All right. Welcome. Great to see you. Thanks for coming and attending our Global Tech Conference. Maybe just for folks who are new to the Docebo story, we can just kinda take it from the top and maybe just start with a brief overview of the business.
Yeah. Sounds good. Thanks for having me. Sukaran, CFO at Docebo, b een with the company since 2019. Just a bit about Docebo. Docebo is a learning management software company. It's the largest public company from a learning management perspective. We have over 4,000 customers. We're $210 million plus in ARR and a profitable business. We, you know, we are close to 16%-17% in free cash flow today, with 81% gross margins. So just to take a step back and, you know, talk about what is Docebo and why we've been successful, especially in the learning management space. You know, historically, learning has been thought through from a perspective of employee training, which is typically your HR type of activity. When we thought about our platform, we think about learning applies in every facet of an organization.
It applies to your employees from an HR perspective, compliance, of course, sales enablement. But equally, and more importantly, I would argue, it also applies to your customers, your partners, your members, so on and so forth. When you think about learning, we think about building a platform that supports all the organization. Just to take a step forward in terms of what we say non-employee training, which is Customer Experience Learning in our world, that's a market that drives almost, at a minimum, 65% of our business, in terms of ARR today, where customers like AWS, which is one of our marquee customers, has over, you know, let's call it millions of users on our platform.
Effectively, all things custom AWS certification are powered by Docebo in the back end in terms of the platform that supports that certification for millions of customers of AWS, as well as the future and prospective engineers that are coming into the workforce. So if you think about Docebo from a perspective of a platform that enables an organization to take their intellectual property and utilize a learning management solution to distribute that at scale to the end user, whether it's your employee, your customer, your partner, your members, that is what we do.
And effectively, what we have carved out is the market-leading position where we not only support large organizations in mid-to-large organizations, or any size, in supporting their what we call Employee Experience Learning , which is, let's say, directly tied to 35% of our business, but almost 65% of our business is actually tied, at a minimum, for those customers to actually utilize our platform, to distribute or to train their customers, their partners and members. You know, even as other examples outside of, you know, AWS would be think about large, you know, large retail, even, let's call it home builders. You know, we just, we have a customer in form of a home builder that's a large public listed company here. They go through an insane amount of complexity when they manage the supply chain.
They have thousands and thousands of vendors that they utilize to actually implement all things home building. Because everything is outsourced, and effectively, they need our platform to be able to actually distribute that, to make sure that everything is happening at a standard and making sure that training is enforced for them to actually do common practices. The same idea goes around, and I'll shut up after this is, you know, typically in the franchisee world, you know, other than McDonald's, you can expect that we serve every other QSR chain in the world. What they're trying to solve for is supply chain complexity and training, product training, as well as employee training.
So what we do as a learning management solution relative to the historical companies that have served it is we serve an organization from a learning perspective, end-to-end, in every department. And the reason we've been successful, you could argue relative to other legacy HCM, HRIS players is because historically, the market has been served from an HCM, HRIS platform where you're just giving some small module of learning to kinda do the basic HR type of training.
And that has been kinda the time historically that people have thought about is the number of enterprise companies were multiplied by number of employees. But for us, 65% of our business, like I said, comes from actually nothing to do with employees. It actually comes from training the customers, the partners, the supply chain, so on and so forth. And that is what we call mostly greenfield market, where 70% of the business is greenfield today. It's really a question of build versus Docebo.
This is super interesting. I mean, this and when I was sort of getting familiar with the business, you know, the first thing you hear, you hear learning. You think of Employee Learning. You think of Compliance Training. You think of, you know, maybe like the, you know, best case, there's upskilling and reskilling, you know, things. But you don't, your mind doesn't necessarily go to, you know, the customer experience, the partner experience. So the, you know, two-thirds of your business is that, you know, external user.
Can you just talk a little bit about, you know, that TAM relative to employees and also maybe, you know, who do you see doing the external use case well? It feels very differentiated relative to, you know, like we said, a lot of the HR tech providers. But we'd love to hear how you think about sort of the competitive side given where you play.
Yeah. No, 100%. I would say in terms of just to give more perspective on Customer Experience Learning , it is so wide and so horizontal in terms of the use case applicability. You know, of course, software, or I would say IT services is 20% of our concentration from a vertical point of view. So even if you think about not just AWS, but, you know, the largest cybersecurity companies that we support today, or other software companies, you have to drive a customer education academy. And what that effectively does is using Docebo and enforcing is the wrong word, but ensuring that you have a platform that supports your customers to engage, learn about the product, actually be able to serve that in their audiences.
Drives two things. One, it drives higher, I mean, higher retention and higher adoption of that product. But a lot of our customers are actually not only doing that, but they're actually monetizing that IP. So if you think about someone like a McKinsey, which sits on this incredible management consulting, you know, proprietary intellectual property, they're utilizing Docebo to take that knowledge that the intellectual property, which is all management consulting, put that as a product SKU on our platform and sell it to the end users from a customer perspective.
Which is a subscription service. But how do you enable that type of learning, which is a management consulting or AWS certification? By the way, AWS also charges, if you go to AWS Skill Builder for a certain population, they also charge $29 per month per user. So what we're trying to help our customers is to actually monetize that IP also, not just distribute knowledge.
A lot of the businesses on our platform are directly tied to revenue generation activities of that business. The more and more you engage, you're either trying to solve for higher product adoption, higher customer engagement, or at a minimum, you're also generating some sort of revenue if your IP is really valuable. And that's where customer education comes into play. The next domain, I would say, which is pretty important for us is supply chain and member training. So if you think about large supermarket in the U.S. chain, they effectively utilize us. It's actually Target. We have to publish this, so I can speak to it. So if you think about Target Supplier Academy, that is powered by Docebo. Any supplier of Target is able to ensure that they're in compliance with all things supply chain that are at the core of Target.
And that effectively is us in the back end supporting that, end-to-end need. So, what I'm trying to speak to is that this platform, anywhere you need to have product training, supply chain training, customer training, you're utilizing a platform like Docebo. And in terms of the competitive landscape, which was your other part of the question, typically, this market's a unique one for us. You're really on the mid to large enterprise customers, which is 50% of our business. So we serve, let's call it the Fortune 2000 and above. So any company about 5,000 employees is enterprise for us, and that's 50% of our business. In that market, you really are competing with the legacy HRIS, HCM players because they just have a small module. There is no competitor at scale that has built an end-to-end learning platform.
That's doing internal and external.
That can do both Customer Experience Learning and Employee Experience Learning . Because typically, the large players are only doing a small portion of the Employee Experience Learning, which is HR training. And so our ability to serve six or seven departments, six or seven buyer personas in one organization is why we've been successful, because we just don't focus on one department, which is HR.
That's where the legacy players have kinda, you know, it's hard for them to compete with us because I would argue someone like a Workday is in the business of a big HRIS suite where they're trying to solve the employee experience, HR problem. For them to drive what we're trying to do means that they have to go to a very different market. A very different buyer persona, and very different product roadmap for a small component of their overall big HRIS suite. And that's where we certainly see that the legacy players certainly don't support our customers in the complexities of their businesses. And for us, all we do is focus on learning.
Yeah. That's super interesting. You know, thinking about the two-thirds of your business that's doing your customers and, you know, doing your supply chain, that's when you hear you're enabling revenue generation and, you know, you're helping your customers drive value for their own businesses in the market, that you think about the ROI and the, you know, decisioning around procuring a software being much different than, you know, selling to HR, like the budget that that can unlock.
So it's, I was gonna ask around, you know, who are you selling to in these cases and, you know, how is that different than selling direct to HR? But you covered some of that. But is that, you know, when you think about the sort of adoption and then, you know, sort of like the white space, you know, maybe talk a little bit about, like, who you're going to? In New York and how you're sort of landing.
Yeah. That's a great question. So yeah, typically, if you think about the six or seven type of use cases we solve, so you've got customer education, where typically my buyer will be anywhere from the CRO to the COO to the CEO, because it's very strategic. So if you think about McKinsey or AWS launching this millions of users, right, when AWS launched their academy with us in 2019, 2020, I'm forgetting which year it was, but it was one of those two years, officially, it was announced at re:Invent, right? So it had full focus from Andy J you know, Andy Jassy at the time.
And so not that he was the buyer, but what I'm trying to make sure people understand is these are very strategic investments that drive revenue. So typically, your ultimate decision maker will be in the form of a CRO in smaller, slightly smaller organizations, like not like AWS, will be CEOs. And the CEOs that we typically will kinda work with because it's tied to the revenue engine. If you think about sales enablement, your buyer persona, which is very typical, will be RevOps and CROs again.
Customer support is another use case for us, where typically the buyer will be a customer support VPs and above. And then, of course, on the compliance and HR side, we'll have a compliance. You know, we recently landed a large Big Five bank, and they have, of course, a total different division from a compliance perspective, s eparate from HR, so there's two different buyers within HR and compliance.
T he benefit we have is one, we are very strategic when we are doing Customer Experience Learning . It is tied to an ROI, so you'll typically have that part of the business engage with you. And if I can even win that part of the business, it gives me the ability to, over time, even if I don't do it on the onset, consolidate the tech stack because you don't need anyone else other than Docebo to solve end-to-end learning needs in all departments.
I was gonna ask about Land & Expand. So now you're in. Now you've gotten in through, you know, a pretty unique approach on the external use case, but then there's other opportunities that.
Sure. And I'll give you an example, which is very typical for us. We signed Fannie Mae, which is a great customer of ours. I'm actually the exec sponsor, so I'm proud, proud, you know, very proud to have them as customers for a long time now. And they started with us where their use case today is all in all things training from a home insurance, a home buying perspective. And they, of course, do a lot of work around the U.S. citizens, and there's mandates from the U.S. government around how they need to educate the U.S. buyer from a affordability home buying perspective. That is a big use case for them. It's, of course, not. It's the audience is the customers of Fannie Mae, or customers, that are the wrong word, but the U.S. consumers.
But we won that business. We did really well for the first year, year and a half, and then we took over the HR side of the business in that because they saw the value of the platform. And typically, that leads to us displacing an employee experience platform on the HR side. So that is a playbook that's happened quite a bit. I will say since 2022, it's been a good playbook for us, or just generally, a lot of CIOs who are our best friends, or CFOs also, are trying to also look at, "Hey, if I'm gonna procure a learning management solution that drives revenue engine for my organization in form of Customer Experience Learning , why do I need these other small or legacy platforms to solve it?
Why don't we consolidate the tech stack with Docebo at the onset? A lot of the, you know, if you've looked at our numbers, our ACV has meaningfully moved up, and our move into the up market has allowed us to consolidate that tech stack when we enter the deal on day one. And that is like playing out in a number of scenarios as we land those deals.
Consolidating the tech stack is pretty interesting 'cause you know we talked about Workday, but I would imagine most of who even in the enterprise, most of who you're running into, you're not able to consolidate the tech stack and the learning in the same way because, you know, they're either, you know, purely focused on the employee or t hey don't have the same depth in terms of, you know, the other use cases. I'm, you know, curious about too, you know, when you talk about learning in terms of content, your approach is to enable your clients to produce, you know, content using the tools in your platform. I'm just curious to think about the stickiness. So they build the content on your platform. It resides there. If, you know, they think about switching, you have to rip that out, right?
That's correct. So the way content is like I simplify content in two ways, right? So you've got, if you think about Customer Experience Learning or even sales enablement, you know, if you think about even I'm sure Barclays, I'll take an example. If you're doing sales training or broker training, for bankers and so on and so forth, your content's gonna continuously change because your business strategy is continuously gonna change, right? Even in my sales enablement in my organization, every week there's a new price book, there's a new something, a new product, something's going on with how we're gonna go about competitor takeout. Like, there's different things that are happening, and you've gotta enable a very large organization.
How do I solve the problem of content creation there? There we give our customers, which is our leading product, module called AI offering, which has been in the market, by the way, guys, for the last three years. It's not something we just created in the last 12 months to create the hype. It is one of our, you know, star products. What it effectively does is takes any form of content and within seconds creates a Microlearning pill in any language with all the voiceovers, with all the context, automated. 90-plus% of the work is already done for you.
We, of course, give our customers the ability to do all the fun stuff they wanna do from an editing point of view. But the AI for us, which has been in the market again for three years, has actually given our customers the ability to create that content at scale, but more importantly, at a fraction of the cost relative to paying outside agencies to produce that content.
That is the competitor, by the way, in from an automation point of view, which is software is lowering the cost of producing content for my large customer or many customers for that matter, because historically, that type of work was done through agencies or in-house. Now, that is where you create their own content. You need to continuously actually build it. Now, in terms of employee experience, there's also courses needed or content needed, I should say, where effectively you need to buy sexual harassment courses, anti-money laundering courses, and so on and so forth, which are mandatory from a compliance point of view.
In that regard, how we control the content business is we are effectively simplifying it, the app store, where we let the aggregators of content, whether it's OpenSesame, Go1, which have a library of 100,000 courses with, you know, Udemy, Coursera, Edflex, you get the whole libraries of thousands of publishers. We let them come through the door, and I take a beautiful rev share, which is higher than what Apple charges, for them to actually sell into my customer base of 4,000 enterprise customers.
You're not producing a single element of content yourself i n avoiding all that.
We will never get into the business of producing content. We'll let them enable and create, collect a beautiful rev share in the middle, which is all margin, or we will provide our customers with capabilities in the form of AI offering where they need to create content continuously, and they utilize that module, which is AI offering, to build content at scale a nd distribute it at scale to the organization.
Yeah. Amazing. And how should we think about sort of, you know, you've had this AI product for three years. You've got, you know, the core, you know, elements software. How do you think about, like, pricing and packaging and you know, either opportunity there or, you know, opportunities to continue to sort of innovate and drive, you know, ACV growth? There's ACV growth removing a market, but there's also, you know, an element of, you know, price and, you know, bundled offering.
That's right. And so in first, you know, Docebo, I would say, is from a pricing point of view, we don't really compete on price per se as much. We are, you know, we try to give our customers the best product and try to drive value. In terms of and that ties into our pricing strategy, which is we, our pricing is tied to a core bundle, which is what we solve for our customer, based on what segment they are. So we have the, you know, the what we call the, commercial mid-market segment versus enterprise segment. And of course, there's a price book for the government customers. And as you think about that price book, it's tied to core functionality bundle. And then as you solve the problem for the customer, so if you're doing customer education, very typical that you'll need e-commerce capabilities.
Why? Because you need to charge, charge your end user, and you need to have a full-on end-to-end integration to be able to take that dollar for the course you're giving them. S o those e-commerce capabilities are what we call add-on capabilities, where the customer is incrementally paying more than the bundle to the extent that they are doing customer education with us.
So the idea here is that you have a core bundle, which the customer utilizes to build the LMS, and depending on their use cases or content, for example, if they needed a library, we have add-ons where we will derive incremental value based on what the needs of the customers are and what outcomes they're trying to solve for in their organization. And so that's been pretty healthy for us. We've actually made a change, at the start of this year, in terms of our pricing structure. It's been very well received by our customers. It simplifies also the talk track in terms of driving value conversations rather than an à la carte menu of items and now the conversation is, how do we solve your customer education use case versus trying to sell them an à la carte problem per se?
Yeah. Maybe we're in sort of seven minutes left. I'd love your view on, you know, you're moving up market. You're, you know, pushing to get ready to enter the government market. You have this system integrator strategy of, you know, partnering and going to market through. You know, some of the big, you know, channel partners there. We'd love to hear, you know, sort of like, where do you see growth? What are the, you know, the biggest kinda levers you're pulling, and a little bit about, you know, the opportunities there.
Yeah. Absolutely. I like to just put it in four or five pillars of growth. The beauty in terms of and I actually just forgot to answer your initial question, which I'll respond here is, the beauty of our business, if you think about Customer Experience Learning , the total addressable market is mostly Greenfield there, right? Just in the U.S., if you think about AWS doing the customer academy with us, that is a brand new category that has been created in the last five years.
It's, of course, one of my top five customers, but that is the addressable market where the question was build versus Docebo. It's a Greenfield opportunity. There's no legacy incumbents that you're really competing with. You know, we signed Google. Also, we, you know, in the last year or so, same similar idea. We're helping organizations to do things they couldn't do in-house themselves at scale.
You're helping them sell their cloud products into the market?
GCP and Sales Mastery.
Yeah.
That's right.
Okay.
That's right.
Okay.
And so if you take the first pillar of growth, that's if we maintain our market leadership position and customer experience, which just in the U.S. is close to $5.6 billion of spend that's coming in the next four or five years. And if I just keep my market leadership position in that space, I think there's enough for us to grow. That's pillar number one. And we clearly are the leaders in that space.
Number two, you know, we, you talked about government, which is an important vertical for us today. 5% of our business comes from Fed and SLED customers, mostly in North America and U.S. specifically. We have reinvested almost 3%-4% of our EBITDA last year to drive FedRAMP certification. So today, we are limited in participating in government segments where customers do not require FedRAMP certification. Once we unlock that FedRAMP certification, which, you know, we've done a lot of work this year, and hopefully, as we enter into 2025, we'll be able to get to that stage. That unlocks our ability to actually participate in large federal RFPs.
Remember, there's only one or two players in that market. I'll go quick in the interest of time, but in that market, there's gonna be a lot of interesting things that are happening from our perspective. Number one, legacy players that are on-prem solutions that are not sustainable and cost an incredible amount of money to the government. With the DOGE that's going on, I would say personally that is an important avenue, I'm sure, that folks would look at where spend is not sustainable and doesn't drive productivity gains because these are on-prem solutions that were built 20 years ago.
Number two, there's only 200 companies, all SaaS roughly, in all verticals that are in FedRAMP works, in the space. In our space, there's only one or two companies that have FedRAMP certification, and they're legacy players from our perspective. So we see an opportunity to disrupt that space once we get to FedRAMP sponsorship, hopefully, in the next year. Number three, in terms of our pillar, I would say we have 4,000 incredible customers. We launched a number of products and modules in the last quarter or two. Our ability to expand those 4,000 customers is gonna be a very important pillar going forward. Number four, I'll just simplify. This one is, without getting too complicated, if you think about our SI strategy, it's also tied to going up market to the large enterprise.
So folks like Deloitte and Accenture are incredibly important system integrators for us. And roughly, the SIs drive close to 30% of our pipeline. Why they're important is, as you move up market, not only we're using their support to influence deals, but we need the manpower or the human capital to actually manage those over time. That's where Deloitte and Accenture and other partners play an important role for us. The move to up market also means is that when you have large SIs participate, they also bring you healthier deals, which take a slightly less time to close. Versus where you didn't have an influence in that. So the SI network also influences the pipeline, which directs how good that health of that pipeline is.
And we certainly like that part of the business, as we move up market. And so, net-net one, one point I'll make is what's interesting about Docebo is that still in the last two years, 70% of our business, net new, net new ARR, sorry, 70% of our net ARR is actually from net new customers, which tells you that there's a pervasive demand for our solution across various horizontals. And it has been happening still in this macro environment in the last three years. That's an important data point because it tells you how pervasive the demand is. There's not only software companies; there's onshoring that is happening that's creating significant amount of, you know, challenges for organizations in terms of how do I move a workforce. Of course, in the past two years, it was ICE to EV. Now it's onshoring from a perspective of supply chain.
We're certainly seeing those trends play out. The government sector will certainly have to invest if they wanna cut costs. I think software will be the enabler of that, and newer players like us, which do it at scale, and do it at the right price . Arguably in the government segment also will be important. So, a lot of good avenues for us. It's a matter of execution.
Yeah. It's super interesting and a lot of momentum in the market. You're right. In a, you know, in a last 24-month period where a lot of folks are slowing down. Maybe last question. We've only have a minute left here. You know, as you're driving growth and scaling, you know, the profitability is starting to come through or coming through, more and faster, and the cash flow is very real now. You know, how do you think about sort of the margin expansion and you know allocation of capital over time?
Yeah. Like, I mean, I will say this in the past. You know, if you're 80% gross margin business, you know, it's not rocket science to get above 20% Free Cash Flow. I prefer Free Cash Flow as a measure than EBITDA because I think it's a more pure measure. But I think most of the folks that follow the company understand that 20% is just in our realms. It's just we're at 17% today. You can expect that will just drive the same execution operational excellence of managing some of the costs on the G&A side flat as we've done in the last eight quarters, and you just get to 20%+ Free Cash Flow. Just like that.
But what one point I would make, just, I know we're slightly over time, is the next two years, at least for us, and I certainly talking to some of my peers, but for us, are going to have you're gonna see margin expansion from companies like us and others as you think about AI automation that's actually permeating internally within the organization, not just in terms of products and modules that you're selling to customers. Of course, think about tier one, tier two customer support. Think about product, coding, R&D, QA. Think about how you build proposals. There is an incredible amount of automation that we certainly think we can achieve from an internal processes perspective.
Which effectively means that you're going to start seeing the next layer of margin expansion from efficiencies within our organization. What I'm trying to point to is that 20%, there's more, there's quite a bit of more room for us, for us to actually drive even more expansion from a margin point of view just by being leaning into technology advancements in the next, you know, few months, and quarters.
Amazing. Congrats on continued success and great, great conversation. Thank you.
Thank you. Thanks for having me.