Docebo Inc. (DCBO) Earnings Call Transcript & Summary

Thank you. Good morning everyone and welcome to the Just Evo's second quarter 2026 earnings call. All participants are currently in a listen-only mode. We will open the line for a question and answer session momentarily. Analysts can ask questions by pressing star one on their telephone keypad. And if you would like to withdraw your question, again, press star one. We ask that analysts please limit themselves to two questions and return to the queue for any follow-ups. Right now, I'd like to turn the call over to Dusty Bowes, Vice President of Investor Relations, Mike McCarthy. Please go ahead, Mike.

Thank you, Krista. Earlier this morning, Docebo issued its Q2 2026 results. The press release, which included a link to management's prepared remarks in our quarterly investor slide deck, were all posted to our investor relations website. This morning's call will allow participants to ask questions about our results and the written commentary that management provided this morning. begin this morning's Q&A, though, Chabot would like to remind listeners that certain information discussed may be forward-looking in nature. Such forward-looking information reflects the company's current views with respect to future events. Any such information is subject to risks, uncertainties, and assumptions that could cause actual results to differ materially from those of in the forward-looking statements. For more information on the risks, uncertainties, and assumptions relating to forward-looking statements, please refer to Docebo's public findings, which are available on CDAR and EDGAR. During the call, we will reference certain non-IFRS financial measures. Although we believe these measures provide useful supplemental information about financial performance, they are not recognized measures and do not have standardized means under IFRS. Please see our MD&A for additional information regarding our non-IFRS financial measures, including reconciliations to the nearest IFRS measures. Please note that unless otherwise stated, all references to any financial figures are in U.S. dollars. Now, I'd like to turn the call over to Dr. Chabot's CEO, Alessio Artufo, and our CFO, Brandon Farmer. Christine, you can open up the line.

If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. Your first question comes from Robert Young with Canaccord Genuity. Please go ahead.

Thanks, good morning. First place, I'm sure there's lots of questions on this forward deployed engineer model, so place I'd like to start. going to work alongside the existing professional services motion what's the impact you anticipate on revenue and margins both gross and EBITDA and then I think you said that you're hiring FDEs and so where are you in the process of building out that FD motion?.

Good morning, Rob. So you are correct. We are starting with hiring a foundational SD that is intended so that we can build the playbook before we scale that practice further. way we think is fairly straightforward. We think that on top of our upcoming release GA of Agent Hub and Enterprise Knowledge, both planned in the early fall. we are going to build custom agents workloads that aim to solve for vertical use cases, right? very specific needs that our top customers to begin with have. Think about solving for specific operational challenges across QSR, healthcare, financial services. We know that these organizations have a data challenge. Everyone has an integration challenge. Everyone has a data discoverability and the limited challenge. And we are going to have these, these, our FDEs help with creating these custom workflows on top of our technology. Now, how does this compound? How does this create greater value? Our plan is to abstract these agents at a greater product level and make those agents available more broadly to a broader audience. In terms of monetization, look, we are going, live with Agent Hub and Knowledge Enterprise in the fall and we'll update you after that time.

Okay, that's all very helpful. I mean, where is this going to fall inside of the income statement on the cost side? Is it going to be something bundled in? Is it going to impact your gross margins or is it something that's going to be part of your sales motion? I'm trying to understand where it'll impact the margin structure.

Rob, when we start to hire them, it's going to be before the product is released. At the start it will be more of an R&D type cost. These are going to work with our top 10, top 20 customers. You know, as we think about scaling, charging professional services, this adding usage to our AI, whether that's through credits or fixed price, you know, that's where it flips to gross margin. So it really depends on, you know, when does it get released? When do we start monetizing? So it's either going to be.

be an R&D or COGS cost. OK, and then second question, just on the confidence in the second half acceleration of ARR. Maybe we could talk about where that's specifically coming from, what gets you the most excited, and then if you could touch on seasonality for the FedRAMP government opportunity alongside that. That'd be helpful. And I'll pass the line. Thanks.

Yes, so let me talk a bit about the underlying ARR acceleration. This is the second quarter in a row where we have a re-acceleration and for sure we're super pleased with that. Rob, if you recall, in November of 2020, 2025 during a conference call, we are sure to 2026 as the year of the enterprise. And that's the view into 2026 and had a point of view that the initiatives we were taking on the product and as well as, you know, broadly execution we're headed in the direction where we thought that 2026, we're going to show the results of the work we were doing. When I impact that, I think it's a three vectors, there is overall execution. where we made investments across the board over the past several years. There was a story of product with the acquisition of 365 and the acquisition of Zive, both. And frankly, a re-acceleration of shipping features in our core product as well. It's not only a story of buying technologies. And then to characterize growth and reacceleration, I always like to kind of separate our partner motion because it is a subcategory of execution, but it truly has become important. The large majority of our enterprise pipeline, roughly 80%. has a partner involved in some fashion, whether it's a wholesale fashion, whether it's an implement fashion, and most times it's a hybrid of both. Shout out to partners like Deloitte and new partners like an IIT that are really embedded with our org and we work super well together. So that story of re-acceleration is, I would say, it hinges on several factors. It's broad-based, right? It's showing in that new, it's showing in expansion, it's showing international. And I like that very much because these multiple growth factors don't, you know, rely on just one segment doing all the work. And as far as the confidence for the future, you know, it's very high. We're extremely pleased with the growth of our pipeline. We look at our pipeline in terms of, you know, deals that are – significant in material in size about 500k and we think it's a really great time at the Chabot and yes. very very excited about the coming quarters now as far as federal pipeline and quarter three Look, we think about government more broadly than just federal. We think about government as a combination of our success in state, local as well as federal. And quarter three is a heavy federal quarter. But we don't disclose what's going to happen in the next quarter. We are just extremely pleased with the pipeline buildup and execution of our teams. Thanks for taking all the questions. Yes, thank you, Rob.

Your next question comes from the line of Ryan McDonald with Needham & Company.

All right, thanks for taking my questions. Congrats on a great quarter. Alessia, I wanted to ask about the investments and decided to move into healthcare here. Obviously, interesting, large opportunity, highly regulated industry. And I feel like there are some sort of correlations to federal government. And obviously we've had those investments over the last couple of years, and that's still sort of starting to generate a return or hit an inflection point. So can you just talk about sort of, you know, the decision to move into healthcare, you know, how you think about the timeline for the return on the investments you're going to make there and where you see a gap within healthcare organizations that you think Docebo can fill.

Yes, awesome. Brian, your premise in seeing some parallels with the investments that we made broadly into government, I think it's very astute. I agree with you. There are several parallels. First, let me ground us in the context of the healthcare market as we have studied. We see this as a roughly $3 billion TAM over a roughly $30 billion corporate learning market that we already operate in. We already have an important base of healthcare customers, call it roughly $10 million of ARR. And we've acquired the $10 million of ARR, notwithstanding certain gaps of knowledge and product that we are now much more educated about. And so I would say that similarly to what happened in the past with the state and local education market, we have operated opportunistically, but we have not been extremely focused and strategic in the way we've addressed this market. Now, as we are a much more mature company, as we have matured our GTM Engine, we believe that as an horizontal player, every opportunity we have to become more efficient in our GTM Engine and more efficient in the way we address customers needs and build products for targeted audiences, the better off we're going to be. We're going to be better in our success of adoption. we're going to be better in our win rates. And so it was a no brainer to start with healthcare because we believe the distance between where we are today capability wise and the optimal scenario is very much in reach and we don't have to do you know years of work to be in an optimal scenario to double our win rate i think we have you know months of work as opposed to years Now, healthcare is a broad definition. And depending on how you slice and dice the verticals, we already have a view that is a multi-year view after which we would talk life sciences. Life sciences carries along a bit more complexity in terms of classification. technical requirements which we are already partially addressing, but we're preparing ourselves over the next 12-24 months to go even deeper. What else can I tell you? I think this is a great market. We're already winning in it. I mentioned it. It's a motion where we're going to invest in products, we're going to invest in the partner ecosystem. We have partners that are really great in the healthcare industry and we work closely with them. And also, you know, when I mentioned the content network, healthcare is also a story of content, our technology being a tool such that you can now aggregate multiple content partners in and we can augment that part is going to be important for our healthcare customers. And listen, one further validation point, we know that in healthcare alone, there are organizations that are very sizable, frankly, in AI, they are comparable to the CHEBO in that range, all they do is healthcare, healthcare learning. And just that validates that if we approach this deeply and become more specialized, which I think is very much in reach, we have an additional.

show a little better. So, very excited about it. Yes, super helpful context and color there. And then, you know, maybe as a follow-up. So, as we think about your sort of, let's call it the increasing sort of verticalization of the platform, you know, with specific verticals where you've seen some big opportunities, can you just talk about how you're seeing or viewing the balance of sort of the pipeline of opportunities for growth sort of within some of your, let's call it your core markets or sort of more to more horizontal applications versus moving more into vertically specific applications. Is, is the healthcare expansion being done with sort of a view of, of more of a, let's call it a shorter runway or limited opportunity within sort sort of broader enterprise? Or is this just based off of seeing some really nice early success, see a product market fit for the solution, and so naturally going after a new opportunity? Thanks.

Yes, you know, I think a bit the opposite of that. Again, we built the Chebo up to where it is today as a horizontal player with the exception government, which we started specializing in a while, we've always recognized that there is a greater benefit in the earlier stages of company as being a generalist. As you grow up as a business, you realize that the generalist categorization to become an impediment to healthy growth. And it shows in every function of the company. It shows also in the way we support the customers. I'm a big believer that in order to do a great job with customers, you need to understand their business deeply and you need to address And when you know you have just for a sheer example, somebody in a sales executive capacity that at 9 a.m. in the morning has a conversation with a manufacturer, you know, and at 11 a.m. with a security company and at 2 p.m. with a healthcare organization, they're going to request their needs deeply. Having that depth of knowledge of the business problems that each of these carry is incredibly hard to scale. And so I believe that it's incumbent upon us as we continue to mature to taking the most valuable verticals and creating emotion around it and the caveat there is, is there opportunity to also verticalize the product and create capabilities that go beyond the lingo and the jargon. And if there really is the combination of that product build alongside the knowledge creates an unstoppable force and an absolute differentiation in the market. So we don't see it as a need to find a new pocket. rather as a desire to win at a higher rate and be seen more as a leader in those verticals.

Thanks, Alyssa. Your next question comes from the line of Erin Kyle with CIBC.

Go ahead. Hi, good morning and thanks for taking the questions. Alessio, maybe a question for you on the skills side. You know, you've described it as a bit of a second door into new logos and a retention lever. So maybe in Q2, can you speak to how many enterprise deals were influenced by having that skills capability? And do you see it lifting your win rates versus a year ago? Yes.

Sure, thank you for the question. First, let me tell you, we are beyond pleased with the progress that we've made so far in the integration process. of 365 talents. It's like all integrations and acquisitions, there are always challenges and we don't shy away from those, but the results speak for themselves. We are six months in, frankly, and our five targets, we've blown that up. We are very pleased with seeing the pipeline growth, including the 365 in enterprise combined offering. While I can tell you exactly the percentage of deals in the tax rates, I don't know that that's something that we are necessarily the federal disclosing, we've mentioned a couple of wins that are very significant in this quarter. One being the world's largest telecom and networking, one of the world's largest telecom and networking companies and one being the world's largest supplier of automotive safety systems. And both of them, we would not have been at the table with them had we not offered the capabilities of 365. And to me that is, you know, more than in initial validation. I think it really validates what we originally thought. And when I look at our pipeline, there are many more of these coming up. The next step here is the job isn't done, to be clear. The job is far from being done. What we need to do and what we're doing is progressing at fast speed our product integration, so that the story of 1 plus 1 equals 3 becomes even more tangible, even in the product and not just in theory. And we are, you know, ahead of schedule in that regard. I'm very pleased with our integration here. And then additionally, I think the story wraps and comes with all together as we launch Agent Hub and we develop further our agentic efforts. Agents that reason around data and take into consideration skills in order to train people on what they want and need is the ultimate connection of all the points here. Again, I can't tell you how excited I am about 365 moving forward. work to do and on the standalone side we haven't even scratched the surface of the potential of this as a secondary product and that's what we hope to do in 2027 and beyond.

Thanks, that's helpful, Keller. And then maybe just on the sales cycle side, we've seen some industry headlines recently about software sales cycles have begun to compress across most ACV buckets. Just wondering if Duchebo is seeing this at all across your enterprise customers?.

Hey, Erin. We have not seen that type of today, if any Within NH1 we've seen sales cycles decrease in a number of segments. Now a lot of that is related to execution. You know, if you recall our mark, our new CRO came in roughly July of last year, came in, did some tweaks and changed some processes that were seen for that labor. But the commentary that you're referring to of other software companies seeing e-login sales cycles is not something we're seeing today.

Sorry, Randall, just to clarify, we were actually seeing headlines that sales cycles were decreasing, not elongating. So good to see that. The shape of things.

Yes, correct. Yes. Your next question comes from the line of George Sutton with Craig Hallam. Please go ahead.

Thank you. Alessio, you called out NIT. I'm curious if you could just give us a sense of the go-to-market with them. And is that one of the reasons why you're seeing the enterprise strength that you're seeing?.

George, for sure. You know, NIIT is a relatively new partner. I call them out in the context of our partner motion being a significant contributor to our ARR reacceleration. Kudos to the partners and to our partnership teams and broadly our GTMT partners. teams for for you know the way we're leveraging this partner motion. It's a lot of work and it's not just over the past few months and I wouldn't you know I wouldn't regard a single partner as part of this and I had used a relative new partner we're doing great work with them. They have a great penetration and. I would equally regard the partners that we worked with longer, like Deloitte, as a firm that is very aligned with the way we operate and we're very close with.

So yes, that's all I have to say about that. So the topic of the week in AI, or certainly one of them has been around rogue agents. And I'm curious with your agent hub, how can you give confidence to customers that you've built proper guardrails in to protect them?.

Yes, yes. Look, first of all, our agent technology is something that we've been working on for a while. We have a very sophisticated team in our AI team that has been doing this for a long time, I trust. their knowledge and expertise and that's in this area are CTO and and I have a you know a very strong point of view on the value you know sits very much also in its reliability and safety and security so everything we're going to be building is going to have a strong point of view on on safeguards and guard rail standards and frankly George you know I think it's a it's a new territory And we're going to be working closely with our customers and their security officers to progress, you know, how we document this and how we give confidence to everyone that what we're building is, is, you know it will improve physically perfect thank you.

Your next question comes from the line of Matthew VanVleet with Cantor Fitzgerald. Please go ahead.

Yes, good morning. Thanks for taking the question. I guess as you look at expanding the product platform into healthcare and a couple other areas you talked about today, and then integrating 365. What is the view from here on future M&A.