too long ago in a sophisticated way. Again, we're bearing the benefits of AI. Our customers are having a wildly positive response to that. We're at the very beginning of the journey. We believe that the CIO office will be more involved, and we're going to repeat the same playbook that we adopted years ago when we approached a different buyer. We're going to do the same thing, and I think it's going to be fantastic.

Thank you. And just staying on the new release. You have 600 beta customers, which sounds like a very large number of beta customers. Can you talk about the importance of the message to that?

Thank you for capturing that nuance. It's one that I particularly care a lot strategically and in the way we think about how we build a docebo. First, let me explain two concepts of beta. There's the private beta and there's the public beta. And we have a few phases there. Once we reach public beta, we involve more people to talk to us. And what is the underlying message? What is the value? The value is becoming a company that builds. You know, with an engineering-first mindset, we're a company that builds with a customer-first mindset. It is during that public beta and working with those 600 customers that we get the real value, the real feedback, the real market, you know, I would say that there's always a gap between what a product management team and an engineering team can think of until you bring something to the use of the practitioners. And so we put a lot of value into that, and we believe that as we do that, once we go in GA, our products are much better off. And frankly, there's a monetization component in that strategy. We want to come out of the gates very, very prepared to welcome net new customers that have already had a chance to go deep in the product and feel like they're a part of it.

Thank you.

Your next question comes from the line of Ryan McDonald with Needham. Ryan, your line is open. Please go ahead.

All right. Thanks for taking my questions, and congrats on a great quarter. Alessio, we've spoken a few times this year about sort of the refresh cycle that's occurring in the LMS space from sort of a forced platform modernization from one of the large legacy incumbents. It wasn't lost on me that there was a number of sort of cited competitive takeoff. This year, or in the quarter, as you talked about client wins. So just curious to hear about what you're seeing from a competitive perspective, and if you're seeing sort of a tailwind in RFP activity, given the dynamics of the market.

Sure, so first let me share something philosophical about how we run the table. We don't focus on the competition very much. We focus on ourselves. I'm a big believer that you need to establish what you think is right and go execute that and not worry about what others are doing. But with that said, being educated and understanding what happens in the market is important. And here's what we see, but not necessarily focus on, okay? What we see is that buyers, the buyers that we're targeting, modern, complex enterprises, want a modern platform that can support their needs. And these needs require a system with... Deep workflow and enterprise capabilities. Those enterprise capabilities range anywhere from the features themselves, to the security layer, to the governance model, to the ability to implement in a certain way. It's not just an engineering concept. It goes well beyond it. It's how you build a company. And when you think about the competitive landscape, and you think about features combined with all these characteristics, you know, notwithstanding things like FedRAM certification, that is definitely something that takes time, energy, and investment, you know, there's not a lot of... I can see a lot of competition there that then brings together AI, learning, knowledge, skills, intelligence in a highly integrated platform that can withstand the complexity of 30, 40, 50, 100,000 people organizations. That is our mode. That is our uniqueness. And the reason why I love that mode, it's very hard to replicate. This is not an AI agent company that tomorrow displaces this need. The need will be there forever, but the way to get there is incredibly hard. We are there, and we're going to crush it.

Love it. Maybe as a follow-up, you also mentioned in the prepared remarks that your agents are helping you to expand who you're selling to within the enterprise, sort of expanding from a traditional HR or CRO or CCO sale to now the CIO. Uh, obviously a very exciting opportunity, but it sometimes can be a bit of a double-edged sword. So I'm curious, how are you thinking about what's the potential incremental budget you can unlock from a CIO sale? And then conversely, how do you think this affects sales cycles, uh, you know, with selling to a new person or adding another layer in the selling motion to the sales process? Thanks.

Well, first, yeah, astute question. So first, the CIO is not a new person at the table for us. The CIO is already a stakeholder that is heavily involved. We actually have plays in our sales process, both at NetNewLogo and existing logo, where we address the CIO office, whether it's for a security questionnaire or for AI reviews and whatnot. So we are very used to that cadence. What the prepared remarks highlight is that the introduction of new capabilities such as knowledge and agents will probably make the CIO more relevant, and budgets that were confined to L&D and or CRO only could potentially open up to CIO budgets as well. It is early for us to give a clear indication or a hard thesis about what the percentage will look like. And we've been focused on creating the value and working with the CIOs and these customers to really understand what they care about. That's what our focus has been so far.

Really helpful. Thanks.

Thank you.

Your next question comes from the line of Matt VanVleet with Cantor Fixgerald. Matt, your line is open. Please go ahead.

Hey, good morning. Thanks for taking the questions. I guess curious on how the ongoing process of cross-selling the skills intelligence platform to your existing customer base is going, where are you seeing the most traction early on there, and how much does the ability to use AI and content creator sort of cross-pollinate between the two platforms to help drive some additional sales?

So, I will address first the Skills Intelligence and 365 cross-selling opportunity. Once again, as a step back, we completed the acquisition earlier this year. And we have been focused on integrating the products. Our whole focus was a seamless experience for our customers that chose to use both Dacebo and 365 Talent. Over the past couple of months, we have accelerated our product integration. We have recently released the latest version of it, which is really brilliant, and that is giving us the opportunity to continue to sell in the base and, frankly, in the greenfield as well. The way we think about that opportunity is two ways. Number one, we have... Customers that are looking to introduce skills in our install base, and we're having conversations with them. But, you know, the reality is enterprises and large enterprises are the ones that so far are benefiting the most from the combination of the two. And as far as... Our goals and our expectations, we, from the beginning of the year, in terms of budget, we are on track to surpass them and very excited about the future ahead. I think that's it on the same side. You had a question on Creator as well, but I didn't quite capture it.

Yeah, just curious on how having the skills, intelligence, and sort of understanding where those gaps are can now be better met for customers using some of the AI content creation capabilities.

Yes, yes. Thank you for that explanation, 100%. So, our thesis, from an agentic standpoint, is that personalization in learning and knowledge is incredibly critical. And actually, personalization is one of the areas where we have... Very significant differentiation. So, you can expect agents that we're actually working on that understand the profile, the learner profile, and are able to create material that address those gaps or those needs in real time using Creator as an underlying engine. In fact, we've shipped our first Creator agent that is extremely powerful. So, yeah, absolutely.

Very helpful. And then I guess as you look towards the next few years, obviously you stood up a government vertical. Are there other verticals that you anticipate maybe having more of that support staff and kind of deep domain knowledge that's required? And how should we think about that from a timeline perspective?

Yeah, look, when we studied the healthcare verticalization, which were about attack, as described earlier, we formed really strong opinions about, you know, where the addressable markets are and what characteristics they have, the gaps that we would need to fill from a product standpoint to become really deep in them. So we have a general sense of where we could go, but the reality is we've learned to do things properly and in alignment with our budget expectations. So in short, we don't want to put too much on the fire. We believe that with government now starting to pick up, and healthcare starting next year, that is our focus, and as we advance healthcare to the place of comfort, where we believe it's really taking off, then we'll tackle on the next one.

Thanks for taking the question.

Your next question comes from the line of Ken Wong with Oppenheimer. Ken, your line is open. Please go ahead.

Fantastic. I just wanted to check in to see where we are on the FDE investments. Are you guys approaching a point where you guys are fairly fully staffed there and what the customer interest has been in terms of deploying that?

For sure. When we discussed this in August, the strategy that we had outlined was to bring the FTEs, you know, directly in our largest enterprise accounts, and that strategy hasn't changed. What has changed is that, as of recent, we finally staffed the founding team. Yeah, we've identified the right. Accounts, companies that we're going to be working with, and we're going to be using the next few months, I expect the next three to six months, to validate the actual model of operation. The engagement with the customers, the monetization strategy, the boundary of where FTEs start and end, the value they create on top of agents that are created by customers or agents that are created by the FTE. In short, there's a lot that we're going to develop from a playbook standpoint. We're at the beginning of this journey. I think it's an incredible journey. The recent release plays really nicely into that. So we're timing things nicely because on top of our pre-created agents, our customers can create no-code agents as well. And we're already seeing signals of customers that raise their hand and say, I'd love to work with somebody to help me on this process. So, I think over the next couple of quarters, we'll have some updates for you guys on how things are trending, but so far, everything is moving according to expectations.

Fantastic. And Brandon, I wanted to just check on gross margins. You called out sort of a higher mix of proser, pressuring that. Just wondering if that's something that we should expect to extend into Q4 and beyond. I imagine with more enterprise, you talked about the FDE just now, you know, we could potentially see pressure also as you guys up the adoption of AI. Any color there would be great.

Yeah, so when we look at gross margin, you know, we have the benefit of internally of seeing our gross margins from a PS perspective in subs. You know, the good news is that the gross margins on subscription business is pretty much the exact same as it has historically been. The quarterly movements and gross margin really relates to the specific professional service projects that we're performing, and also the fact that right now professional services is growing faster than stuff. I do believe that into Q4 you'll see a similar trend, but as we get into 2027 and start lapsing the strong urine enterprise, I would expect a little bit more consistent growth in PS to be consistent with subscription revenue and then it would normalize and allow gross margins to start kicking back up.

Perfect. Thank you.

Your next question comes from the line of Aaron Kyle with CIBC. Aaron, your line is open. Please go ahead.

Hi, good morning. Thanks for taking the questions. Brandon, I just wanted to follow up on the margins as well. The Q4 EBITDA guide implies... Margin is roughly comparable to where they were in Q3. And we've been talking about reinvestment in the business in terms of the healthcare vertical and the FDE program. So how should we think about sort of margin expansion carrying into 2027 from here? Do you expect to see continued margin expansion in 27, or should we expect 26 exit margins to kind of be a stable level on a go-forward basis?

Yeah, listen, we're going to guide EBITDA in 2027. I think our main principles of the business remain consistent. We remain disciplined capital investors. I think we're really proud of our EBITDA growth, not just EBITDA margins. This quarter, we grew EBITDA about 34% while growing the top line. We are making strategic investments, and we still see strong EBITDA margins. And when we look at the different lines within our business, you know, I think it's natural to say that we're expecting R&D to roughly stay flat as a percentage of revenue into 2027. And the one area that we're remaining disciplined is G&A. I've said it for a number of years, is that you could continue to expect leverage in that area of the business. So, without giving you a full guide, yes, you'll see some EBITDA margin expansion, and stay tuned in February for more guidance on EBITDA.

That's helpful. Thank you. And then maybe for my second question, just going back to the federal pipeline, as it relates to sort of the September period, and I know the environment's changed quite a bit in the U.S. in the last week or so, but earlier in the year in Q3, would you say that you saw any evidence that some procurement uncertainty from some of the administration's policies that were announced? Have you impacted any RFP processes, delayed anything, or is kind of the timeline moving from pipelining Q3 to Q4 more just the nature of it being a new market for you?

I think it's actually a nature of the agencies we are working with. We do not believe that the elections had any impact on the results in Q3. We're working with some agencies that, you know, are seeing buying potential into Q4 and we're not necessarily felt the pressure of the lose it or use it budget buying cycles. So historically, we've always mentioned Q3 will be the highest FedRAMP quarter. We're seeing that potential this year to be into Q4. But if we look into the next couple years, we continue to believe that naturally Q3 will be the highest. So this year is a bit of an anomaly for us.

Thanks, I'll pass the line.

As a reminder, if you would like to ask a question, please press star 1 to raise your hand. Your next question comes from the line of John Hsiao with TD Cowan. John, your line is open. Please go ahead.

Yes. Good morning. Thanks for taking my question. So given the milestone you have with the GenTech capabilities and a growing customer base, so do you think in 2027 your AR growth is going to include some of the potential uplift from, you know, the new hybrid pricing model?

I think the natural answer is yes. You know, as customers are buying Docebo, you know, they're no longer looking for just learning. You know, if I think about when we started, you know, when I started Docebo five years ago, you know, if we signed a customer, you know, we'd have a $200,000 ticket and that'd be it. You know, we added content. That $200,000 ticket turned into $400,000.

We added skills.

That $200 ticket now turned into a $600,000 ticket. We're adding knowledge. That's going to turn that $600 ticket to even a larger dollar ticket. You know, we're still developing our thesis on what the ARPU growth will be and, you know, what the attach rates are, but we're already seeing pipeline into Q4. We're already seeing interest from prospects, and, you know, we'll impact that into our guide when we give our revenue guide in February.

Good. Thank you. I'll pop the line.

We have reached the end of our Q&A session. I will now turn the call back to Alessio Artufo, Chief Executive Officer, for closing remarks.

Well, thank you, everyone, for being here, for your questions. As we approach for the Americans on the call, the Thanksgiving holidays, we wish you and your families, you know, a fantastic time. We are looking forward to talking to you, to report on our Q4 results in February. Stay tuned until then, and thank you again.

This concludes today's call. Thank you for attending. You may now disconnect.