CIBC Part 2 August 6, 2020 Earnings Update
DOCEBO, INC.
Strong Growth As Customers Focus On E-Learning
Our Conclusion
Docebo reported subscription growth of 55% Y/Y, with the company’s elearning solutions well positioned in the current environment. With another
OEM agreement announced and sales hires completed, we see Docebo as
well positioned to continue to grow in the current environment. We retain our
Outperformer rating and increase our price target to $54 (prior $48) as we
value Docebo in line with Rule-of-40 peers.
Key Points
Subscription Growth: Docebo’s core subscription revenue of $13.4 million
grew 55% Y/Y and was above our estimate of $12.8 million. Growth drivers
included increasing customer counts and increased average contract value,
which was up 25% Y/Y as the company transitions to an enterprise customer
base. Annual Recurring Revenue of $57 million was up 10% Q/Q from
$52.1MM and up 55% Y/Y.
Significant Customer Wins Announced: Docebo announced a significant
customer in the quarter, with Lego using the solution for teacher education.
Docebo also announced the expansion of the Walmart agreement, with
Walmart Media Group now using Docebo to train advertising agencies.
Recall that the original Walmart agreement was announced last quarter.
Docebo’s MD&A also notes a significant enterprise customer that was signed
post Q2. We assume revenue from this large customer will start to roll
through in Q3 as the customer goes live.
OEMs A Significant Opportunity: Ceridian, Docebo’s first OEM partner, is
now Docebo’s largest customer. The company also signed an additional
OEM partnership in Q2 with U.K. HCM provider MHR. MHR is the largest
payroll provider in the U.K., providing Docebo additional inroads within the
U.K. market (especially the U.K. government). We believe implementation
will take roughly six months, down significantly from the 18-month Ceridian
implementation given the learnings from the first OEM agreement. We see
OEM agreements as a capital-efficient way to reach a broader customer
base, with management noting over 10 potential OEMs in the pipeline.
Positive CFO In Q2, But Expect H2 Investments: Adjusted EBITDA came
in at -$0.9 million in the quarter (-6.2% margin), above consensus estimates
of -$2.1MM (-16.0%). Stronger margins were a result of higher revenue and
improvements to gross margin and G&A spending (lower travel, etc.). We
expect spending to ramp back up in H2, with Docebo looking to hire ~50 staff
(sales/R&D) to execute on the current opportunity.
Changes To Our Model: We have increased our F20 and F21 revenue
growth slightly to reflect the current environment. We are now expecting F21
revenue of $80 million (prior $77 million) and an adjusted EBITDA loss of
($0.7) million (unchanged). We continue to expect cash flow breakeven in
Q2/21.