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EQUITY RESEARCH
September 13, 2024 Earnings Update
DOCEBO INC.
Highlights From Docebo’s Annual User Conference
Our Conclusion
Docebo hosted its annual Docebo Inspire user conference in Dallas, Texas
this week. The event was well attended, with a turnout of 700+, nearly
double that in 2023. Newly appointed CEO Alessio Artuffo led the investor
update briefing, providing an overview of his vision for the company: to be a
platform provider for all variations of learning. We regard Mr. Artuffo as
potentially more open to strategic M&A than his predecessor, and with a net
cash balance of $82MM and solid cash flow generation, we foresee upside to
our estimates. The event reaffirmed our investment thesis; we like Docebo’s
large and growing total addressable market (TAM), improving profitability and
healthy balance sheet. We retain our Outperformer rating, but increase our
price target to $52 (from $44) as we adjust our multiple to 6.0x sales, a
one-turn premium to R40 peers given DCBO’s strong margin profile and
potential upside from M&A.
Key Points
Alessio Artuffo Appointed Chief Executive Officer And Board Member:
On Tuesday, the company announced the appointment of current interim
CEO Alessio Artuffo to the role of CEO and his appointment as a member of
the Board. We view this appointment as expected. Mr. Artuffo had been
serving as interim CEO since March 2024, following Claudio Erba’s transition
to Chief Innovation Officer, and Mr. Artuffo has been with the company since
2012. Mr. Artuffo will continue to serve as the company’s President. Since
Mr. Artuffo was named interim CEO in March there have been several other
management changes at Docebo, including a New Chief Marketing Officer,
Alex Asnovich, a new SVP Customer Experience, Katie Bonilla, and a new
EVP Corporate Development and Partnerships, Travis Burke.
Refined Go-to-market Strategy: Docebo has made several changes to the
organization to become enterprise-focused, primarily centered around
upskilling its sales organization. The company rolled out a new pricing model
earlier this year (announced in Q2), and is now pricing its offerings in three
tiers vs. its prior la carte model. Management noted that it has seen strong
indicators from customers so far, and 25% of pipeline customers who were
previously offered the prior pricing model have converted to the new pricing
tiers. Management expects the new pricing model will drive an increase in
average contract value (ACV), potentially providing an uplift of 5%-10%
following a six- to nine-month deal cycle.
Targeting Rule Of 40: Management’s long-term goal is to be a Rule-of-40
company with a growth-first mindset, balanced with scaling free cash flow
(FCF) contribution. The company is well positioned for this target with a FCF
margin of 17% YTD and we model SaaS growth of 18.6% for 2024E. We
foresee upside as Docebo continues to scale, with the company currently
trading in line with current Rule-of-40 peers (Rule of 40 between 25%-39%),
and at a discount of 2.8x if the company can move up to the next level of
Rule-of-40 growth (40%+).