Q1/24: MACRO AND CUSTOMER SALE AFFECT 2024 OUTLOOK
THE TD COWEN INSIGHT
Docebo posted solid results in the quarter demonstrating better-than-expected operating leverage. Newly introduced 2024 guidance, however, is falling short of expectations due to macro uncertainty and the sale of a large customer. We would continue to be buyers on share price weakness.
Event
Docebo reported Q1/24 results.
Conference Call: 8:00 a.m. ET; 1-646-960-0169 or 1-888-440-6849. Conference ID: 8722408
Impact: SLIGHTLY NEGATIVE
Revenue slightly ahead, beat on EBITDA. Revenue of $51.4mm was up 24.0% y/y, slightly ahead of expectations of $51.2mm (TD)/$51.1mm (consensus). Subscription revenue of $47.9mm was up 23.3% y/y, which represented 93% of total revenue. Professional Services revenue of $3.5mm was up 34.3% y/y. EBITDA of $7.5mm, or a 14.5% margin, was ahead of expectations of $6.9mm (TD)/ $6.7mm (consensus). Docebo generated $9.2mm of free cash flow to end the quarter with $80.6mm in cash.
Docebo added $6.9mm of ARR in the quarter to end it with $201.2mm. This was slightly below our expectations and may be due to the macro softening.
The company continues to execute well on its enterprise strategy as evidenced by ACV growing 11.6% y/y to $52,492. 74 new customers were added in the quarter to 3,833 customers. Enterprise customers grew 36% y/y and accounted for ~40% of gross ARR generated in the quarter.
F2024 guidance light due to macro and customer sale. Docebo expects F2024 total revenue growth between 17.0% to 18.5%, below expectations of ~23%. EBITDA margin is expected to be between 14.5% to 15.5%, in-line with expectations of ~15%.
Management highlighted that the annual guidance is negatively impacted by the sale of
a large customer to an acquiring entity that has its own LMS. This customer contributed seven-figures of ARR, which is expected to come out in Q2. While this does reduce Docebo's financial outlook, it does not have any bearing on our thesis.
Macro uncertainty was also highlighted in the past couple of months with SMB and lower mid-market customers optimizing their seats as part of their renewal cycles.
Government also seems to be tracking well with a number of wins and FedRAMP certification on track. The pipeline with its gov partners continue to build, including in the private sector. We believe this partner is a top-tier partner; expanding the relationship to the private sector could be meaningful. Considering government spending could be counter- cyclical, increased exposure here could offset macro weakness.