Docebo Inc 6-K, filed Nov 9, 2023
Docebo Inc. (DCBO)
6-K
2023-11-09
For: 2023-09-30
View Original
Added on
April 08, 2026
About this 6-K
Docebo Inc filed this 6-K on November 9, 2023.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13A-16 OR 15D-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of November 2023
Commission File Number 001-39750
(Exact name of Registrant as specified in its charter)
N/A
(Translation of Registrant’s name)
(800) 681-4601
(Address and telephone number of registrant’s principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
| Form 20-F | ☐ | Form 40-F | ☒ | |||||||||||
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ____
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ____
INCORPORATION BY REFERENCE
Exhibits 99.1, 99.2, 99.4 and 99.5 of this Form 6-K are incorporated by reference to the registrant's Registration Statement on Form F-10 (File No. 333-251046), the registrant’s Registration Statement on Form S-8 (File No. 333-251417) and the registrant’s Registration Statement on Form F-3 (File No. 333-262000).
DOCUMENTS INCLUDED AS PART OF THIS REPORT
| Exhibit | |||||
| 99.1 | |||||
| 99.2 | |||||
| 99.3 | |||||
| 99.4 | |||||
| 99.5 | |||||
| 101.INS | Inline XBRL Instance Document. | ||||
| 101.SCH | Inline XBRL Taxonomy Schema Linkbase Document. | ||||
| 101.CAL | Inline XBRL Taxonomy Calculation Linkbase Document. | ||||
| 101.DEF | Inline XBRL Taxonomy Definition Linkbase Document. | ||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | ||||
| 101.PRE | Inline XBRL Taxonomy Presentation Linkbase Document. | ||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | ||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Docebo Inc. | ||||||||||||||||||||
| Date: | November 9, 2023 | By: | /s/ Sukaran Mehta | |||||||||||||||||
| Name: | Sukaran Mehta | |||||||||||||||||||
| Title: | Chief Financial Officer | |||||||||||||||||||
| DOCEBO INC. | ||
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION | ||
| (expressed in thousands of United States dollars) | ||
| September 30, | December 31, | ||||||||||
| 2023 | 2022 | ||||||||||
| $ | $ | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | |||||||||||
Trade and other receivables (Note 5) | |||||||||||
| Income taxes receivable | |||||||||||
| Prepaids and deposits | |||||||||||
| Net investment in finance lease | |||||||||||
Contract costs, net | |||||||||||
| Non-current assets: | |||||||||||
Contract costs, net | |||||||||||
| Net investment in finance lease | |||||||||||
Deferred tax asset | |||||||||||
Right-of-use assets, net (Note 6) | |||||||||||
Property and equipment, net (Note 7) | |||||||||||
Intangible assets, net (Note 8) | |||||||||||
Goodwill (Note 9) | |||||||||||
| Liabilities | |||||||||||
| Current liabilities: | |||||||||||
| Trade and other payables | |||||||||||
Automatic share repurchase plan liability (Note 11) | |||||||||||
| Income taxes payable | |||||||||||
Deferred revenue | |||||||||||
| Contingent consideration | |||||||||||
Lease obligations (Note 6) | |||||||||||
| Non-current liabilities: | |||||||||||
| Acquisition holdback payables | |||||||||||
| Contingent consideration | |||||||||||
Deferred revenue | |||||||||||
Lease obligations (Note 6) | |||||||||||
Employee benefit obligations | |||||||||||
Deferred tax liability | |||||||||||
| Shareholders’ equity | |||||||||||
Share capital (Note 11) | |||||||||||
| Contributed surplus | |||||||||||
Accumulated other comprehensive loss | ( | ( | |||||||||
Deficit | ( | ( | |||||||||
| Total equity | |||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.
1
| DOCEBO INC. | ||
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS) | ||
| (expressed in thousands of United States dollars, except per share amounts) | ||
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
Revenue (Note 14) | |||||||||||||||||||||||
Cost of revenue (Note 15 and 16) | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
General and administrative (Note 16) | |||||||||||||||||||||||
Sales and marketing (Note 16) | |||||||||||||||||||||||
Research and development (Note 16) | |||||||||||||||||||||||
Share-based compensation (Note 12) | |||||||||||||||||||||||
Foreign exchange (gain) loss | ( | ( | ( | ||||||||||||||||||||
Depreciation and amortization (Note 6, 7 and 8) | |||||||||||||||||||||||
Operating income (loss) | ( | ||||||||||||||||||||||
Finance income, net (Note 10) | ( | ( | ( | ( | |||||||||||||||||||
Other (income) expense, net | ( | ( | ( | ||||||||||||||||||||
Income before income taxes | |||||||||||||||||||||||
Income tax expense | |||||||||||||||||||||||
Net income (loss) for the periods | ( | ||||||||||||||||||||||
Other comprehensive loss (income) | |||||||||||||||||||||||
| Item that may be reclassified subsequently to income: | |||||||||||||||||||||||
Exchange loss (gain) on translation of foreign operations | ( | ||||||||||||||||||||||
Comprehensive income (loss) | ( | ( | |||||||||||||||||||||
| Income per share - basic | ( | ||||||||||||||||||||||
| Income per share - diluted | ( | ||||||||||||||||||||||
Weighted average number of common shares outstanding - basic (Note 13) | |||||||||||||||||||||||
Weighted average number of common shares outstanding - diluted (Note 13) | |||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.
2
| DOCEBO INC. | ||
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY | ||
| (expressed in thousands of United States dollars, except number of shares) | ||
| Share capital | Contributed surplus | Accumulated other comprehensive income (loss) | Deficit | Total | |||||||||||||||||||||||||||||||
| # | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
Balance, December 31, 2021 | ( | ||||||||||||||||||||||||||||||||||
Exercise of stock options (Note 11 and 12) | ( | — | — | ||||||||||||||||||||||||||||||||
Share-based compensation (Note 12) | — | — | — | — | |||||||||||||||||||||||||||||||
Release of RSUs (Note 11 and 12) | ( | — | — | ||||||||||||||||||||||||||||||||
| Issuance of common shares related to business combination | — | — | — | ||||||||||||||||||||||||||||||||
Share issuance under employee share purchase plan (Note 11 and 12) | ( | — | — | ||||||||||||||||||||||||||||||||
| Comprehensive loss | — | — | — | ( | ( | ||||||||||||||||||||||||||||||
Balance, September 30, 2022 | ( | ( | |||||||||||||||||||||||||||||||||
Balance, December 31, 2022 | ( | ( | |||||||||||||||||||||||||||||||||
Exercise of stock options (Note 11 and 12) | ( | — | — | ||||||||||||||||||||||||||||||||
Share-based compensation (Note 12) | — | — | — | — | |||||||||||||||||||||||||||||||
Share issuance under employee share purchase plan (Note 11 and 12) | ( | — | — | ||||||||||||||||||||||||||||||||
Release of restricted share units (Note 11 and 12) | ( | — | — | ||||||||||||||||||||||||||||||||
| Shares issued related to contingent consideration | — | — | — | ||||||||||||||||||||||||||||||||
Shares repurchased for cancellation under normal course issuer bid (Note 11) | ( | ( | — | — | ( | ( | |||||||||||||||||||||||||||||
Share repurchase commitment under the automatic share purchase plan (Note 11) | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| Comprehensive income (loss) | — | — | — | ( | |||||||||||||||||||||||||||||||
Balance, September 30, 2023 | ( | ( | |||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.
3
| DOCEBO INC. | ||
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS | ||
| (expressed in thousands of United States dollars) | ||
Nine months ended September 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| $ | $ | ||||||||||
Cash flows from operating activities | |||||||||||
Net (loss) income | ( | ||||||||||
Adjustments to reconcile net (loss) income to net cash from operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Share-based compensation | |||||||||||
Loss on disposal of asset | |||||||||||
Unrealized foreign exchange loss (gain) | ( | ||||||||||
Income tax expense | |||||||||||
Finance income, net | ( | ( | |||||||||
| Changes in non-cash working capital items: | |||||||||||
| Trade and other receivables | ( | ( | |||||||||
| Prepaids and deposits | ( | ||||||||||
| Contract costs | ( | ( | |||||||||
| Trade and other payables | |||||||||||
| Employee benefit obligations | |||||||||||
| Deferred revenue | |||||||||||
| Income taxes (paid) received | ( | ( | |||||||||
Cash from operating activities | |||||||||||
Cash flows used in investing activities | |||||||||||
| Purchase of property and equipment | ( | ( | |||||||||
| Payments of contingent consideration from acquisitions | ( | ( | |||||||||
| Acquisition of business, net of cash acquired | ( | ( | |||||||||
Cash used in investing activities | ( | ( | |||||||||
| Cash flows (used in) from financing activities | |||||||||||
| Payments received on net investment in finance lease | |||||||||||
| Repayment of lease obligations | ( | ( | |||||||||
| Interest received | |||||||||||
| Proceeds from exercise of stock options | |||||||||||
| Proceeds from share issuance under employee share purchase plan | |||||||||||
| Shares repurchased for cancellation under normal course issuer bid | ( | ||||||||||
Cash (used in) from financing activities | ( | ||||||||||
Net change in cash and cash equivalents during the period | ( | ( | |||||||||
| Effect of foreign exchange on cash and cash equivalents | ( | ( | |||||||||
Cash and cash equivalents, beginning of the period | |||||||||||
Cash and cash equivalents, end of the period | |||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.
4
| DOCEBO INC. | ||
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS | ||
September 30, 2023 | ||
| (expressed in thousands of US dollars, except share amounts) | ||
| 1 | |||||
Docebo Inc. (the “Company” or “Docebo”) is a provider of cloud-based learning management systems. The Company was incorporated on April 21, 2016 under the laws of the Province of Ontario. The Company’s head office is located at Suite 701, 366 Adelaide Street West, Toronto, Canada, M5V 1R9.
The Company’s shares are listed on both the Toronto Stock Exchange (“TSX”), as of October 8, 2019, and the Nasdaq Global Select Market (“Nasdaq”), as of December 3, 2020, under the stock symbol “DCBO”.
The Company has the following subsidiaries:
| Entity name | Country | Ownership percentage September 30, 2023 | Ownership percentage December 31, 2022 | ||||||||||||||
| % | % | ||||||||||||||||
| Docebo S.p.A | Italy | ||||||||||||||||
| Docebo NA, Inc. | United States | ||||||||||||||||
| Docebo EMEA FZ-LLC | Dubai | ||||||||||||||||
| Docebo UK Limited | England | ||||||||||||||||
| Docebo France Société par Actions Simplifiée (“Docebo France”) | France | ||||||||||||||||
| Docebo DACH GmbH (“Docebo Germany”) | Germany | ||||||||||||||||
| Docebo Australia Pty Ltd. ("Docebo Australia") | Australia | ||||||||||||||||
| Docebo Ireland Limited | Ireland | ||||||||||||||||
| Circles Collective Inc. ("PeerBoard") | United States | ||||||||||||||||
| Edugo AI HK Limited | Hong Kong | ||||||||||||||||
| 2 | |||||
Statement of compliance
The unaudited condensed consolidated interim financial statements (“financial statements”) have been prepared by management using the same accounting policies and methods as those used in the Company’s consolidated financial statements for the year ended December 31, 2022. These unaudited condensed consolidated interim financial statements have been prepared in accordance with IAS 34 – Interim Financial Reporting. Accordingly, certain disclosures normally included in annual financial statements prepared in accordance with IFRS Accounting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) have been omitted or condensed. These unaudited condensed consolidated interim financial statements should be read in conjunction with the Company’s consolidated financial statements for the year ended December 31, 2022.
These financial statements were approved and authorized for issuance by the Board of Directors of the Company on November 8, 2023.
Use of estimates, assumptions and judgments
The preparation of these financial statements in conformity with IFRS requires management to make estimates, assumptions and judgments that affect the application of accounting policies and the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results may differ from those estimates.
5
DOCEBO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
September 30, 2023
(expressed in thousands of US dollars, except share amounts)
Estimates are based on management’s best knowledge of current events and actions the Company may undertake in the future. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
In preparing these financial statements, the significant judgments made by management in applying the Company’s accounting policies and the key sources of uncertainty are the same as those applied and described in the Company’s annual audited consolidated financial statements for the year ended December 31, 2022.
| 3 | |||||
| 4 | |||||
Circles Collective Inc.
On April 3, 2023, the Company acquired all of the issued and outstanding shares of Circles Collective Inc. (o/a PeerBoard), a plug and play community-as-a-service platform based in the United States. The acquisition of PeerBoard will expand Docebo’s external training offering and enhance the Company’s social learning capabilities.
Total purchase consideration of $2,991 , consisting of: (i) cash paid on closing of $2,526 ; and (ii) a cash holdback amount of $466 (maximum undiscounted amount of $500 ) payable on the second year anniversary of the acquisition. The issuance of an additional 26,185 common shares, at a fair value of $40.74 (C$51.68 ) per share, is payable through April 2026 to an employee of the acquiree contingent on continued employment and is accounted for as compensation for post-acquisition services.
In addition, potential future consideration of up to $4,000 in cash over the three years following the closing date is owing to an employee of the acquiree based on the achievement of both performance milestones and continued employment. Given the continued employment requirement, these earn-out payouts will be accounted for as compensation for post-acquisition services and are not considered purchase consideration in the business combination.
Transaction costs relating to due diligence fees, legal costs, accounting fees, advisory fees and other professional fees for the three and nine months ended September 30, 2023 amounting to $23 and $522 , respectively, were incurred in relation to the acquisition. These amounts have been included in general and administrative expenses in the Company's condensed consolidated interim statements of income and comprehensive income (loss).
The acquisition has been accounted for as a business combination in accordance with IFRS 3, Business Combinations, using the acquisition method whereby the net assets acquired and the liabilities assumed are recorded at fair value.
The following table summarizes the preliminary allocations of the consideration paid and the amounts of fair value of the assets acquired and liabilities assumed at the acquisition date:
| Fair value recognized on acquisition | |||||
| $ | |||||
| Assets | |||||
| Current assets: | |||||
6
DOCEBO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
September 30, 2023
(expressed in thousands of US dollars, except share amounts)
| Cash and cash equivalents | |||||
| Non-current assets: | |||||
| Technology | |||||
| Goodwill | |||||
| Total assets | |||||
| Liabilities | |||||
| Current liabilities: | |||||
| Trade and other payables | |||||
| Deferred revenue | |||||
| Non-current liabilities: | |||||
| Deferred tax liability | |||||
| Total liabilities | |||||
| Fair value of net assets acquired | |||||
| Paid in cash | |||||
| Holdback payable | |||||
| Working capital adjustment | ( | ||||
| Total purchase consideration | |||||
The goodwill related to the acquisition of PeerBoard reflects the benefits attributable to future market development and the fair value of an assembled workforce. These benefits were not recognized separately from goodwill because they did not meet the recognition criteria for identifiable intangible assets. This goodwill is not deductible for income tax purposes.
The technology acquired is amortized on a straight-line basis over the estimated useful life of 5 years.
The allocation of the purchase price to assets acquired and liabilities assumed was based upon a preliminary valuation for all items and may be subject to adjustment during the 12-month measurement period following the acquisition date.
Edugo AI HK Limited
On June 9, 2023, the Company acquired all of the issued and outstanding shares of Edugo AI HK Limited (“Edugo.AI”), a Generative AI-based Learning Technology that uses advanced Large Language Models and algorithms to optimize learning paths and adapt to individual learner needs.
Total purchase consideration of $6,731 consisted of: (i) cash paid on closing of $6,151 ; (ii) a cash holdback amount of $552 (maximum undiscounted amount of $603 ) payable on the second year anniversary of the acquisition; and (iii) a pre-closing expense advance and post-close working capital adjustment of $28 .
In addition, up to $8,028 of additional cash consideration may be payable over the three years following the closing of the transaction, representing the earn-out portion of the consideration paid by the Company or subsidiary thereof in connection with the transaction, based on the achievement of certain performance milestones and employment obligations. Given the continued employment requirement, these earn-out payouts will be accounted for as compensation for post-acquisition services and are not considered purchase consideration in the business combination.
7
DOCEBO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
September 30, 2023
(expressed in thousands of US dollars, except share amounts)
Transaction costs relating to due diligence fees, legal costs, accounting fees, advisory fees and other professional fees for the three and nine months ended September 30, 2023 amounting to $218 and $551 , respectively, were incurred in relation to the acquisition. These amounts have been included in general and administrative expenses in the Company's condensed consolidated interim statements of income and comprehensive income (loss).
The acquisition has been accounted for as a business combination in accordance with IFRS 3, Business Combinations, using the acquisition method whereby the net assets acquired and the liabilities assumed are recorded at fair value.
The following table summarizes the preliminary allocations of the consideration paid and the amounts of fair value of the assets acquired and liabilities assumed at the acquisition date:
| Fair value recognized on acquisition | |||||
| $ | |||||
| Assets | |||||
| Current assets: | |||||
| Cash and cash equivalents | |||||
| Non-current assets: | |||||
| Technology | |||||
| Goodwill | |||||
| Total assets | |||||
| Liabilities | |||||
| Current liabilities: | |||||
| Trade and other payables | |||||
| Total liabilities | |||||
| Fair value of net assets acquired | |||||
| Paid in cash | |||||
| Holdback payable | |||||
| Pre-funded expenses | |||||
| Working capital adjustment | ( | ||||
| Total purchase consideration | |||||
The goodwill related to the acquisition of Edugo.AI reflects the benefits attributable to future market development and the fair value of an assembled workforce. These benefits were not recognized separately from goodwill because they did not meet the recognition criteria for identifiable intangible assets. This goodwill is not deductible for income tax purposes.
The technology acquired is amortized on a straight-line basis over the estimated useful life of 5 years.
The allocation of the purchase price to assets acquired and liabilities assumed was based upon a preliminary valuation for all items and may be subject to adjustment during the 12-month measurement period following the acquisition date.
8
DOCEBO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
September 30, 2023
(expressed in thousands of US dollars, except share amounts)
| 5 | |||||
The Company’s trade and other receivables as at September 30, 2023 and December 31, 2022 include the following:
2023 | 2022 | ||||||||||
| $ | $ | ||||||||||
| Trade receivables | |||||||||||
| Accrued revenues | |||||||||||
| Tax credits receivable | |||||||||||
| Interest receivable | |||||||||||
| Other receivables | |||||||||||
Included in trade receivables is a loss allowance of $986 as at September 30, 2023 and $719 as at December 31, 2022.
| 6 | |||||
The Company’s right-of-use assets by class of assets are as follows:
| Premises | Others | Total | |||||||||||||||
| $ | $ | $ | |||||||||||||||
| Costs | |||||||||||||||||
Balance – December 31, 2022 | |||||||||||||||||
| Additions | |||||||||||||||||
| Effects of foreign exchange | ( | ( | ( | ||||||||||||||
Balance – September 30, 2023 | |||||||||||||||||
| Accumulated amortization | |||||||||||||||||
Balance – December 31, 2022 | |||||||||||||||||
| Amortization | |||||||||||||||||
| Effects of foreign exchange | ( | ( | |||||||||||||||
Balance – September 30, 2023 | |||||||||||||||||
| Carrying value | |||||||||||||||||
Net balance – December 31, 2022 | |||||||||||||||||
Net balance – September 30, 2023 | |||||||||||||||||
9
DOCEBO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
September 30, 2023
(expressed in thousands of US dollars, except share amounts)
The Company’s lease obligations are as follows:
2023 | ||||||||||||||
| $ | ||||||||||||||
| Balance – January 1 | ||||||||||||||
| Additions | ||||||||||||||
| Interest accretion | ||||||||||||||
| Lease repayments | ( | |||||||||||||
| Effects of foreign exchange | ( | |||||||||||||
| Balance – September 30 | ||||||||||||||
| Current | ||||||||||||||
| Non-current | ||||||||||||||
| 7 | |||||
| Furniture and office equipment | Leasehold improvements | Land and Building | Total | ||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
| Cost | |||||||||||||||||||||||
Balance – December 31, 2022 | |||||||||||||||||||||||
| Additions | |||||||||||||||||||||||
| Effects of foreign exchange | ( | ( | ( | ( | |||||||||||||||||||
Balance – September 30, 2023 | |||||||||||||||||||||||
| Accumulated depreciation | |||||||||||||||||||||||
Balance – December 31, 2022 | |||||||||||||||||||||||
| Depreciation | |||||||||||||||||||||||
| Effects of foreign exchange | ( | ( | ( | ( | |||||||||||||||||||
Balance – September 30, 2023 | |||||||||||||||||||||||
| Carrying value | |||||||||||||||||||||||
Balance – December 31, 2022 | |||||||||||||||||||||||
Balance – September 30, 2023 | |||||||||||||||||||||||
| 8 | |||||
| Acquired | ||||||||||||||||||||||||||
| Customer relationships | Technology | Trademarks | Total | |||||||||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||||||||
| Cost | ||||||||||||||||||||||||||
Balance – December 31, 2022 | ||||||||||||||||||||||||||
| Acquisitions through business combinations | ||||||||||||||||||||||||||
| Effects of foreign exchange | ( | ( | ( | |||||||||||||||||||||||
Balance – September 30, 2023 | ||||||||||||||||||||||||||
10
DOCEBO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
September 30, 2023
(expressed in thousands of US dollars, except share amounts)
| Acquired | ||||||||||||||||||||||||||
| Customer relationships | Technology | Trademarks | Total | |||||||||||||||||||||||
Balance – December 31, 2022 | ||||||||||||||||||||||||||
| Amortization | ||||||||||||||||||||||||||
| Effects of foreign exchange | ( | ( | ( | ( | ||||||||||||||||||||||
Balance – September 30, 2023 | ||||||||||||||||||||||||||
| Carrying value | ||||||||||||||||||||||||||
Balance – December 31, 2022 | ||||||||||||||||||||||||||
Balance – September 30, 2023 | ||||||||||||||||||||||||||
| 9 | |||||
| $ | |||||
Balance – December 31, 2022 | |||||
| Additions | |||||
| Effects of foreign exchange | ( | ||||
Balance – September 30, 2023 | |||||
| 10 | |||||
Finance income for the three and nine months ended September 30, 2023 and 2022 is comprised of:
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
| Interest on acquisition related consideration | |||||||||||||||||||||||
| Interest on lease obligations | |||||||||||||||||||||||
| Interest income | ( | ( | ( | ( | |||||||||||||||||||
| Bank fees and other | |||||||||||||||||||||||
| ( | ( | ( | ( | ||||||||||||||||||||
| 11 | |||||
| Authorized: | |||||||||||
| Unlimited common shares with no par value | |||||||||||
| Issued and outstanding: | |||||||||||
Number of shares | Amount | ||||||||||
| # | $ | ||||||||||
11
DOCEBO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
September 30, 2023
(expressed in thousands of US dollars, except share amounts)
Balance – December 31, 2022 | |||||||||||
| Exercise of stock options | |||||||||||
| Issuance of common shares under employee share purchase plan | |||||||||||
| Release of restricted share units | |||||||||||
| Issuance of common shares related to contingent consideration | |||||||||||
| Purchase of common shares held for cancellation under normal course issuer bid | ( | ( | |||||||||
Balance – September 30, 2023 | |||||||||||
On April 27, 2023, the Company issued a total of 50,550 common shares from treasury as part of the contingent consideration earn-out payments due to the sellers of forMetris Société par Actions Simplifiée for meeting certain revenue conditions in the second year following the date of acquisition. The shares were issued based on the fair value thereof, which was determined to be $32.09 (C$44.74 ). The equity settlement resulted in a reduction to the contingent consideration balance as at June 30, 2022.
On May 15, 2023, the Company announced the commencement of a normal course issuer bid (“NCIB”) to repurchase and cancel up to 1,650,672 of its common shares, representing approximately 5 % of the public float, over the 12-month period commencing May 18, 2023, and ending no later than May 17, 2024. All repurchases are made through the facilities of the Toronto Stock Exchange and are done at market prices. The amounts paid above the average book value of the common shares are charged to retained earnings. During the nine months ended September 30, 2023, the Company repurchased a total of 1,333,361 common shares for cancellation at an average price of $38.43 (C$50.27 ) per common share for total cash consideration of $51,245 . As at September 30, 2023, $831 of consideration related to common share repurchases was recorded in trade and other payables.
In connection with the NCIB, the Company entered into an automatic share purchase plan ("ASPP") with a designated broker for the purpose of allowing the Company to purchase its common shares under the NCIB during self-imposed trading blackout periods. Under the ASPP, the broker is authorized to repurchase common shares during blackout periods, without consultation with the Company, on predefined terms, including share price, time period and subject to other limitations imposed by the Company and subject to rules and policies of the TSX and applicable securities laws, such as a daily purchase restriction.
A liability representing the maximum amount that the Company could be required to pay the designated broker under the ASPP was $12,763 as at September 30, 2023. The amount was charged to retained earnings.
| 12 | |||||
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
| Stock options | |||||||||||||||||||||||
| DSUs | |||||||||||||||||||||||
| RSUs | |||||||||||||||||||||||
| ESPP | |||||||||||||||||||||||
There were no PSUs issued and outstanding for the three and nine months ended September 30, 2023 and 2022.
12
DOCEBO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
September 30, 2023
(expressed in thousands of US dollars, except share amounts)
The following table presents share-based compensation expense by function for the three and nine months ended September 30:
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
| Cost of revenue | |||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Sales and marketing | |||||||||||||||||||||||
| Research and development | |||||||||||||||||||||||
The changes in the number of stock options during the nine months ended September 30, 2023 and 2022 were as follows:
2023 | 2022 | ||||||||||||||||||||||
| Number of options | Weighted average exercise price | Number of options | Weighted average exercise price | ||||||||||||||||||||
| # | C$ | # | C$ | ||||||||||||||||||||
| Options outstanding – January 1 | |||||||||||||||||||||||
| Options granted | |||||||||||||||||||||||
| Options forfeited | ( | ( | |||||||||||||||||||||
| Options exercised | ( | ( | |||||||||||||||||||||
Options outstanding – September 30 | |||||||||||||||||||||||
Options exercisable – September 30 | |||||||||||||||||||||||
The weighted average fair value of share options granted during the nine months ended September 30, 2023 and 2022 was estimated at the date of grant using the Black-Scholes option pricing model using the following inputs:
2023 | 2022 | ||||||||||
| C$ | C$ | ||||||||||
| Weighted average stock price valuation | $ | $ | |||||||||
| Weighted average exercise price | $ | $ | |||||||||
| Risk-free interest rate | % | % | |||||||||
| Expected life in years | |||||||||||
| Expected dividend yield | % | % | |||||||||
| Volatility | % | % | |||||||||
| Weighted average fair value of options issued | $ | $ | |||||||||
13
DOCEBO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
September 30, 2023
(expressed in thousands of US dollars, except share amounts)
| Options outstanding | Options exercisable | |||||||||||||||||||||||||
| Exercise price range | Number outstanding | Weighted average remaining contractual life (years) | Exercise price range | Number exercisable | ||||||||||||||||||||||
| C$ | # | # | C$ | # | ||||||||||||||||||||||
The following table is a summary of the Company’s stock options outstanding as at September 30, 2022:
| Options outstanding | Options exercisable | |||||||||||||||||||||||||
| Exercise price range | Number outstanding | Weighted average remaining contractual life (years) | Exercise price range | Number exercisable | ||||||||||||||||||||||
| C$ | # | # | C$ | # | ||||||||||||||||||||||
DSUs
The following table presents information concerning the number of DSUs granted by the Company:
| # | |||||
DSUs – December 31, 2022 | |||||
Granted (at C$ | |||||
DSUs - September 30, 2023 | |||||
RSUs
The following table presents information concerning the number of RSUs granted by the Company:
| # | |||||
RSUs – December 31, 2022 | |||||
Granted (at C$ | |||||
Released (at C$ | ( | ||||
Forfeited (at C$ | ( | ||||
RSUs - September 30, 2023 | |||||
| 13 | |||||
14
DOCEBO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
September 30, 2023
(expressed in thousands of US dollars, except share amounts)
Basic and diluted net income per share for the three and nine months ended September 30 are calculated as follows:
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Net income (loss) attributable to common shareholders | $ | ( | $ | ||||||||||||||||||||
| Basic weighted average number of common shares outstanding | |||||||||||||||||||||||
| Stock options | |||||||||||||||||||||||
| DSUs | |||||||||||||||||||||||
| RSUs | |||||||||||||||||||||||
| Diluted weighted average number of common shares outstanding | |||||||||||||||||||||||
| Basic net income (loss) per common share | $ | $ | $ | ( | $ | ||||||||||||||||||
| Diluted net income (loss) per common share | $ | $ | $ | ( | $ | ||||||||||||||||||
| 14 | |||||
Disaggregated revenue
The Company derives its revenues from two main sources, subscription to its SaaS application, and professional services revenue, which includes services such as initial implementation, project management, and training.
The following table presents a disaggregation of revenue for the three and nine months ended September 30:
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
| Subscription revenue | |||||||||||||||||||||||
| Professional services | |||||||||||||||||||||||
| 15 | |||||
The following table represents cost of revenue for the three and nine months ended September 30:
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
| Employee salaries and benefits | |||||||||||||||||||||||
| Web hosting fees | |||||||||||||||||||||||
| Third party service fees | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
15
DOCEBO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
September 30, 2023
(expressed in thousands of US dollars, except share amounts)
| 16 | |||||
Employee compensation costs were included in the following expenses for the three and nine months ended September 30:
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
| Cost of revenue | |||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Sales and marketing | |||||||||||||||||||||||
| Research and development | |||||||||||||||||||||||
| 17 | |||||
Key management personnel are those persons having the authority and responsibility for planning, directing and controlling activities of the Company, directly or indirectly. Key management personnel includes the Company’s Directors and Officers.
Compensation awarded to key management personnel for the three and nine months ended September 30, 2023 and 2022 is as follows:
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
| Salaries and benefits | |||||||||||||||||||||||
| Share-based compensation | |||||||||||||||||||||||
| 18 | |||||
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from deposits with banks and outstanding receivables. The Company trades only with recognized, creditworthy third parties. Due to the Company’s diversified customer base, there is no particular concentration of credit risk related to the Company’s trade and other receivables. Trade and other receivables are monitored on an ongoing basis to ensure timely collection of amounts.
The carrying values of cash and cash equivalents, trade and other receivables, trade and other payables, and ASPP liability approximate fair values due to the short-term nature of these items or being carried at fair value. The risk of material change in fair value is not considered to be significant. The Company does not use derivative financial instruments to manage this risk.
Contingent consideration is classified as a Level 3 financial instrument. The fair value of the contingent consideration was calculated using discounted cash flows. During the three and nine months ended September 30, 2023, there were no transfers of amounts between levels in the fair value hierarchy.
16
DOCEBO INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
September 30, 2023
(expressed in thousands of US dollars, except share amounts)
| 19 | |||||
The following tables present details on revenues derived in the following geographical locations for the three and nine months ended September 30, 2023 and 2022.
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
| North America | |||||||||||||||||||||||
Rest of World | |||||||||||||||||||||||
17
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023
As used in this management’s discussion and analysis of financial condition and results of operations (“MD&A”), unless the context indicates or requires otherwise, all references to the “Company”, “Docebo”, “we”, “us” or “our” refer to Docebo Inc., together with our subsidiaries, on a consolidated basis as constituted on September 30, 2023.
This MD&A for the three and nine months ended September 30, 2023 and 2022 should be read in conjunction with the Company’s unaudited condensed consolidated interim financial statements and accompanying notes thereto for the three and nine months ended September 30, 2023 and 2022, and the Company's audited annual consolidated financial statements and accompanying notes thereto for the year ended December 31, 2022. The financial information presented in this MD&A is derived from the Company’s unaudited condensed consolidated interim financial statements for the nine months ended September 30, 2023 and 2022 which have been prepared in accordance with IFRS Accounting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). All amounts are in thousands of United States dollars except where otherwise indicated.
This MD&A is dated as of November 8, 2023.
Forward-looking Information
This MD&A contains “forward-looking information” and “forward-looking statements” (collectively, “forward-looking information”) within the meaning of applicable securities laws. Forward-looking information may relate to our future financial outlook and anticipated events or results and may include information regarding our financial position, business strategy, macroeconomic conditions and global economic uncertainty, the war in Ukraine and inflation, including actions of Central banks to contain it, on our business, growth strategies, addressable markets, budgets, operations, financial results, taxes, dividend policy, plans and objectives. Particularly, information regarding our expectations of future results, performance, achievements, prospects or opportunities or the markets in which we operate is forward-looking information.
In some cases, forward-looking information can be identified by the use of forward-looking terminology such as “plans”, “targets”, “expects”, “is expected”, “an opportunity exists”, “budget”, “scheduled”, “estimates”, “outlook”, “forecasts”, “projection”, “prospects”, “strategy”, “intends”, “anticipates”, “believes”, or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “would”, “might” or, “will”, “occur” or “be achieved”, and similar words or the negative of these terms and similar terminology. In addition, any statements that refer to expectations, intentions, projections or other characterizations of future events or circumstances contain forward-looking information. Statements containing forward-looking information are not historical facts but instead represent management’s expectations, estimates and projections regarding future events or circumstances.
This forward-looking information includes, but is not limited to, statements regarding the Company’s business; future financial position and business strategy; the learning management industry; our growth rates and growth strategies; addressable markets for our solutions; the achievement of advances in and expansion of our platform; expectations regarding our revenue and the revenue generation potential of our platform and other products; our business plans and strategies; and our competitive position in our industry. This forward-looking information is based on our opinions, estimates and assumptions in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we currently believe are appropriate and reasonable in the circumstances. Despite a careful process to prepare and review the forward-looking information, there can be no assurance that the underlying opinions, estimates and assumptions will prove to be correct. Certain assumptions include: our ability to build our market share and enter new markets and industry verticals; our ability to attract and retain key personnel; our ability to maintain and expand geographic scope; our ability to execute on our expansion plans; our ability to continue investing in infrastructure to support our growth; our ability to obtain and maintain existing financing on acceptable terms; our ability to execute on profitability initiatives; our ability to successfully integrate the companies we have acquired and to derive the benefits we expect from the acquisition thereof; currency exchange and interest rates; the impact of inflation and
1
global macroeconomic conditions; the impact of competition; our ability to respond to the changes and trends in our industry or the global economy; and the changes in laws, rules, regulations, and global standards are material factors made in preparing forward-looking information and management’s expectations.
Forward-looking information is necessarily based on a number of opinions, estimates and assumptions that, while considered by the Company to be appropriate and reasonable as of the date of this MD&A, are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information, including but not limited to:
•the Company’s ability to execute its growth strategies;
•the impact of changing conditions in the global corporate e-learning market;
•increasing competition in the global corporate e-learning market in which the Company operates;
•fluctuations in currency exchange rates and volatility in financial markets;
•changes in the attitudes, financial condition and demand of our target market;
•the Company’s ability to operate its business and effectively manage its growth under evolving macroeconomic conditions, such as high inflation and recessionary environments;
•developments and changes in applicable laws and regulations;
•fluctuations in the length and complexity of the sales cycle for our platform, especially for sales to larger enterprises;
•issues in the use of AI in our platform may result in reputational harm or liability; and
•such other factors discussed in greater detail under the “Risk Factors” section of our Annual Information Form dated March 8, 2023 (“AIF”), which is available under our profile on SEDAR+ at www.sedarplus.ca.
If any of these risks or uncertainties materialize, or if the opinions, estimates or assumptions underlying the forward-looking information prove incorrect, actual results or future events might vary materially from those anticipated in the forward-looking information. The opinions, estimates or assumptions referred to above and described in greater detail in “Summary of Factors Affecting our Performance” and in the “Risk Factors” section of our AIF, should be considered carefully by prospective investors.
Although we have attempted to identify important risk factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other risk factors not presently known to us or that we presently believe are not material that could also cause actual results or future events to differ materially from those expressed in such forward-looking information. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. No forward-looking statement is a guarantee of future results. Accordingly, you should not place undue reliance on forward-looking information, which speaks only as of the date made. The forward-looking information contained in this MD&A represents our expectations as of the date specified herein, and are subject to change after such date. However, we disclaim any intention or obligation or undertaking to update or revise any forward-looking information whether as a result of new information, future events or otherwise, except as required under applicable securities laws.
All of the forward-looking information contained in this MD&A is expressly qualified by the foregoing cautionary statements.
Additional information relating to Docebo, including our AIF, can be found on SEDAR+ at www.sedarplus.ca.
Overview
At Docebo, our mission is to redefine the way enterprises, including their internal and external workforces, partners and customers, learn by applying new technologies to the traditional corporate Learning Management System (“LMS”) market. Founded in 2005, we provide an easy-to-use, highly configurable and affordable learning platform with the end-to-end capabilities and critical functionality needed to train internal and external workforces, partners and customers. Our solution allows our customers to take control of their desired training strategies and retain institutional knowledge, while providing efficient course delivery, tracking of learning progress, advanced reporting
2
tools and analytics. Our robust platform helps our customers centralize a broad range of learning materials from peer enterprises and learners into one LMS to expedite and enrich the learning process, increase productivity and grow teams uniformly.
Our platform is now used by almost 3,700 companies of all sizes, providing access to learners situated around the world in a variety of languages. Our clients range from select small local businesses, with a focus on mid-sized enterprises, to large multi-nationals, including service, financial, technology and resource-based companies and consulting firms. We have registered offices in Toronto, Canada, Athens, Georgia (USA), Wilmington, Delaware (USA), Biassono, Italy, Dubai, United Arab Emirates, London, England, Paris, France, Frankfurt, Germany, Melbourne, Australia, and Dublin, Ireland. Our platform is sold primarily through a direct sales force located in several of these offices. We also have some relationships with resellers and other channel partners, such as human resource and payroll services providers.
The Docebo Learning Platform currently includes: (i) “Docebo Learn LMS”, (ii) “Docebo Shape”, (iii) “Docebo Content”, (iv) “Docebo Learning Impact”, (v) “Docebo Learn Data”, (vi) “Docebo Connect” and (vii) “Docebo Flow”.
•Docebo Learn LMS is a cloud-based learning technology that allows learning administrators to deliver scalable and flexible personalized learning experiences, from formal training to social learning, to multiple internal, external and blended audiences.
•Docebo Shape is an AI-powered learning content creation tool that enables users to turn internal and external resources into engaging, multilingual microlearning content to share across their business in minutes, without needing months to master the tool.
•With over 200,000 courses and programs, Docebo Content allows learning administrators to unlock the industry’s best-learning content and get high-quality, off-the-shelf learning content from the world’s top publishers in front of your learners. Learning administrators can select the most impactful e-learning content by partnering with a Docebo Content specialist to help curate the right resources.
•Docebo Learning Impact is a learning measurement tool that enables learning administrators to prove and improve the impact of their training programs and validate their company’s investment in learning with optimized questionnaires, learning benchmarks and actionable next steps.
•Docebo Learn Data allows learning administrators to securely integrate their own internal data warehouse and any other business intelligence tool with both the raw data from Docebo Learn LMS and the learning key performance learning analytics to gain a comprehensive view into how their learning programs are powering their business; connecting learning data to business results.
•Docebo Connect enables organizations to seamlessly connect Docebo to any custom tech stack, making integrations faster and more effective.
•Docebo Flow is a product that allows businesses to directly inject learning into other software environments, helping organizations to create contextual in-product training and learning experience.
Additional modules can also be purchased with the LMS platform including: “Docebo for Salesforce”, “Docebo Embed (OEM)”, “Docebo Mobile App Publisher”, “Docebo Extended Enterprise”, “Docebo Discover, Coach & Share” and “Docebo for Microsoft Teams”. Docebo for Salesforce is a native integration that leverages Salesforce’s API and technology architecture to produce a learning experience that remains uniform no matter the use-case. Docebo Embed (OEM) eliminates disjointed learner experiences, long development cycles and ineffective partner models by allowing original equipment manufacturers (“OEMs”) to embed and re-sell the Docebo learning suite as a part of their software, including human capital management (“HCM”), risk management and retail/hospitality SaaS product suites. Docebo’s Mobile App Publisher product allows companies to create their own branded version of the award-winning “Docebo Go.Learn” mobile learning application and publish it as their own in Apple’s App Store, the Google Play Store or in their own Apple Store for Enterprise. Docebo Extended Enterprise breeds customer
3
education, partner enablement, and retention by allowing customers to train multiple external audiences with a single LMS solution. Docebo Discover, Coach & Share enhances the learning experience by going beyond the limits of formal training by bringing social learning into their LMS to create a culture of social learning. Lastly, Docebo for Microsoft Teams is designed to remove barriers to learning, drive adoption and increase productivity by bringing learning directly into Microsoft Teams, where people at organizations who use this as their collaboration tool, already spend most of their time.
We generate revenue primarily from the provision of access to our platform, which is typically provided on the basis of an annual subscription fee and prepaid on a quarterly or annual basis. We offer our customers the flexibility to choose annual or multi-year contract terms, with the majority of our enterprise customers choosing three years. This results in a relatively smooth revenue curve with good visibility into near-term revenue growth. We typically enter into subscription agreements with our customers, with pricing based on the number of active or registered users, with minimum user commitment levels, in a measured time period, and the number of modules requested by the customer. Our goal is to continue to grow revenues arising from our existing customer base as well as adding new subscription customers to our platform. Our business does not have significant seasonal attributes, although historically the sales in the fourth quarter have tended to be slightly stronger than the first three. The Company operates on a global basis and for this reason has decided to report its consolidated financial results in U.S. dollars notwithstanding that the Company’s functional currency is the Canadian dollar. The Company does not currently hedge its exposure to currencies different than its functional currency.
The Company’s shares are listed under the symbol “DCBO” on both the Toronto Stock Exchange, as of October 8, 2019, following the completion of its public offering in Canada (the “TSX IPO”) and the Nasdaq Global Select Market (the “Nasdaq”), as of December 3, 2020, following the completion of its initial public offering in the United States (the “Nasdaq IPO” and together with the TSX IPO, the “IPOs”).
Non-IFRS Measures and Reconciliation of Non-IFRS Measures
This MD&A makes reference to certain non-IFRS measures including key performance indicators used by management and typically used by our competitors in the software-as-a-service (“SaaS”) industry. These measures are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS and are therefore not necessarily comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management’s perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. These non-IFRS measures are used to provide investors with alternative measures of our operating performance and liquidity and thus highlight trends in our business that may not otherwise be apparent when relying solely on IFRS measures. We also believe that securities analysts, investors and other interested parties frequently use non-IFRS measures, including SaaS industry metrics, in the evaluation of companies in the SaaS industry. Management also uses non-IFRS measures to facilitate operating performance comparisons from period to period, the preparation of annual operating budgets and forecasts and to determine components of executive compensation. The non-IFRS measures referred to in this MD&A include “Annual Recurring Revenue”, “Average Contract Value”, “Adjusted EBITDA”, “Adjusted Net Income (Loss)”, “Adjusted Net Income (Loss) per Share - Basic and Diluted” “Working Capital” and “Free Cash Flow”.
Key Performance Indicators
We recognize subscription revenues ratably over the term of the subscription period under the provisions of our agreements with customers. The terms of our agreements, combined with high customer retention rates, provides us with a significant degree of visibility into our near-term revenues. Management uses a number of metrics, including the ones identified below, to measure the Company’s performance and customer trends, which are used to prepare financial plans and shape future strategy. Our key performance indicators may be calculated in a manner different than similar key performance indicators used by other companies.
Annual Recurring Revenue. We define Annual Recurring Revenue as the annualized equivalent value of the subscription revenue of all existing contracts (including OEM contracts) as at the date being measured, excluding
4
non-recurring revenues from implementation, support and maintenance fees. Our customers generally enter into one to three year contracts which are non-cancellable or cancellable with penalty. Accordingly, our calculation of Annual Recurring Revenue assumes that customers will renew the contractual commitments on a periodic basis as those commitments come up for renewal. Subscription agreements may be subject to price increases upon renewal reflecting both inflationary increases and the additional value provided by our solutions. In addition to the expected increase in subscription revenue from price increases over time, existing customers may subscribe for additional features, learners or services during the term. We believe that this measure provides a fair real-time measure of performance in a subscription-based environment. Annual Recurring Revenue provides us with visibility for consistent and predictable growth to our cash flows. Our strong total revenue growth coupled with increasing Annual Recurring Revenue indicates the continued strength in the expansion of our business and will continue to be our focus on a go-forward basis.
Average Contract Value. Average Contract Value is calculated as total Annual Recurring Revenue divided by the number of active customers.
Annual Recurring Revenue and Average Contract Value as at September 30 was as follows:
2023 | 2022 | Change | Change % | |||||||||||
| Annual Recurring Revenue (in millions of US dollars) | 181.8 | 144.6 | 37.2 | 25.7% | ||||||||||
| Average Contract Value (in thousands of US dollars) | 49.4 | 44.6 | 4.8 | 10.8% | ||||||||||
Adjusted EBITDA
Adjusted EBITDA is defined as net income excluding net finance income, depreciation and amortization, income taxes, share-based compensation and related payroll taxes, other income, foreign exchange gains and losses, loss on disposal of assets (if applicable), acquisition related compensation, transaction related expenses and restructuring costs.
The IFRS measure most directly comparable to Adjusted EBITDA presented in our financial statements is net (loss) income.
The following table reconciles Adjusted EBITDA to net income (loss) for the periods indicated:
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||
| $ | $ | $ | $ | ||||||||||||||
Net income (loss) for the period | 4,047 | 10,274 | (382) | 5,418 | |||||||||||||
Finance income, net(1) | (1,933) | (1,325) | (6,506) | (1,677) | |||||||||||||
Depreciation and amortization(2) | 1,056 | 564 | 2,587 | 1,731 | |||||||||||||
Income tax expense | 997 | 95 | 1,918 | 583 | |||||||||||||
Share-based compensation(3) | 1,845 | 1,000 | 4,438 | 3,745 | |||||||||||||
Other (income) expense, net(4) | (2) | (21) | 181 | (64) | |||||||||||||
Foreign exchange (gain) loss(5) | (3,092) | (10,213) | 1,365 | (11,676) | |||||||||||||
Acquisition related compensation(6) | 1,258 | 256 | 2,246 | 868 | |||||||||||||
Transaction related expenses(7) | 271 | — | 1,081 | 101 | |||||||||||||
Restructuring(8) | 65 | — | 2,849 | — | |||||||||||||
| Adjusted EBITDA | 4,512 | 630 | 9,777 | (971) | |||||||||||||
| Adjusted EBITDA as a percentage of total revenue | 9.7 | % | 1.7 | % | 7.4 | % | (0.9) | % | |||||||||
(1)Finance income, net, is primarily related to interest income earned on the net proceeds from the IPOs as the funds are invested in highly liquid short-term interest-bearing marketable securities which is offset by interest expenses incurred on lease obligations, and contingent consideration.
(2)Depreciation and amortization expense is primarily related to depreciation expense on right-of-use assets (“ROU assets”), property and equipment and acquired intangible assets.
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(3)These expenses represent non-cash expenditures recognized in connection with the issuance of share-based compensation to our employees and directors and cash payroll taxes paid on gains earned by option holders when stock options are exercised.
(4)Other (income) expense is primarily comprised of rental income from subleasing office space.
(5)These non-cash gains and losses relate to foreign exchange translation.
(6)These costs represent the earn-out portion of the consideration paid to the vendors of acquired businesses that is associated with the achievement of certain performance and employment obligations.
(7)These expenses relate to professional, legal, consulting, accounting and other fees related to acquisition activities that would otherwise have not been incurred and are not considered an expense indicative of continuing operations.
(8) There was a reduction in workforce during the second quarter of 2023 that resulted in severance payments to employees. Certain functions and the associated management structure were reorganized to realize synergies and ensure organizational agility.
Adjusted Net Income (Loss) and Adjusted Income (Loss) per Share - Basic and Diluted
Adjusted Net (Loss) Income is defined as net (loss) income excluding amortization of intangible assets, share-based compensation and related payroll taxes, acquisition related compensation, transaction related expenses, restructuring costs, foreign exchange gains and losses, and income taxes.
Adjusted Net (Loss) Income per share - basic and diluted is defined as Adjusted Net (Loss) Income divided by the weighted average number of common shares (basic and diluted).
The IFRS measure most directly comparable to Adjusted Net Income (Loss) presented in our financial statements is net (loss) income.
The following table reconciles net (loss) income to Adjusted Net (Loss) Income for the periods indicated:
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||
| $ | $ | $ | $ | ||||||||||||||
Net income (loss) for the period | 4,047 | 10,274 | (382) | 5,418 | |||||||||||||
| Amortization of intangible assets | 381 | 80 | 692 | 252 | |||||||||||||
| Share-based compensation | 1,845 | 1,000 | 4,438 | 3,745 | |||||||||||||
| Acquisition related compensation | 1,258 | 256 | 2,246 | 868 | |||||||||||||
| Transaction related expenses | 271 | — | 1,081 | 101 | |||||||||||||
| Restructuring | 65 | — | 2,849 | — | |||||||||||||
Foreign exchange (gain) loss | (3,092) | (10,213) | 1,365 | (11,676) | |||||||||||||
Income tax expense related to adjustments(1) | 177 | 75 | 567 | 198 | |||||||||||||
| Adjusted net income (loss) | 4,952 | 1,472 | 12,856 | (1,094) | |||||||||||||
| Weighted average number of common shares - basic | 32,474,975 | 33,044,250 | 32,907,374 | 33,024,887 | |||||||||||||
| Weighted average number of common shares - diluted | 33,513,101 | 34,069,688 | 32,907,374 | 34,032,666 | |||||||||||||
| Adjusted net income (loss) per share - basic | 0.15 | 0.04 | 0.39 | (0.03) | |||||||||||||
| Adjusted net income (loss) per share - diluted | 0.15 | 0.04 | 0.39 | (0.03) | |||||||||||||
(1) This line item reflects income tax expense on taxable adjustments using the tax rate of the applicable jurisdiction.
See “Liquidity, Capital Resources and Financing - Working Capital” and “Liquidity, Capital Resources and Financing - Free Cash Flow” in this MD&A for an explanation of Working Capital and Free Cash Flow (and, in the case of Free Cash Flow, a reconciliation of such measure to the most directly comparable IFRS measure presented in our financial statements).
Summary of Factors Affecting Our Performance
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We believe that the growth and future success of our business depends on many factors, including those described below. While each of these factors presents significant opportunities for our business, they also pose important challenges, some of which are discussed below and in the “Risk Factors” section of the AIF.
Market adoption of our SaaS platform
We intend to continue to drive adoption of our SaaS platform by scaling our solutions to meet the needs of both new and existing customers. We believe that there is significant potential to increase penetration of our total addressable market and attract new customers. We plan to do this by further developing our products and services as well as continuing to invest in marketing strategies tailored to attract new businesses to our platform, both in our existing geographies and new markets around the world. We plan to continue to invest in our platform to expand our customer base and drive market adoption. The success of our operations may fluctuate as we make these investments.
Up-selling with existing customers
Our existing customers represent a significant opportunity to up-sell additional functionality with limited incremental sales and marketing expense. We plan to continually invest in product development and sales and marketing to add additional solutions to our platform as well as increase the usage and awareness of our platform. Our future revenue growth and our ability to achieve and maintain profitability is dependent upon our ability to maintain existing customer relationships and to continue to expand our customers’ use of our platform.
The length and complexity of our sales cycle may fluctuate significantly which could result in significant fluctuations in revenues being recognized from quarter to quarter
The decision by a customer to use our platform may involve a comprehensive implementation process across the customer's network or networks. As a result, use of our platform and any related professional services may entail a significant commitment of resources by prospective customers, accompanied by the attendant risks and delays frequently associated with significant technology implementation projects. Given the investment and commitment of resources required by an organization to implement our platform, in particular of larger enterprise customers, our sales cycle may be longer compared to other companies within our industry, as well as companies in other industries. If there is a reduction in information technology spending, due to weak economic conditions or otherwise, it may take several months, or even several quarters, for marketing opportunities to materialize. Additionally, due in part to the effects of the recent macroeconomic uncertainty, we have experienced and may continue to experience longer sales cycles for new customers and existing customer expansions, as existing and potential customers have increased scrutiny on information technology spending and budgets.
Scaling our sales and marketing team
Our ability to achieve significant growth in future revenue will largely depend upon the effectiveness of our sales and marketing efforts. The majority of our sales and marketing efforts are accomplished in-house and we believe the strength of our sales and marketing team is critical to our success. We have invested, and intend to continue to invest meaningfully, in the expansion of our sales force and consequently, we anticipate that our headcount will continue to increase as a result of these investments.
Foreign currency
The Company’s functional currency is Canadian dollars, the functional currency for our subsidiaries is the local currency of the country the foreign operation is located in and our presentation currency is the U.S. dollar. Our results of operations are converted from our functional currency to U.S. dollars using the average foreign exchange rates for each period presented. As a result, our results of operations will be adversely impacted by a decrease in the value of the U.S. dollar relative to the Euro and Canadian dollar. See “Risk Factors” section of our AIF for a discussion on exchange rate fluctuations and their potential negative effect on our results of operations.
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Natural disasters, public health crises, political crises, or other catastrophic events
Our business and financial condition have been, and we believe will continue to be, impacted by adverse and uncertain macroeconomic conditions, including higher inflation, higher interest rates, and supply chain challenges, fluctuations or volatility in capital markets or foreign currency exchange rates, the collapse of financial institutions, such as Silicon Valley Bank, and related uncertainty, the COVID-19 pandemic, and geopolitical events such as the ongoing conflict between Russia and Ukraine. In particular, we have experienced in certain instances, and we believe we will continue to experience, longer sales cycles or generally increased scrutiny on spending from existing and potential customers due to macroeconomic uncertainty. We cannot be certain how long these uncertain macroeconomic conditions and the resulting effects on our industry, our business strategy, and customers will persist.
If we fail to retain key employees or to recruit qualified technical and sales personnel, our business could be harmed.
We believe that our success depends on the continued employment of our senior management and other key employees. In addition, because our future success is dependent on our ability to continue to enhance and introduce new platform features, we are heavily dependent on our ability to attract and retain qualified personnel with the requisite education, background, and industry experience. As we expand our business, our continued success will also depend, in part, on our ability to attract and retain qualified sales, marketing, and operational personnel capable of supporting a larger and more diverse customer base. We and our competitors continue to face significant turnover in our employee base. Qualified individuals are in high demand in our industry, and we may incur significant costs to attract and retain them. The loss of the services of a significant number of our technology or sales personnel could be disruptive to our business development efforts or customer relationships. In addition, if any of our key employees join a competitor or decides to otherwise compete with us, we may experience a material disruption of our operations and business strategy, which may cause us to lose customers or increase operating expenses and may divert our attention as we seek to recruit replacements for the departed employees. Further, changes we make to our current and future work environments (including in connection with COVID-19, such as remote or in-office environments and health and safety matters) may not meet the needs or expectations of our employees or may be perceived as less favourable compared to other companies’ policies, which could negatively impact our ability to hire and retain qualified personnel. Our future work strategy and continued efforts related to employee onboarding, training and development and retention may not be successful. Further, our future work strategy is continuing to evolve and may not meet the needs of our existing and potential future employees and they may prefer work models offered by other companies.
Issues in the use of AI in our platform may result in reputational harm or liability
Our platform uses AI, and we expect to continue building AI into our platform in the future. We envision a future in which AI operates within our cloud-based platform to offer an efficient and effective e-learning solution for our customers. As with many disruptive innovations, AI presents risks and challenges that could affect its adoption, and therefore our business. AI algorithms may be flawed. Datasets may be insufficient or contain biased information. Inappropriate or controversial data practices by us or others could impair the acceptance, utility and effectiveness of AI solutions. These deficiencies could undermine the decisions, predictions, or analysis AI applications produce, subjecting us to competitive harm, legal liability, and brand or reputational harm. Some AI scenarios present ethical issues. If we enable or offer AI solutions that are controversial because of their impact on human rights, privacy, employment, equity, accessibility or other social issues, we may experience brand or reputational harm.
Key Components of Results of Operations
Docebo has always been operated and managed as a single economic entity, notwithstanding the fact that it has operations in several different countries. There is one management team that directs the activities of all aspects of the Company and it is managed globally through global department heads. As a result, we believe that we have one operating segment, being the consolidated company. Over time, this may change as the Company grows and when this occurs we will reflect the change in our reporting practice.
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Revenue
We generate revenue from the following two primary sources:
•Recurring Subscriptions to Our Learning Platform and Related Products. Our customers enter into agreements that provide for recurring subscription fees. The majority of the customer agreements currently being entered into have a term of one to three years and are non-cancellable or cancellable with penalty. Subscription revenue per contract will vary depending upon the particular products that each customer subscribes for, the number and type of learners intended to utilize the platform and the term of the agreement. Subscription revenue is typically recognized evenly over the enforceable term of a contract, commencing on the in-service date.
•Professional Services. Our customers generally require support in implementing our product and training their learners. This support can include system integration, application integration, learner training and any required process-change analysis. Normally, these services are purchased at the same time as the original customer agreement is completed and while they are usually delivered during the 60-120 days immediately following the effective date of the customer agreement, timing can vary. As a result, unlike the recognition of recurring subscription revenue, the recognition of professional service revenue can be recorded unevenly from period to period. When customer agreements are renewed, there is not typically a need for additional professional services so as overall revenue increases over time, the percentage of revenue that is generated from professional services will decrease. Revenues derived from professional services are recognized over the term that the service is provided.
Our agreements generally do not contain any cancellation or refund provisions without penalty, other than in the case of our default.
Cost of Revenue
Cost of revenue is comprised of costs related to provisioning and hosting our learning platform and related products, the delivery of professional services, and customer support. Significant expenses included in cost of revenue include employee salaries and benefits expenses, web hosting fees, third party service fees, and software costs. Share-based compensation and depreciation and amortization are excluded.
Operating Expenses
Our primary operating expenses are as follows:
•General and Administrative. General and administrative expenses consist of employee salaries and benefits expenses for our finance, legal, administrative, human resources, and information technology and security teams. These costs also include consulting and professional service fees, transaction costs related to our acquisitions, software, travel, general office and administrative expenses, credit impairment losses, as well as public company costs including directors and officers liability insurance.
•Sales and Marketing. Sales and marketing expenses are comprised primarily of employee salaries and benefits expenses for our sales and marketing teams, amortization of contract acquisition costs, software, travel and advertising and marketing events. We intend to continue to grow our sales and marketing teams to support our growth strategy.
•Research and Development. Research and development expenses are comprised primarily of employee salaries and benefits for our product and innovation-related functions (net of tax credits), consulting and professional fees, software, travel and web hosting fees. Our research and development team is focused on both continuous improvement of our existing learning platform, as well as developing new product modules and features. In the immediate future, as Docebo’s growth continues, we expect our research and development costs to increase proportionately, however, over time we believe it is reasonable to expect that they will decline as a percentage of revenue.
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•Share-based Compensation. Share-based compensation expenses are comprised of the value of stock options granted to employees expensed over the vesting period of the options, deferred share units (“DSUs”), restricted stock units (“RSUs”) and shares issued pursuant to the Employee Share Purchase Plan (“ESPP”). In addition, the Company’s board of directors may fix, from time to time, a portion of the total compensation (including an annual retainer) paid by the Company to a director in a calendar year for service on the Board (the “Director Fees”) and directors may elect to receive a portion of their total compensation (including cash retainer) in the form of DSUs.
•Foreign Exchange Loss (Income). Foreign exchange loss primarily relates to translation of monetary assets and liabilities denominated in foreign currencies being translated into functional currencies at the foreign exchange rate applicable at the end of each period.
•Depreciation and Amortization. Depreciation and amortization expense primarily relates to depreciation on property and equipment, and amortization of ROU assets and intangible assets. Property and equipment are comprised of furniture and office equipment, leasehold improvements and land and building. ROU assets are comprised of capitalized leases. Intangible assets are comprised of acquired intangible assets.
Other Expenses
•Finance Income, net. This includes costs related to interest income less interest on lease obligations, accretion of interest on contingent consideration and acquisition holdback payables, and bank fees.
•Other (Income) Expense, net. These costs are comprised of rental income from subleasing office space, offset by losses incurred upon termination of a sublease.
Results of Operations
The following table outlines our consolidated statements of income (loss) and comprehensive income (loss) for the periods indicated:
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||
| Revenue | 46,506 | 36,966 | 131,559 | 103,957 | ||||||||||||||||
Cost of revenue(1) | 8,779 | 7,140 | 25,243 | 20,671 | ||||||||||||||||
| Gross profit | 37,727 | 29,826 | 106,316 | 83,286 | ||||||||||||||||
| Operating expenses | ||||||||||||||||||||
General and administrative(1) | 8,317 | 7,824 | 25,218 | 22,796 | ||||||||||||||||
Sales and marketing(1) | 16,221 | 15,523 | 51,041 | 44,150 | ||||||||||||||||
Research and development(1) | 10,271 | 6,105 | 26,456 | 18,401 | ||||||||||||||||
| Share-based compensation | 1,845 | 1,000 | 4,438 | 3,624 | ||||||||||||||||
Foreign exchange (gain) loss | (3,092) | (10,213) | 1,365 | (11,676) | ||||||||||||||||
| Depreciation and amortization | 1,056 | 564 | 2,587 | 1,731 | ||||||||||||||||
| 34,618 | 20,803 | 111,105 | 79,026 | |||||||||||||||||
Operating income (loss) | 3,109 | 9,023 | (4,789) | 4,260 | ||||||||||||||||
Finance income, net | (1,933) | (1,325) | (6,506) | (1,677) | ||||||||||||||||
Other (income) expense, net | (2) | (21) | 181 | (64) | ||||||||||||||||
Income before income taxes | 5,044 | 10,369 | 1,536 | 6,001 | ||||||||||||||||
Income tax expense | 997 | 95 | 1,918 | 583 | ||||||||||||||||
Net income (loss) for the period | 4,047 | 10,274 | (382) | 5,418 | ||||||||||||||||
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Other comprehensive loss (income) | ||||||||||||||||||||
| Item that may be reclassified subsequently to income: | ||||||||||||||||||||
Exchange loss (gain) on translation of foreign operations | 3,776 | 10,690 | (592) | 12,633 | ||||||||||||||||
Comprehensive income (loss) | 271 | (416) | 210 | (7,215) | ||||||||||||||||
| Income per share - basic | 0.12 | 0.31 | (0.01) | 0.16 | ||||||||||||||||
| Income per share - diluted | 0.12 | 0.30 | (0.01) | 0.16 | ||||||||||||||||
| Weighted average number of common shares outstanding - basic | 32,474,975 | 33,044,250 | 32,907,374 | 33,024,887 | ||||||||||||||||
| Weighted average number of common shares outstanding - diluted | 33,513,101 | 34,069,688 | 32,907,374 | 34,032,666 | ||||||||||||||||
(1) For the nine months ended September 30, 2023, the Company incurred a total of $2.8 million of severance related costs associated with a one-time reduction in workforce, comprised of $0.1 million in cost of revenue, $0.9 million in general and administrative, $1.6 million in sales and marketing, and $0.3 million in research and development. Costs incurred in the third quarter of 2023 were not material.
Review of Operations for the three and nine months ended September 30, 2023
Revenue
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||||||||
2023 | 2022 | Change | Change | 2023 | 2022 | Change | Change | ||||||||||||||||||||||
| $ | $ | $ | % | $ | $ | $ | % | ||||||||||||||||||||||
| Subscription revenue | 43,588 | 34,279 | 9,309 | 27 | % | 123,278 | 95,323 | 27,955 | 29 | % | |||||||||||||||||||
| Professional services | 2,918 | 2,687 | 231 | 9 | % | 8,281 | 8,634 | (353) | (4) | % | |||||||||||||||||||
| Total revenue | 46,506 | 36,966 | 9,540 | 26 | % | 131,559 | 103,957 | 27,602 | 27 | % | |||||||||||||||||||
Total revenue increased by $9.5 million or 26% for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 and increased by $27.6 million or 27% for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. The increase in both periods was primarily due to growth in our customer base, as well as up-selling to existing customers, as the number of customers rose from 3,245 as at September 30, 2022 to 3,679 as at September 30, 2023 and the Average Contract Value per customer increased from approximately $45 thousand as at September 30, 2022 to approximately $49 thousand as at September 30, 2023. Average Contract Value is not a recognized measure under IFRS. See “Non-IFRS Measures and Reconciliation of Non-IFRS Measures”.
Subscription revenue increased by $9.3 million or 27% for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 and increased by $28.0 million or 29% for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. The increase in both periods was due to initial revenues from customers who did not contribute to subscription revenue during the prior period, and growth from existing customers.
Professional services revenue increased by $0.2 million or 9% for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 and decreased by $0.4 million or 4% for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.
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Cost of Revenue
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||||||||
2023 | 2022 | Change | Change | 2023 | 2022 | Change | Change | ||||||||||||||||||||||
| $ | $ | $ | % | $ | $ | $ | % | ||||||||||||||||||||||
| Cost of revenue | 8,779 | 7,140 | 1,639 | 23 | % | 25,243 | 20,671 | 4,572 | 22 | % | |||||||||||||||||||
| Percentage of total revenue | 18.9 | % | 19.3 | % | 19.2 | % | 19.9 | % | |||||||||||||||||||||
Cost of revenue increased by $1.6 million or 23% for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 and increased by $4.6 million or 22% for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. The period over period increases in cost of revenue were primarily driven by higher employee-compensation related costs due to the Company’s continued investment in headcount to support implementation and ongoing success of new customers. Web hosting fees and third party service fees also increased as a result of higher revenues.
Gross Profit
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||||||||
2023 | 2022 | Change | Change | 2023 | 2022 | Change | Change | ||||||||||||||||||||||
| $ | $ | $ | % | $ | $ | $ | % | ||||||||||||||||||||||
| Gross profit | 37,727 | 29,826 | 7,901 | 26 | % | 106,316 | 83,286 | 23,030 | 28 | % | |||||||||||||||||||
| Percentage of total revenue | 81.1 | % | 80.7 | % | 80.8 | % | 80.1 | % | |||||||||||||||||||||
Gross profit for the three months ended September 30, 2023 increased by $7.9 million or 26.5% and increased to 81.1% of revenue compared to 80.7% for the three months ended September 30, 2022. Gross profit for the nine months ended September 30, 2023 increased by $23.0 million or 27.7% and increased to 80.8% of revenue compared to 80.1% for the nine months ended September 30, 2022.
Operating Expenses
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||||||||
2023 | 2022 | Change | Change | 2023 | 2022 | Change | Change | ||||||||||||||||||||||
| $ | $ | $ | % | $ | $ | $ | % | ||||||||||||||||||||||
| General and administrative | 8,317 | 7,824 | 493 | 6 | % | 25,218 | 22,796 | 2,422 | 11 | % | |||||||||||||||||||
| Sales and marketing | 16,221 | 15,523 | 698 | 4 | % | 51,041 | 44,150 | 6,891 | 16 | % | |||||||||||||||||||
| Research and development | 10,271 | 6,105 | 4,166 | 68 | % | 26,456 | 18,401 | 8,055 | 44 | % | |||||||||||||||||||
| Share-based compensation | 1,845 | 1,000 | 845 | 85 | % | 4,438 | 3,624 | 814 | 22 | % | |||||||||||||||||||
Foreign exchange (gain) loss | (3,092) | (10,213) | 7,121 | (70) | % | 1,365 | (11,676) | 13,041 | (112) | % | |||||||||||||||||||
| Depreciation and amortization | 1,056 | 564 | 492 | 87 | % | 2,587 | 1,731 | 856 | 49 | % | |||||||||||||||||||
| Total operating expenses | 34,618 | 20,803 | 13,815 | 66 | % | 111,105 | 79,026 | 32,079 | 41 | % | |||||||||||||||||||
General and Administrative Expenses
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||||||||
2023 | 2022 | Change | Change | 2023 | 2022 | Change | Change | ||||||||||||||||||||||
| $ | $ | $ | % | $ | $ | $ | % | ||||||||||||||||||||||
| General and administrative | 8,317 | 7,824 | 493 | 6 | % | 25,218 | 22,796 | 2,422 | 11 | % | |||||||||||||||||||
| Percentage of total revenue | 17.9 | % | 21.2 | % | 19.2 | % | 21.9 | % | |||||||||||||||||||||
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General and administrative expenses increased by $0.5 million or 6% for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 and increased by $2.4 million or 11% for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.
For the three months ended September 30, 2023, general and administrative expenses included $0.3 million in transaction-related costs. Excluding these costs, general and administrative expenses increased by $0.2 million or 2% representing 17.2% of total revenue due to higher employee compensation-related expenses, as well as software and IT licensing costs. For the nine months ended September 30, 2023, general and administrative expenses included $1.1 million in transaction-related costs and $0.9 million in restructuring costs. Excluding these costs, general and administrative expenses increased by $0.5 million or 2% representing 17.7% of total revenue.
Our general and administrative expenses as a percentage of total revenue decreased from 21.2% to 17.9% for the three months ended September 30, 2022 and September 30, 2023, respectively, and decreased from 21.9% to 19.2% for the nine months ended September 30, 2022 and September 30, 2023, respectively.
Sales and Marketing Expenses
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||||||||
2023 | 2022 | Change | Change | 2023 | 2022 | Change | Change | ||||||||||||||||||||||
| $ | $ | $ | % | $ | $ | $ | % | ||||||||||||||||||||||
| Sales and marketing | 16,221 | 15,523 | 698 | 4 | % | 51,041 | 44,150 | 6,891 | 16 | % | |||||||||||||||||||
| Percentage of total revenue | 34.9 | % | 42.0 | % | 38.8 | % | 42.5 | % | |||||||||||||||||||||
Sales and marketing expenses increased by $0.7 million or 4% for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 and increased by $6.9 million or 16% for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.
For the three months ended September 30, 2023, the increase in sales and marketing expenses was driven by higher marketing and marketing event costs, as well as an increase in customer facing costs. For the nine months ended September 30, 2023, sales and marketing expenses included $1.6 million in restructuring costs. Excluding these costs, sales and marketing expenses increased by $5.3 million or 12% representing 37.6%. of total revenue. We expect to continue to grow our sales and marketing team and incrementally invest in advertising and marketing events for so long as we can efficiently increase our revenue base.
Our sales and marketing expenses as a percentage of total revenue decreased from 42.0% to 34.9% for the three months ended September 30, 2022 and September 30, 2023, respectively, and decreased from 42.5% to 38.8% for the nine months ended September 30, 2022 and September 30, 2023, respectively.
Our sales and marketing expenses as a percentage of total revenue generally fluctuate quarterly within any given year based on the timing of advertising and marketing events; therefore, expressing sales and marketing expenses as a percentage of total revenue for any given quarter is not necessarily indicative of annual results. As we grow, we expect these fluctuations in sales and marketing expenses as a percentage of total revenue that are attributable to the fluctuations in the timing of advertising and marketing events will moderate.
Research and Development Expenses
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||||||||
2023 | 2022 | Change | Change | 2023 | 2022 | Change | Change | ||||||||||||||||||||||
| $ | $ | $ | % | $ | $ | $ | % | ||||||||||||||||||||||
| Research and development | 10,271 | 6,105 | 4,166 | 68 | % | 26,456 | 18,401 | 8,055 | 44 | % | |||||||||||||||||||
| Percentage of total revenue | 22.1 | % | 16.5 | % | 20.1 | % | 17.7 | % | |||||||||||||||||||||
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Research and development expenses increased by $4.2 million or 68% for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 and increased by $8.1 million or 44% for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.
For the three months ended September 30, 2023, research and development expenses included $1.3 million in acquisition related compensation. Excluding these costs, research and development expenses increased by $2.9 million or 48% representing 19.4% of total revenue. For the nine months ended September 30, 2023, research and development expenses included $2.2 million in acquisition related compensation and $0.3 million in restructuring costs. Excluding these costs, research and development expenses increased by $5.5 million or 30% representing 18.2% of total revenue. The increase in both periods was driven by the Company’s continued focus on maintaining and improving its existing platform and the development of new products, which resulted in higher personnel costs due to an increase in employee headcount, as well as additional costs associated with becoming compliant with the Federal Risk and Authorization Management Program (‘FedRAMP’). On an absolute basis, we expect that research and development expenses will continue to grow as the Company maintains its efforts to keep its product at the leading edge of learning technology but will decrease as a percentage of revenue over time.
Our research and development expenses as a percentage of total revenue increased from 16.5% to 22.1% for the three months ended September 30, 2022 and September 30, 2023, respectively, and increased from 17.7% to 20.1% for the nine months ended September 30, 2022 and September 30, 2023, respectively.
Share-Based Compensation
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||||||||
2023 | 2022 | Change | Change | 2023 | 2022 | Change | Change | ||||||||||||||||||||||
| $ | $ | $ | % | $ | $ | $ | % | ||||||||||||||||||||||
| Share-based compensation | 1,845 | 1,000 | 845 | 85 | % | 4,438 | 3,624 | 814 | 22 | % | |||||||||||||||||||
| Percentage of total revenue | 4.0 | % | 2.7 | % | 3.4 | % | 3.5 | % | |||||||||||||||||||||
Share-based compensation expense increased by $0.8 million or 85% for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 and increased by $0.8 million or 22% for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. The increase was driven by equity compensation granted throughout the year.
Foreign Exchange (Gain) Loss
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||||||||
2023 | 2022 | Change | Change | 2023 | 2022 | Change | Change | ||||||||||||||||||||||
| $ | $ | $ | % | $ | $ | $ | % | ||||||||||||||||||||||
Foreign exchange (gain) loss | (3,092) | (10,213) | 7,121 | (70) | % | 1,365 | (11,676) | 13,041 | (112) | % | |||||||||||||||||||
| Percentage of total revenue | (6.6) | % | (27.6) | % | 1.0 | % | (11.2) | % | |||||||||||||||||||||
Foreign exchange (gain) loss primarily relates to translation of monetary assets and liabilities denominated in foreign currencies into functional currencies at the foreign exchange rate applicable at the end of each period. The Company invested the proceeds from the TSX IPO, the bought deal offering of common shares of the Company which closed on August 27, 2020 (the “Bought Deal”) and the Nasdaq IPO in cash equivalents denominated in United States dollars. As a result of the movement of the United States dollar in comparison to the Canadian dollar (the Company’s functional currency) an unrealized foreign exchange gain was recorded for the three months ended September 30, 2023 while an unrealized loss was recorded for the nine months ended September 30, 2023, which represents a significant portion of the movement during the periods.
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Depreciation and Amortization
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||||||||
2023 | 2022 | Change | Change | 2023 | 2022 | Change | Change | ||||||||||||||||||||||
| $ | $ | $ | % | $ | $ | $ | % | ||||||||||||||||||||||
| Depreciation and amortization | 1,056 | 564 | 492 | 87 | % | 2,587 | 1,731 | 856 | 49 | % | |||||||||||||||||||
| Percentage of total revenue | 2.3 | % | 1.5 | % | 2.0 | % | 1.7 | % | |||||||||||||||||||||
Depreciation and amortization expense increased by $0.5 million or 87% for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 and increased by $0.9 million or 49% for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. The increase in depreciation and amortization expense relates primarily to intangible assets acquired through the acquisition of PeerBoard, operated by Circles Collective Inc. (“PeerBoard”).
Non-Operating Income
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||||||||
2023 | 2022 | Change | Change | 2023 | 2022 | Change | Change | ||||||||||||||||||||||
| $ | $ | $ | % | $ | $ | $ | % | ||||||||||||||||||||||
| Finance income, net | (1,933) | (1,325) | (608) | 46 | % | (6,506) | (1,677) | (4,829) | 288 | % | |||||||||||||||||||
| Other (income) expense, net | (2) | (21) | 19 | (90) | % | 181 | (64) | 245 | (383) | % | |||||||||||||||||||
Finance Income, net
Finance income, net, increased by $0.6 million or 45.9% for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 and increased by $4.8 million or 288.0% for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 due to an increase in interest income earned on cash and cash equivalents that include short-term investments in highly liquid marketable securities, having a term to maturity of one year or less, and earning interest income, as a result of higher interest rates.
Other (Income) Expense, net
Other (income) expense is primarily comprised of losses incurred as a result of a terminated sublease offset by rental income from subleasing office space.
Key Statement of Financial Position Information
September 30, 2023 | December 31, 2022 | Change | Change | |||||||||||
| $ | $ | $ | % | |||||||||||
| Cash and cash equivalents | 170,648 | 216,293 | (45,645) | (21) | % | |||||||||
| Total assets | 254,175 | 283,669 | (29,494) | (10) | % | |||||||||
| Total long-term liabilities | 7,648 | 7,096 | 552 | 8 | % | |||||||||
| Total liabilities | 118,475 | 91,458 | 27,017 | 30 | % | |||||||||
Total Assets
September 30, 2023 compared to December 31, 2022
Total assets decreased by $29.5 million from December 31, 2022 to September 30, 2023 with cash and cash equivalents accounting for $45.6 million of the decrease primarily due to purchases made under the NCIB, as defined under “Normal Course Issuer Bid” in this MD&A, as well as cash consideration paid in connection with the
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PeerBoard and Edugo.AI acquisitions. The decrease in total assets was partially offset by an increase in intangible assets and goodwill, contract costs, and trade and other receivables. The increase in intangible assets and goodwill of $9.1 million was a result of the PeerBoard and Edugo.AI acquisitions. Contract costs and trade and other receivables increased by $4.2 million and $3.4 million, respectively, as a result of higher revenue recognized and the related receivables along with increased contract commission and fulfillment costs.
Total Liabilities
September 30, 2023 compared to December 31, 2022
Total liabilities increased by $27.0 million or 30% from December 31, 2022 to September 30, 2023. The movement in liabilities was driven by an increase in the ASPP liability, trade and other payables and deferred revenue. A liability was recorded in the amount of $12.8 million related to the ASPP (as defined under “Normal Course Issuer Bid” in this MD&A) under the NCIB. The increase in trade and other payables of $4.6 million was driven by timing of payments to vendors while deferred revenue increased by $9.1 million driven by the growth in revenue.
Quarterly Results of Operations
The following table sets forth selected unaudited quarterly statements of operations data for each of the eight quarters ended December 31, 2021 to ended September 30, 2023. The information for each of these quarters has been prepared on the same basis as the audited annual financial statements for the year ended December 31, 2022 and the unaudited condensed consolidated interim financial statements for the period ended September 30, 2023. This data should be read in conjunction with our audited annual financial statements for the year ended December 31, 2022 and the unaudited condensed consolidated interim financial statements for the period ended September 30, 2023. These quarterly operating results are not necessarily indicative of our operating results for a full year or any future period.
| Three months ended | ||||||||||||||||||||||||||
| (In thousands of US dollars, except per share data) | Q3 2023 | Q2 2023 | Q1 2023 | Q4 2022 | Q3 2022 | Q2 2022 | Q1 2022 | Q4 2021 | ||||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||
| Revenue | 46,506 | 43,594 | 41,459 | 38,955 | 36,966 | 34,936 | 32,055 | 29,801 | ||||||||||||||||||
Net income (loss) before taxes | 5,044 | (5,116) | 1,608 | 1,781 | 10,369 | 2,462 | (6,830) | (2,887) | ||||||||||||||||||
Net income (loss) attributable to equity owners of the Company | 4,047 | (5,674) | 1,245 | 1,600 | 10,274 | 2,103 | (6,959) | (1,428) | ||||||||||||||||||
Income (loss) per share - basic | 0.12 | (0.17) | 0.04 | 0.05 | 0.31 | 0.06 | (0.21) | (0.04) | ||||||||||||||||||
Income (loss) per share - diluted | 0.12 | (0.17) | 0.04 | 0.05 | 0.30 | 0.06 | (0.21) | (0.04) | ||||||||||||||||||
Revenue
Our total quarterly revenue increased sequentially for all periods presented which was primarily attributable to revenue from new customers, strong revenue retention and up-selling from existing customers, and delivery of professional services to customers. We cannot provide assurance that this pattern of sequential growth in revenue will continue.
Net Income (Loss)
Net income has improved relative to preceding periods as the Company continues to grow its revenue base while costs continue to decrease as a percentage of total revenue. The net losses incurred in prior periods were primarily attributable to unrealized losses in foreign exchange due to the weakening of the Canadian dollar relative to the US dollar.
See "Results of Operations" in this MD&A for a more detailed discussion of the year-over-year changes in revenues and net income (loss).
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Liquidity, Capital Resources and Financing
Overview
The general objectives of our capital management strategy are to preserve our capacity to continue operating, provide benefits to our stakeholders and provide an adequate return on investment to our shareholders by selling our platform and services at a price that is commensurate with the level of operating risk we assume. We thus determine the total amount of capital required consistent with risk levels. This capital structure is adjusted on a timely basis depending on changes in the economic environment and risks of the underlying assets. We are not subject to any externally imposed capital requirements.
Working Capital
Our primary source of cash flow is revenue from operations and equity capital raises totaling $225.4 million including net proceeds from the IPOs and the Bought Deal. Our approach to managing liquidity is to ensure, to the extent possible, that we always have sufficient liquidity to meet our liabilities as they become due. We do so by monitoring cash flow and performing budget-to-actual analysis on a regular basis.
Working Capital as at September 30, 2023 and 2022 was $110.9 million and $177.3 million, respectively. Working Capital is defined as current assets, excluding the current portion of the net investment in finance lease and contract costs, minus current liabilities, excluding borrowings, if any, and the current portion of contingent consideration and lease obligations. Working Capital is not a recognized measure under IFRS. See “Non-IFRS Measures and Reconciliation of Non-IFRS Measures”.
The following table represents the Company’s Working Capital position as at September 30:
2023 | 2022 | |||||||
| $ | $ | |||||||
| Current assets | 224,664 | 252,216 | ||||||
| Less: Current portion of net investment in finance lease | (81) | (172) | ||||||
| Less: Current portion of contract costs | (5,484) | (2,210) | ||||||
| Current assets, net of net investment in finance lease and contract costs | 219,099 | 249,834 | ||||||
| Current liabilities | 110,827 | 74,997 | ||||||
| Less: Current portion of contingent consideration | (1,153) | (1,168) | ||||||
| Less: Current portion of lease obligations | (1,513) | (1,253) | ||||||
| Current liabilities, net of borrowings, contingent consideration and lease obligations | 108,161 | 72,576 | ||||||
| Working Capital | 110,938 | 177,258 | ||||||
Our principal cash requirements are for Working Capital. Given our existing cash and cash equivalents, along with net proceeds obtained from our capital raises as described above, we believe there is sufficient liquidity to meet our current and short-term growth requirements in addition to our long-term strategic objectives.
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Cash Flows
The following table presents cash and cash equivalents as at September 30, 2023 and 2022, and cash flows from operating, investing, and financing activities for the three and nine months ended September 30, 2023 and 2022:
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||
| $ | $ | $ | $ | ||||||||||||||
| Cash and cash equivalents | 170,648 | 212,733 | 170,648 | 212,733 | |||||||||||||
| Net cash provided by (used in): | |||||||||||||||||
| Operating activities | 6,215 | 975 | 9,488 | 95 | |||||||||||||
| Investing activities | (120) | (351) | (9,273) | (1,931) | |||||||||||||
| Financing activities | (39,018) | 359 | (45,620) | 530 | |||||||||||||
| Effect of foreign exchange on cash and cash equivalents | (352) | (585) | (240) | (1,284) | |||||||||||||
| Net (decrease) increase in cash and cash equivalents | (33,275) | 398 | (45,645) | (2,590) | |||||||||||||
Cash flows from operating activities for the three months ended September 30, 2023 were $6.2 million compared to $1.0 million for the three months ended September 30, 2022. Improved income before non-cash items in the third quarter of 2023 as compared to the same period in the prior year was mainly due to higher revenue, improvement in gross margin and lower general and administrative and sales and marketing costs as a percentage of total revenue resulting in higher cash flows generated from operating activities.
Cash flows from operating activities for the nine months ended September 30, 2023 were $9.5 million compared to $0.1 million for the nine months ended September 30, 2022.The increase in cash generated from operating activities was driven by improved income before non-cash items as a result of stronger revenues while costs decreased as a percentage of total revenue compared to the same period in the prior year.
Cash Flows Used in Investing Activities
Cash flows used in investing activities for the three months ended September 30, 2023 were $0.1 million compared to $0.4 million for the three months ended September 30, 2022. Cash outflows for investing activities relate to investments in property and equipment to support business growth.
Cash flows used in investing activities for the nine months ended September 30, 2023 were $9.3 million compared to $2.0 million for the nine months ended September 30, 2022. Cash outflows for investing activities primarily related to approximately $2.5 million cash consideration paid in connection with the acquisition of PeerBoard in April 2023 and approximately $6.2 million of cash consideration paid in connection with the acquisition of Edugo.AI in June 2023.
Cash Flows (Used in) from Financing Activities
Cash flows used in financing activities for the three months ended September 30, 2023 were $39.0 million compared to cash flows from financing activities of $0.4 million for the three months ended September 30, 2022. Financing activities for the three months ended September 30, 2023 primarily relate to the $41.0 million repurchase of common shares for cancellation, partially offset by interest income of $1.6 million earned on cash and cash equivalents due to higher interest rates.
Cash flows used in financing activities for the nine months ended September 30, 2023 were $45.6 million compared to cash flows from financing activities of $0.6 million for the nine months ended September 30, 2022. Financing activities for the nine months ended September 30, 2023 primarily related to the $51.2 million repurchase of common shares for cancellation, partially offset by interest income of $5.6 million earned on cash and cash equivalents due to higher interest rates.
Free Cash Flow
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Free Cash Flow is defined as cash used in operating activities less cash used for purchases of property and equipment and capitalized internal-use software costs, plus non-recurring expenditures such as the payment of acquisition-related compensation, the payment of transaction-related costs, and the payment of restructuring costs. Free Cash Flow is not a recognized measure under IFRS. See “Non-IFRS Measures and Reconciliation of Non-IFRS Measures”. The IFRS measure most directly comparable to Free Cash Flow presented in our financial statements is cash flow used in operating activities.
The following table reconciles our cash flow used in operating activities to Free Cash Flow:
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||
| $ | $ | $ | $ | ||||||||||||||
Cash flow from operating activities | 6,215 | 975 | 9,488 | 95 | |||||||||||||
| Purchases of property and equipment | (120) | (351) | (386) | (860) | |||||||||||||
| Acquisition related compensation paid | — | — | 189 | 82 | |||||||||||||
| Transaction related expenses paid | 551 | — | 991 | 141 | |||||||||||||
| Restructuring costs paid | 1,707 | — | 2,831 | — | |||||||||||||
| Free Cash Flow | 8,353 | 624 | 13,113 | (542) | |||||||||||||
| Free Cash Flow as a percentage of total revenue | 18.0 | % | 1.7 | % | 10.0 | % | (0.5) | % | |||||||||
Use of Proceeds from the Nasdaq IPO and the Bought Deal
As a result of the Bought Deal, the Company raised net proceeds of $18.1 million. These proceeds have been placed in cash and cash equivalents that include short-term investments in highly liquid marketable securities, having a term to maturity of one year or less. The Company’s use of proceeds from the Bought Deal has not changed from the disclosure set forth in the “Use of Proceeds” section of our short form prospectus dated August 24, 2020 to the date of this MD&A.
Additionally, as a result of the Nasdaq IPO, the Company raised net proceeds of $154.9 million. These proceeds have been placed in cash and cash equivalents that include short-term investments in highly liquid marketable securities, having a term to maturity of one year or less. The Company’s use of proceeds from the Nasdaq IPO has not changed from the disclosure set forth in the “Use of Proceeds” section of our prospectus supplement dated December 2, 2020 to the short form base shelf prospectus dated October 22, 2020 to the date of this MD&A.
Normal Course Issuer Bid
On May 15, 2023, the Company announced the commencement of a normal course issuer bid (“NCIB”) to repurchase and cancel up to 1,650,672 of its common shares, representing approximately 5% of the public float, over the 12-month period commencing May 18, 2023, and ending no later than May 17, 2024. All repurchases are made through the facilities of the Toronto Stock Exchange and are done at market prices.
In May 2023, the Company also entered into an automatic share purchase plan ("ASPP") with a third-party broker for purposes of allowing the Company to purchase common shares under the NCIB during the Company's self-imposed trading blackout periods. Under the ASPP, the broker is authorized to repurchase common shares during blackout periods, without consultation with the Company, on predefined terms, including share price, time period and subject to other limitations imposed by the Company and subject to rules and policies of the TSX and applicable securities laws, such as a daily purchase restriction.
During the nine months ended September 30, 2023, the Company repurchased and cancelled a total of 1,333,361 common shares for total cash consideration, including transaction costs, of $51.2 million. A liability representing the maximum amount that the Company could be required to pay the designated broker under the ASPP of $12.8 million was recorded as at September 30, 2023.
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Off-Balance Sheet Arrangements
In relation to the PeerBoard acquisition, up to $4.0 million in additional consideration may be payable over the three years following the closing date of April 3, 2023, representing the earn-out portion of the consideration paid by the Company or subsidiary thereof in connection with the transaction, based on certain performance milestones and employment obligations.
In relation to the Edugo.AI acquisition, up to $8.0 million in additional consideration may be payable over the three years following the closing date of June 9, 2023, representing the earn-out portion of the consideration paid by the Company or subsidiary thereof in connection with the transaction, based on certain performance milestones and employment obligations.
We have no other material off-balance sheet arrangements, other than operating leases not recognized as ROU assets under IFRS 16. From time to time, we may be contingently liable with respect to litigation and claims that arise in the normal course of operations.
Related Party Transactions
In the ordinary course of business, we may provide services (including our Platform) to, and enter into contracts with, related parties on terms similar to those offered to non-related parties. We have no related party transactions, other than those noted in Note 17 in our unaudited condensed consolidated interim financial statements.
Financial Instruments and Other Instruments
Credit Risk
Generally, the carrying amount in our consolidated statement of financial position exposed to credit risk, net of any applicable provisions for losses, represents the maximum amount exposed to credit risk.
Our credit risk is primarily attributable to our cash and cash equivalents and trade and other receivables. We do not require guarantees from our customers. Credit risk with respect to cash and cash equivalents is managed by maintaining balances only with high credit quality financial institutions.
Due to our diverse customer base, there is no particular concentration of credit risk related to our trade and other receivables. Moreover, balances for trade and other receivables are managed and analyzed on an ongoing basis to ensure allowances for doubtful accounts are established and maintained at an appropriate amount.
We estimate anticipated losses from doubtful accounts based upon the expected collectability of all trade and other receivables, which estimate takes into account the number of days past due, collection history, identification of specific customer exposure and current economic trends. An impairment loss on trade and other receivables is calculated as the difference between the carrying amount and the present value of the estimated future cash flow. Impairment losses are charged to general and administrative expense in the consolidated statements of (loss) income and comprehensive loss. Receivables for which an impairment provision was recognized are written off against the corresponding provision when they are deemed uncollectible. Impairment losses for trade receivables are based on the expected credit loss model. The Company applies the simplified approach to impairment for trade and other receivables by recognizing lifetime expected losses on initial recognition through both the analysis of historical defaults and a reassessment of counterparty credit risk in revenue contracts on an annual basis.
The maximum exposure to credit risk at the date hereof is the carrying value of each class of receivables mentioned above. We do not hold any collateral as security.
Foreign Currency Exchange Risk
We are exposed to currency risk due to financial instruments denominated in foreign currencies. The Company’s primary exposure with respect to foreign currencies is from U.S. dollar denominated cash and cash equivalents,
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trade and other receivables, and trade and other payables in entities whose functional currency is other than U.S. dollars.
We have not entered into arrangements to hedge our exposure to currency risk.
Inflation Risk
We do not believe that inflation has had a material effect on our business, financial condition or results of operations. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations
Critical Accounting Policies and Estimates
The preparation of our consolidated financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We review these estimates on an ongoing basis based on management’s best knowledge of current events and actions that we may undertake in the future. Actual results could differ from these estimates. Areas requiring the most significant estimates and judgments which are deemed critical are outlined below.
Revenue Recognition
Revenue recognition requires judgment and the use of estimates, especially in evaluating the various non-standard terms and conditions in our contracts with customers as to their effect on reported revenue.
The Company derives its revenues from two main sources: subscription and professional services revenue, which includes services such as initial project management and training and integration. Professional services do not include significant customization to, or development of, the software. Revenue is recognized by applying the five-step framework under IFRS 15 Revenue from contracts with customers, as described in Note 3 of our audited annual consolidated financial statements for the year ended December 31, 2022.
The Company enters into significant revenue contracts with certain large enterprise customers that contain non-standard terms and conditions, pricing and promised services. Significant management judgement can be required to assess the impact of these items on the amount and timing of revenue recognition for these contracts including the determination of performance obligations, calculation of transaction price, allocation of transaction price across performance obligations, and timing of revenue recognition.
Outstanding Share Information
We are currently authorized to issue an unlimited number of common shares. As of the date hereof, 31,717,338 common shares, 1,259,366 stock options, 115,576 DSUs and 161,932 RSUs are issued and outstanding.
Foreign Currency Exchange (“FX”) Rates
Although our functional currency is the Canadian dollar, we have elected to report our financial results in U.S. dollars to improve the comparability of our financial results with our peers. Reporting our financial results in U.S. dollars also reduces the impact of foreign currency exchange fluctuations in the Company’s reported amounts, as our transactions denominated in U.S. dollars are significantly larger than Canadian dollars or Euros.
Our consolidated financial position and operating results have been translated to U.S. dollars applying FX rates outlined in the table below. FX rates are expressed as the amount of U.S. dollars required to purchase one Canadian dollar. FX rates represent the daily closing rate published by Thomson Reuters.
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Period | Consolidated Statement of Financial Position | Consolidated Statement of Income (Loss) and Comprehensive Loss | |||||||||
Current Rate | Average Rate | ||||||||||
Three months ended September 30, 2022 | $0.7302 | $0.7626 | |||||||||
Three months ended September 30, 2023 | $0.7364 | $0.7460 | |||||||||
Disclosure Controls and Procedures and Internal Controls over Financial Reporting
Management of the Company, under the supervision of the Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining disclosure controls and procedures (as defined under applicable Canadian securities laws and by the United States Securities and Exchange Commission (“SEC”) in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (“the Exchange Act”) for the Company to ensure that material information relating to the Company, including its consolidated subsidiaries, that is required to be made known to the Chief Executive Officer and Chief Financial Officer by others within the Company and disclosed by the Company in reports filed or submitted by it under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and (ii) accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, the Chief Executive Officer and the Chief Financial Officer and effected by the Company’s board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Management determined that there were no material weaknesses in the Company’s internal control over financial reporting as of September 30, 2023.
In the three months ended September 30, 2023, we completed our migration of certain financial reporting systems and their accompanying financial information, which included changes to our underlying information technology infrastructure and internal controls over financial reporting.
Other than the system migration as described above, there have been no changes to the Company’s internal controls over financial reporting during the quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, its internal controls over financial reporting.
22
Docebo Reports Third Quarter 2023 Results
TORONTO, ONTARIO - November 9, 2023 - Docebo Inc. (NASDAQ: DCBO; TSX:DCBO) (“Docebo” or the “Company”), a leading learning platform provider with a foundation in artificial intelligence (AI) and innovation, announced financial results for the three and nine months ended September 30, 2023. All amounts are expressed in US dollars unless otherwise stated.
"Consistent execution and operating discipline allowed us to surpass the upper limit of our revenue and profitability guidance for the quarter. The horizontal reach of our platform created momentum in all customer segments," said Claudio Erba, Founder and Chief Executive Officer. “Docebo continues to excel in delivering innovation. Over the past nine months, we introduced an impressive range of nearly 90 new features and capabilities, which were proudly showcased at Docebo Inspire in September. This innovation has not only led to measurable success for our customers, but also significantly contributed to long-term sustainable and profitable growth for our shareholders.”
Third Quarter 2023 Financial Highlights
•Revenue of $46.5 million, an increase of 26% from the comparative period in the prior year.
•Subscription revenue of $43.6 million, represented 94% of total revenue, an increase of 27% from the comparative period in the prior year.
•Gross profit of $37.7 million, an increase of 26% from the comparative period in the prior year, or 81.1% of revenue, compared to 80.7% of revenue for the comparative period in the prior year.
•Net income of $4.0 million, or $0.12 per share, compared to net income of $10.3 million, or $0.31 per share for the comparative period in the prior year.
•Adjusted Net Income1 of $5.0 million, or adjusted net income per share of $0.15, compared to Adjusted Net Income of $1.5 million, or adjusted net income per share of $0.04 for the comparative period in the prior year.
•Annual Recurring Revenue (“ARR”)1 added during the quarter of $10.1 million, after adjusting for the negative impact of $1.2 million given the strengthening of the U.S. dollar relative to foreign currencies. ARR as of September 30, 2023 of $181.8 million, an increase of $37.2 million from $144.6 million at the end of the third quarter of 2022, or an increase of 26%.
•Adjusted EBITDA1 of $4.5 million, representing 9.7% of total revenue, compared to Adjusted EBITDA income of $0.6 million, representing 1.7% of total revenue, for the comparative period in the prior year.
•Cash flow from operating activities of $6.2 million, compared to $1.0 million for the comparative period in the prior year.
•Free Cash Flow1 of $8.4 million, representing 18.0% of total revenue, compared to $0.6 million, representing 1.7% of total revenue, for the comparative period in the prior year.
Third Quarter 2023 Business Highlights
•Docebo is now used by 3,679 customers, an increase from 3,245 customers at the end of September 30, 2022.
•Strong growth in Average Contract Value1, calculated as total Annual Recurring Revenue divided by the number of active customers, an increase from $44,561 as at September 30, 2022 to $49,416 as at September 30, 2023.
•Notable new customer wins in the quarter include a significant deal with a Big 5 US-based global technology leader that will support multiple use cases, including a large external audience.
•Enterprise Holdings is a leading provider of mobility solutions including car rental, fleet management, carsharing, vanpooling, truck rental, luxury rental, retail car sales, and vehicle subscription, as well as travel management and other transportation technology services and solutions, to make travel easier and more convenient for customers. Enterprise Holdings’ subsidiaries and franchisees, together with its affiliate, Enterprise Fleet Management, manage a diverse fleet of 2.1 million vehicles through an integrated network of more than 10,000 fully staffed neighborhood and airport rental locations in more than 90 countries and territories. Privately held by the Taylor family of St. Louis, Enterprise Holdings manages the Enterprise Rent-A-Car, National Car Rental, and Alamo brands. Enterprise selected Docebo for their onboarding, compliance, and professional development learning requirements.
1
•Milwaukee Tool, founded in 1924, is a global leader in delivering innovative solutions to the professional construction trades that increase productivity and safety. They chose to partner with Docebo to address their onboarding, professional development, and organizational learning requirements.
•Founded in 1977, Bojangles, is a North Carolina-born restaurant chain known for its scratch-made Southern food served at approximately 800 locations. They selected Docebo for internal use cases including professional development and onboarding, as well as for the external use case of training franchisees.
•The US Department of Energy deployed Docebo for both external and internal use cases in one of their 17 national research labs servicing more than 5,700 researchers and support staff focused on innovations in nuclear research, renewable energy systems and security solutions.
•Leveraging Docebo’s existing partnership with Amazon Web Services (AWS), the Company is expanding into the Amazon Small Business division to address the external hybrid use case of customer training and sales enablement to help upskill small business owners in North America , as well as expanding into Amazon Global Engineering Services, which selected Docebo for multiple internal use cases including onboarding, professional development, compliance, and leadership training.
•Docebo has entered into an ecosystem participant agreement with EY Global Services Limited (EYGS) to provide Learn LMS and content delivery technology to EY member firms as a part of the EY Skills Foundry solution technology stack. EY Skills Foundry is an end-to end, AI activated platform for companies to manage the entire reskilling process at scale, identifying skill gaps, deploying customized learning journeys and facilitating redeployment to best-fit internal roles.
1 Please refer to “Non-IFRS Measures and Reconciliation of Non-IFRS Measures” section of this press release.
Third Quarter 2023 Results
Selected Financial Measures
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||||||||
2023 | 2022 | Change | Change | 2023 | 2022 | Change | Change | ||||||||||||||||||||||
| $ | $ | $ | % | $ | $ | $ | % | ||||||||||||||||||||||
| Subscription Revenue | 43,588 | 34,279 | 9,309 | 27.2 | % | 123,278 | 95,323 | 27,955 | 29.3 | % | |||||||||||||||||||
| Professional Services | 2,918 | 2,687 | 231 | 8.6 | % | 8,281 | 8,634 | (353) | (4.1) | % | |||||||||||||||||||
| Total Revenue | 46,506 | 36,966 | 9,540 | 25.8 | % | 131,559 | 103,957 | 27,602 | 26.6 | % | |||||||||||||||||||
| Gross Profit Margin | 37,727 | 29,826 | 7,901 | 26.5 | % | 106,316 | 83,286 | 23,030 | 27.7 | % | |||||||||||||||||||
| Percentage of Total Revenue | 81.1 | % | 80.7 | % | 80.8 | % | 80.1 | % | |||||||||||||||||||||
| Net (Loss) Income | 4,047 | 10,274 | (6,227) | (60.6) | % | (382) | 5,418 | (5,800) | (107.1) | % | |||||||||||||||||||
Cash Provided by Operating Activities | 6,215 | 975 | 5,240 | 537.4 | % | 9,488 | 95 | 9,393 | 9,887.4 | % | |||||||||||||||||||
Key Performance Indicators and Non-IFRS Measures
As at September 30, | ||||||||||||||
2023 | 2022 | Change | Change % | |||||||||||
| Annual Recurring Revenue (in millions of US dollars) | 181.8 | 144.6 | 37.2 | 25.7 | % | |||||||||
| Average Contract Value (in thousands of US dollars) | 49.4 | 44.6 | 4.8 | 10.8 | % | |||||||||
| Customers | 3,679 | 3,245 | 434 | 13.4 | % | |||||||||
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Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||||||||
2023 | 2022 | Change | Change | 2023 | 2022 | Change | Change | ||||||||||||||||||||||
| $ | $ | $ | % | $ | $ | $ | % | ||||||||||||||||||||||
| Adjusted EBITDA | 4,512 | 630 | 3,882 | 616.2 | % | 9,777 | (971) | 10,748 | 1,106.9 | % | |||||||||||||||||||
| Adjusted Net Income (Loss) | 4,952 | 1,472 | 3,480 | 236.4 | % | 12,856 | (1,094) | 13,950 | 1,275.1 | % | |||||||||||||||||||
| Adjusted Net Income (Loss) per Share - Basic | 0.15 | 0.04 | 0.11 | 275.0 | % | 0.39 | (0.03) | 0.42 | 1400.0 | % | |||||||||||||||||||
| Adjusted Net Income (Loss) per Share - Diluted | 0.15 | 0.04 | 0.11 | 275.0 | % | 0.39 | (0.03) | 0.42 | 1400.0 | % | |||||||||||||||||||
| Working Capital | 110,938 | 177,258 | (66,320) | (37.4) | % | 110,938 | 177,258 | (66,320) | (37.4) | % | |||||||||||||||||||
| Free Cash Flow | 8,353 | 624 | 7,729 | 1,238.6 | % | 13,113 | (542) | 13,655 | 2,519.4 | % | |||||||||||||||||||
Financial Outlook
Docebo is providing financial guidance for the three months ended December 31, 2023 as follows:
•Total revenue between $48.3 and $48.5 million
•Gross profit margin between 80.5% and 81.5%
•Adjusted EBITDA as a percentage of total revenue between 10.0% to 10.5%
The information in this section is forward-looking. Please see the sections entitled “Non-IFRS Measures and Reconciliation of Non-IFRS Measures” and “Key Performance Indicators” in this press release for how we define “Adjusted EBITDA” and the section entitled “Forward-Looking Information.” A reconciliation of forward-looking “Adjusted EBITDA” to the most directly comparable IFRS measure is not available without unreasonable effort, as certain items cannot be reasonably predicted because of their high variability, complexity and low visibility. Docebo believes that this type of guidance provides useful insight into the anticipated performance of its business.
Conference Call
Management will host a conference call on Thursday, November 9, 2023 at 8:00 am ET to discuss these third quarter results. To access the conference call, please dial 416-764-8624 or 1-888-259-6580 or access the webcast at
https://docebo.inc/events-and-presentations/default.aspx. The unaudited condensed consolidated interim financial statements for the nine months ended September 30, 2023 and Management’s Discussion & Analysis for the same period have been filed on SEDAR+ at www.sedarplus.ca and on EDGAR at www.sec.gov. Alternatively, these documents along with a presentation in connection with the conference call can be accessed online at https://investors.docebo.com.
An archived recording of the conference call will be available until November 16, 2023 and for 90 days on our website. To listen to the recording, please visit the webcast link which can be found on Docebo’s investor relations website at https://docebo.inc/events-and-presentations/default.aspx or call 416-764-8692 or 1-877-674-7070 and enter passcode 944945#.
Forward-Looking Information
This press release contains “forward-looking information” and “forward-looking statements” (collectively, “forward-looking information”) within the meaning of applicable securities laws. Forward-looking information may relate to our future financial outlook and anticipated events or results and may include information regarding our financial position, business strategy, macroeconomic conditions and global economic uncertainty, the war in Ukraine and inflation, including actions of Central banks to contain it, on our business, growth strategies, addressable markets, budgets, operations, financial results, taxes, dividend policy, plans and objectives. Particularly, information regarding our expectations of future results, performance, achievements, prospects or opportunities or the markets in which we operate is forward-looking information.
In some cases, forward-looking information can be identified by the use of forward-looking terminology such as “plans”, “targets”, “expects”, “is expected”, “an opportunity exists”, “budget”, “scheduled”, “estimates”, “outlook”, “forecasts”, “projection”, “prospects”, “strategy”, “intends”, “anticipates”, “believes”, or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “would”, “might” or, “will”, “occur” or “be achieved”, and similar words or the negative of these terms and similar terminology. In addition, any statements that refer to expectations, intentions, projections or other characterizations of future events or circumstances contain forward-looking information. Statements containing forward-looking information are not historical facts but instead represent management’s expectations, estimates and projections regarding future events or circumstances.
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This forward-looking information includes, but is not limited to, statements regarding the Company’s business; the guidance for the three months ended December 31, 2023 in respect of total revenue, gross profit margin and Adjusted EBITDA as a percentage of total revenue discussed under “Financial Outlook” in this press release; future financial position and business strategy; the learning management industry; our growth rates and growth strategies; addressable markets for our solutions; the achievement of advances in and expansion of our platform; expectations regarding our revenue and the revenue generation potential of our platform and other products; our business plans and strategies; and our competitive position in our industry. This forward-looking information is based on our opinions, estimates and assumptions in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we currently believe are appropriate and reasonable in the circumstances. Despite a careful process to prepare and review the forward-looking information, there can be no assurance that the underlying opinions, estimates and assumptions will prove to be correct. Certain assumptions include: our ability to build our market share and enter new markets and industry verticals; our ability to attract and retain key personnel; our ability to maintain and expand geographic scope; our ability to execute on our expansion plans; our ability to continue investing in infrastructure to support our growth; our ability to obtain and maintain existing financing on acceptable terms; our ability to execute on profitability initiatives; currency exchange and interest rates; the impact of inflation and global macroeconomic conditions; the impact of competition; our ability to respond to the changes and trends in our industry or the global economy; and the changes in laws, rules, regulations, and global standards are material factors made in preparing forward-looking information and management’s expectations.
Forward-looking information is necessarily based on a number of opinions, estimates and assumptions that, while considered by the Company to be appropriate and reasonable as of the date of this press release, are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information, including but not limited to:
•the Company’s ability to execute its growth strategies;
•the impact of changing conditions in the global corporate e-learning market;
•increasing competition in the global corporate e-learning market in which the Company operates;
•fluctuations in currency exchange rates and volatility in financial markets;
•changes in the attitudes, financial condition and demand of our target market;
•the Company’s ability to operate its business and effectively manage its growth under evolving macroeconomic conditions, such as high inflation and recessionary environments;
•developments and changes in applicable laws and regulations;
•fluctuations in the length and complexity of the sales cycle for our platform, especially for sales to larger enterprises;
•issues in the use of AI in our platform may result in reputational harm or liability; and
•such other factors discussed in greater detail under the “Risk Factors” section of our Annual Information Form dated March 8, 2023 (“AIF”), which is available under our profile on SEDAR+ at www.sedar.com.
Our guidance for the three months ended December 31, 2023 in respect of total revenue, gross profit margin, and Adjusted EBITDA as a percentage of total revenue is subject to certain assumptions and associated risks as stated under “Forward-Looking Statements,” and in particular the following:
•our ability to win business from new customers and expand business from existing customers;
•the timing of new customer wins and expansion decisions by our existing customers;
•maintaining our customer retention levels, and specifically, that customers will renew contractual commitments on a periodic basis as those commitments come up for renewal, at rates consistent with our historical experience; and
•with respect to gross profit margin and Adjusted EBITDA as a percentage of revenue, our ability to contain expense levels while expanding our business.
If any of these risks or uncertainties materialize, or if the opinions, estimates or assumptions underlying the forward-looking information prove incorrect, actual results or future events might vary materially from those anticipated in the forward-looking information. The opinions, estimates or assumptions referred to above and described in greater detail in the “Summary of Factors Affecting our Performance” section of our MD&A for the three and nine months ended September 30, 2023 and in the “Risk Factors” section of our AIF, should be considered carefully by prospective investors.
Although we have attempted to identify important risk factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other risk factors not presently known to us or that we presently believe are not material that could also cause actual results or future events to differ materially from those expressed in such forward-looking information. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. No forward-looking statement is a guarantee of future results. Accordingly, you should not place undue reliance on forward-looking information, which speaks only as of the date
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made. The forward-looking information contained in this press release represents our expectations as of the date specified herein, and are subject to change after such date. However, we disclaim any intention or obligation or undertaking to update or revise any forward-looking information whether as a result of new information, future events or otherwise, except as required under applicable securities laws.
All of the forward-looking information contained in this press release is expressly qualified by the foregoing cautionary statements.
Additional information relating to Docebo, including our AIF, can be found on SEDAR+ at www.sedar.com.
About Docebo
Docebo is redefining the way enterprises leverage technology to create and manage content, deliver training, and measure the business impact of their learning programs. With Docebo’s end-to-end learning platform, organizations worldwide are equipped to deliver scaled, personalized learning across all their audiences and use cases, driving growth and powering their business.
For further information, please contact:
Mike McCarthy
Vice President - Investor Relations
(214) 830-0641
mike.mccarthy@docebo.com
Results of Operations
The following table outlines our unaudited condensed consolidated interim statements of income (loss) and comprehensive income (loss) for the following periods:
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||
| (In thousands of US dollars, except per share data) | 2023 | 2022 | 2023 | 2022 | |||||||||||||
| $ | $ | $ | $ | ||||||||||||||
| Revenue | 46,506 | 36,966 | 131,559 | 103,957 | |||||||||||||
| Cost of revenue | 8,779 | 7,140 | 25,243 | 20,671 | |||||||||||||
| Gross profit | 37,727 | 29,826 | 106,316 | 83,286 | |||||||||||||
| Operating expenses | |||||||||||||||||
| General and administrative | 8,317 | 7,824 | 25,218 | 22,796 | |||||||||||||
| Sales and marketing | 16,221 | 15,523 | 51,041 | 44,150 | |||||||||||||
| Research and development | 10,271 | 6,105 | 26,456 | 18,401 | |||||||||||||
| Share-based compensation | 1,845 | 1,000 | 4,438 | 3,624 | |||||||||||||
Foreign exchange (gain) loss | (3,092) | (10,213) | 1,365 | (11,676) | |||||||||||||
| Depreciation and amortization | 1,056 | 564 | 2,587 | 1,731 | |||||||||||||
| 34,618 | 20,803 | 111,105 | 79,026 | ||||||||||||||
Operating income (loss) | 3,109 | 9,023 | (4,789) | 4,260 | |||||||||||||
| Finance income, net | (1,933) | (1,325) | (6,506) | (1,677) | |||||||||||||
| Other (income) loss | (2) | (21) | 181 | (64) | |||||||||||||
Income before income taxes | 5,044 | 10,369 | 1,536 | 6,001 | |||||||||||||
Income tax expense | 997 | 95 | 1,918 | 583 | |||||||||||||
Net income (loss) for the period | 4,047 | 10,274 | (382) | 5,418 | |||||||||||||
Other comprehensive loss (income) | |||||||||||||||||
| Item that may be reclassified subsequently to income: | |||||||||||||||||
Exchange loss (gain) on translation of foreign operations | 3,776 | 10,690 | (592) | 12,633 | |||||||||||||
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Comprehensive income (loss) | 271 | (416) | 210 | (7,215) | |||||||||||||
| (Loss) income per share - basic | 0.12 | 0.31 | (0.01) | 0.16 | |||||||||||||
| (Loss) income per share - diluted | 0.12 | 0.30 | (0.01) | 0.16 | |||||||||||||
| Weighted average number of common shares outstanding - basic | 32,474,975 | 33,044,250 | 32,907,374 | 33,024,887 | |||||||||||||
| Weighted average number of common shares outstanding - diluted | 33,513,101 | 34,069,688 | 32,907,374 | 34,032,666 | |||||||||||||
Key Statement of Financial Position Information
(In thousands of US dollars, except percentages) | September 30, 2023 | December 31, 2022 | Change | Change | |||||||||||||
| $ | $ | $ | % | ||||||||||||||
Cash and cash equivalents | 170,648 | 216,293 | (45,645) | (21.1) | % | ||||||||||||
Total assets | 254,175 | 283,669 | (29,494) | (10.4) | % | ||||||||||||
Total liabilities(1) | 118,475 | 91,458 | 27,017 | 29.5 | % | ||||||||||||
Total long-term liabilities | 7,648 | 7,096 | 552 | 7.8 | % | ||||||||||||
(1) On May 15, 2023, the Company announced the commencement of a normal course issuer bid (“NCIB”) to repurchase and cancel up to 1,650,672 of its common shares. In connection with the NCIB, the Company also entered into an automatic share purchase plan ("ASPP") with a third-party broker for purposes of allowing the Company to purchase common shares under the NCIB during the Company's self-imposed trading blackout periods. Under the ASPP, the broker is authorized to repurchase common shares during blackout periods, without consultation with the Company, on predefined terms, including share price, time period and subject to other limitations imposed by the Company and subject to rules and policies of the TSX and applicable securities laws, such as a daily purchase restriction. A liability representing the maximum amount that the Company could be required to pay the designated broker under the ASPP of $12.8 million was recorded as at September 30, 2023.
Non-IFRS Measures and Reconciliation of Non-IFRS Measures
This press release makes reference to certain non-IFRS measures including key performance indicators used by management and typically used by our competitors in the software-as-a-service (“SaaS”) industry. These measures are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS and are therefore not necessarily comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management’s perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. These non-IFRS measures are used to provide investors with alternative measures of our operating performance and liquidity and thus highlight trends in our business that may not otherwise be apparent when relying solely on IFRS measures. We also believe that securities analysts, investors and other interested parties frequently use non-IFRS measures, including SaaS industry metrics, in the evaluation of companies in the SaaS industry. Management also uses non-IFRS measures to facilitate operating performance comparisons from period to period, the preparation of annual operating budgets and forecasts and to determine components of executive compensation. The non-IFRS measures referred to in this press release include “Annual Recurring Revenue”, “Average Contract Value ”, “Adjusted EBITDA”, “Adjusted Net Income (Loss)”, “Adjusted Net Income (Loss) per Share - Basic and Diluted” “Working Capital” and “Free Cash Flow”.
Key Performance Indicators
We recognize subscription revenues ratably over the term of the subscription period under the provisions of our agreements with customers. The terms of our agreements, combined with high customer retention rates, provides us with a significant degree of visibility into our near-term revenues. Management uses a number of metrics, including the ones identified below, to measure the Company’s performance and customer trends, which are used to prepare financial plans and shape future strategy. Our key performance indicators may be calculated in a manner different than similar key performance indicators used by other companies.
•Annual Recurring Revenue: We define Annual Recurring Revenue as the annualized equivalent value of the subscription revenue of all existing contracts (including Original Equipment Manufacturer (“OEM”) contracts) as at the date being measured, excluding non-recurring revenues from implementation, support and maintenance fees. Our customers generally enter into one to three year contracts which are non-cancellable or cancellable with penalty. Accordingly, our calculation of Annual Recurring Revenue assumes that customers will renew the contractual commitments on a periodic basis as those commitments come up for renewal. Subscription agreements may be subject to price increases upon renewal reflecting both inflationary increases and the additional value provided by our solutions. In addition to the expected increase in subscription revenue from price increases over time, existing
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customers may subscribe for additional features, learners or services during the term. We believe that this measure provides a fair real-time measure of performance in a subscription-based environment. Annual Recurring Revenue provides us with visibility for consistent and predictable growth to our cash flows. Our strong total revenue growth coupled with increasing Annual Recurring Revenue indicates the continued strength in the expansion of our business and will continue to be our focus on a go-forward basis.
•Average Contract Value: Average Contract Value is calculated as total Annual Recurring Revenue divided by the number of active customers.
Annual Recurring Revenue and Average Contract Value as at September 30 was as follows:
2023 | 2022 | Change | Change % | ||||||||||||||
| Annual Recurring Revenue (in millions of US dollars) | 181.8 | 144.6 | 37.2 | 25.7% | |||||||||||||
| Average Contract Value (in thousands of US dollars) | 49.4 | 44.6 | 4.8 | 10.8% | |||||||||||||
Adjusted EBITDA
Adjusted EBITDA is defined as net income excluding net finance income, depreciation and amortization, income taxes, share-based compensation and related payroll taxes, other income, foreign exchange gains and losses, loss on disposal of assets (if applicable), acquisition related compensation, transaction related expenses and restructuring costs.
The IFRS measure most directly comparable to Adjusted EBITDA presented in our financial statements is net (loss) income.
The following table reconciles Adjusted EBITDA to net income (loss) for the periods indicated:
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||
(In thousands of US dollars) | 2023 | 2022 | 2023 | 2022 | |||||||||||||
| $ | $ | $ | $ | ||||||||||||||
Net income (loss) | 4,047 | 10,274 | (382) | 5,418 | |||||||||||||
Finance income, net(1) | (1,933) | (1,325) | (6,506) | (1,677) | |||||||||||||
Depreciation and amortization(2) | 1,056 | 564 | 2,587 | 1,731 | |||||||||||||
Income tax expense | 997 | 95 | 1,918 | 583 | |||||||||||||
Share-based compensation(3) | 1,845 | 1,000 | 4,438 | 3,745 | |||||||||||||
Other income(4) | (2) | (21) | 181 | (64) | |||||||||||||
Foreign exchange (gain) loss(5) | (3,092) | (10,213) | 1,365 | (11,676) | |||||||||||||
Acquisition related compensation(6) | 1,258 | 256 | 2,246 | 868 | |||||||||||||
Transaction related expenses(7) | 271 | — | 1,081 | 101 | |||||||||||||
Restructuring(8) | 65 | — | 2,849 | — | |||||||||||||
| Adjusted EBITDA | 4,512 | 630 | 9,777 | (971) | |||||||||||||
| Adjusted EBITDA as a percentage of total revenue | 9.7 | % | 1.7 | % | 7.4 | % | (0.9) | % | |||||||||
(1)Finance income, net, is primarily related to interest income earned on the net proceeds from the IPOs as the funds are invested in highly liquid short-term interest-bearing marketable securities which is offset by interest expenses incurred on lease obligations, and contingent consideration.
(2)Depreciation and amortization expense is primarily related to depreciation expense on right-of-use assets (“ROU assets”), property and equipment and acquired intangible assets.
(3)These expenses represent non-cash expenditures recognized in connection with the issuance of share-based compensation to our employees and directors and cash payroll taxes paid on gains earned by option holders when stock options are exercised.
(4)Other (income) expense is primarily comprised of rental income from subleasing office space.
(5)These non-cash gains and losses relate to foreign exchange translation.
(6)These costs represent the earn-out portion of the consideration paid to the vendors of acquired businesses that is associated with the achievement of certain performance and employment obligations.
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(7)These expenses relate to professional, legal, consulting, accounting and other fees related to acquisition activities that would otherwise have not been incurred and are not considered an expense indicative of continuing operations.
(8) There was a reduction in workforce during the second quarter of 2023 that resulted in severance payments to employees. Certain functions and the associated management structure were reorganized to realize synergies and ensure organizational agility.
Adjusted Net (Loss) Income and Adjusted (Loss) Income per Share - Basic and Diluted
Adjusted Net (Loss) Income is defined as net (loss) income excluding amortization of intangible assets, share-based compensation and related payroll taxes, acquisition related compensation, transaction related expenses, restructuring costs, foreign exchange gains and losses, and income taxes.
Adjusted Net (Loss) Income per share - basic and diluted is defined as Adjusted Net (Loss) Income divided by the weighted average number of common shares (basic and diluted).
The IFRS measure most directly comparable to Adjusted Net Income (Loss) presented in our financial statements is net (loss) income.
The following table reconciles net (loss) income to Adjusted Net (Loss) Income for the periods indicated:
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||
| (In thousands of US dollars) | 2023 | 2022 | 2023 | 2022 | |||||||||||||
| $ | $ | $ | $ | ||||||||||||||
Net income (loss) for the period | 4,047 | 10,274 | (382) | 5,418 | |||||||||||||
| Amortization of intangible assets | 381 | 80 | 692 | 252 | |||||||||||||
| Share-based compensation | 1,845 | 1,000 | 4,438 | 3,745 | |||||||||||||
| Acquisition related compensation | 1,258 | 256 | 2,246 | 868 | |||||||||||||
| Transaction related expenses | 271 | — | 1,081 | 101 | |||||||||||||
Restructuring | 65 | — | 2,849 | — | |||||||||||||
Foreign exchange (gain) loss | (3,092) | (10,213) | 1,365 | (11,676) | |||||||||||||
Income tax (recovery) expense related to adjustments(1) | 177 | 75 | 567 | 198 | |||||||||||||
| Adjusted net income (loss) | 4,952 | 1,472 | 12,856 | (1,094) | |||||||||||||
| Weighted average number of common shares - basic | 32,474,975 | 33,044,250 | 32,907,374 | 33,024,887 | |||||||||||||
| Weighted average number of common shares - diluted | 33,513,101 | 34,069,688 | 32,907,374 | 34,032,666 | |||||||||||||
| Adjusted net income (loss) per share - basic | 0.15 | 0.04 | 0.39 | (0.03) | |||||||||||||
| Adjusted net income (loss) per share - diluted | 0.15 | 0.04 | 0.39 | (0.03) | |||||||||||||
(1) This line item reflects income tax expense on taxable adjustments using the tax rate of the applicable jurisdiction.
Working Capital
Working Capital as at September 30, 2023 and 2022 was $110.9 million and $177.3 million, respectively. Working Capital is defined as current assets, excluding the current portion of the net investment in finance lease and contract costs, minus current liabilities, excluding borrowings, if any, and the current portion of contingent consideration and lease obligations. Working Capital is not a recognized measure under IFRS. See “Non-IFRS Measures and Reconciliation of Non-IFRS Measures”.
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The following table represents the Company’s working capital position as at September 30, 2023 and 2022:
2023 | 2022 | ||||||||||
| $ | $ | ||||||||||
| Current assets | 224,664 | 252,216 | |||||||||
| Less: Current portion of net investment in finance lease | (81) | (172) | |||||||||
| Less: Current portion of contract acquisition costs | (5,484) | (2,210) | |||||||||
| Current assets, net of net investment in finance lease and contract acquisition costs | 219,099 | 249,834 | |||||||||
| Current liabilities | 110,827 | 74,997 | |||||||||
| Less: Current portion of contingent consideration | (1,153) | (1,168) | |||||||||
| Less: Current portion of lease obligations | (1,513) | (1,253) | |||||||||
| Current liabilities, contingent consideration and lease obligations | 108,161 | 72,576 | |||||||||
| Working capital | 110,938 | 177,258 | |||||||||
Free Cash Flow
Free Cash Flow is defined as cash used in operating activities less cash used for purchases of property and equipment and capitalized internal-use software costs, plus non-recurring expenditures such as the payment of acquisition-related compensation, the payment of transaction-related costs, and the payment of restructuring costs. Free Cash Flow is not a recognized measure under IFRS. See “Non-IFRS Measures and Reconciliation of Non-IFRS Measures”. The IFRS measure most directly comparable to Free Cash Flow presented in our financial statements is cash flow used in operating activities.
The following table reconciles our cash flow used in operating activities to Free Cash Flow:
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||
(In thousands of US dollars) | 2023 | 2022 | 2023 | 2022 | |||||||||||||
| $ | $ | $ | $ | ||||||||||||||
Cash flow from operating activities | 6,215 | 975 | 9,488 | 95 | |||||||||||||
| Purchases of property and equipment | (120) | (351) | (386) | (860) | |||||||||||||
| Acquisition related compensation paid | — | — | 189 | 82 | |||||||||||||
| Transaction related expenses paid | 551 | — | 991 | 141 | |||||||||||||
Restructuring costs paid | 1,707 | — | 2,831 | — | |||||||||||||
Free cash flow | 8,353 | 624 | 13,113 | (542) | |||||||||||||
| Free cash flow as a percentage of total revenue | 18.0 | % | 1.7 | % | 10.0 | % | (0.5) | % | |||||||||
9
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
I, Claudio Erba, Chief Executive Officer of Docebo Inc., certify the following:
1. Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Docebo Inc. (the “issuer”) for the interim period ended September 30, 2023.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
4. Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.
5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings
1.designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
a.material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
b.information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
2.designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.
5.1 Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is Internal Control – Integrated Framework (COSO 2013 Framework) published by The Committee of Sponsoring Organizations of the Treadway Commission.
5.2 N/A
5.3 N/A
6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on July 1, 2023 and ended on September 30, 2023 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.
Date: November 9, 2023
/s/ Claudio Erba
_______________________
Claudio Erba
Chief Executive Officer
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
I, Sukaran Mehta, Chief Financial Officer of Docebo Inc., certify the following:
1. Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Docebo Inc. (the “issuer”) for the interim period ended September 30, 2023.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
4. Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.
5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings
1.designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
a.material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
b.information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
2.designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.
5.1 Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is Internal Control – Integrated Framework (COSO 2013 Framework) published by The Committee of Sponsoring Organizations of the Treadway Commission.
5.2 N/A
5.3 N/A
6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on July 1, 2023 and ended on September 30, 2023 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.
Date: November 9, 2023
/s/ Sukaran Mehta
_______________________
Sukaran Mehta
Chief Financial Officer