Good morning, everyone, and welcome to the Docebo Third Quarter 2026 Earnings Call. All participants are currently in listen-only mode. We will open the line for a question-and-answer session momentarily. Analysts, you can ask questions by pressing star one to raise your hand. To withdraw your question, press star one again. We ask that analysts please limit themselves to two questions and return to the queue for any follow-ups. I'd now like to turn the call over to Docebo's Vice President of Investor Relations, Mike McCarthy. Please go ahead, Mike.
Thank you, Jillian. Earlier this morning, Docebo issued Q3 2026 Earnings Results. The press release, which included a link to management's prepared remarks and 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. Before we begin this morning's Q&A, Docebo 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 projected 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 filings, which are available on SEDAR and EDGAR.
During the call, we will reference certain non-IFRS financial measures. Although we believe these measures provide useful supplemental information about our financial performance, they are not recognized measures and do not have standardized meanings 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 USD. Now, I'd like to turn the call over to Docebo's CEO, Alessio Artuffo, and our CFO, Brandon Farber. Jillian, please open the line for questions.
We will now begin the question-and-answer session. As a reminder, please limit yourself to two questions and return to the queue for any follow-ups. Please stand by while we compile the Q&A roster. Your first question comes from the line of Suthan Sukumar with Stifel. Suthan, your line is open. Please go ahead.
Good morning, gents, and congrats on another strong quarter. Good to see consistent execution here. For my first question, I wanted to touch on the government segment. Didn't catch much of an update this quarter. Can you give us a look at what current operational traction is looking like, and what is your outlook going forward post the U.S. midterm elections?
Good morning, everyone. Alessio speaking. Hi, Suthan. Thank you for the question, and thank you for the comment on the quarter. Very proud of the team. Regarding government, we're very pleased with how things are progressing on our end. We introduced government as our very first verticalization, and our strategy is starting to play out. We entered Q3 with a very strong pipeline and a consistent pipeline build, frankly, above our expectations. We had anticipated this would happen, and as a result, we had started our plan to staff up the team to continue to meet the goals that we're setting forth in the future. As far as when you approach a new market, it's also an opportunity to learn. Among the learning opportunity is that the procurement processes across both SLED, state and local, and federal are, let's say, trivial at times.
While we have progressed very positively during quarter three, very significant deals, we were hoping to get some of them in the quarter itself. We have great confidence they're going to still come in in this fiscal year. One more thing. When we speak about government, we tend to focus a lot on federal, but as a reminder, we are really building a much more diversified public sector, state, and local government relationship, also through partners. With relationships like Deloitte, we feel like we're very well positioned to continue to succeed in this new vertical. So stay tuned for more news coming next quarter.
Okay. Thank you. Appreciate the update. For my second question, wanted to touch on the special dividend that you guys announced. Obviously, this is a positive vote of confidence from you and the board. How are you guys thinking about deleveraging, and what does this mean for M&A capacity from here?
Hey, Suthan. Just taking a step back, as you mentioned, we announced today an approximate $60 million one-time special dividend. The dividend will be funded from our remaining debt capacity, taking us from $90 million- $150 million of debt. That leaves us in a net debt position of approximately $108 million, with an adjusted EBITDA, or projected adjusted EBITDA, $56 million. So that's a net debt-to-EBITDA ratio of 1.9. I think the ultimate question is, why dividend, why now? If you actually look at our capital allocation priorities, they've really remained consistent. Number one, invest back in the business. We're investing in healthcare, we're investing in FDE, we're going to continue to hire in the government. We're doing that with still projected 20% EBITDA margins, and that's going to grow into 2027. Acquisitions, you brought it up.
We've done two acquisitions in 2026, and funny enough for Docebo, that's a lot. We continue to believe that we're at heart an organic growth story, and we will always be opportunistic in M&A, but when we look at the next 12 months, we're really heads down on execution. That leaves the third is returning cash to shareholders. Listen, we've historically aggressively done that from buybacks. In 2026 alone, we spent $82 million repurchasing 4.1 million shares at an average price of $19.97, which has frankly generated significant value for shareholders. If you look at the last SIB we did a couple months ago, only $2.5 million was filled at a possible $70 million.
We looked at today, we looked at our balance sheet flexibility, we looked at our excess capital, and we felt like returning cash to shareholders versus dividend was the best use of cash. It really speaks to the confidence we have in the business right now, not only us, but the board. When we look at our business, it's highly recurring in nature, subscription business, highly predictable cash flow that is growing and will continue to grow.
Thank you, guys. I'll pass the line.
Your next question comes from the line of Robert Young with Canaccord Genuity. Robert, your line is open. Please go ahead.
Hi, good morning. Thanks for taking the question. I'd like you to unpack the guidance a little bit. It seems conservative after the read on the confident tone in the prepared remarks. You just noted a strong pipeline ahead of your own internal expectations, and then you've got seasonality benefit in Q4, as I understand it, and then new AI products in market. So, maybe if you could just give a little bit of context for us on how you arrived at the guidance, and what's driving it.
Rob, if you think about the Q3 guide, it's one of the easiest of the year, but it's also the hardest. Why do I say that? It really gives you no insight into how the business is doing in a short and midterm perspective. Why do I say that? Well, when we guide to Q4, our starting point is, what was our Q3 ARR? We look at the number of days in Q4, and then we unpack what happened in October. What happened in October is U.S. dollar strengthened a little bit, so we lost some ARR on FX. When we look at our pipeline, which is heavy enterprise in Q4, that tends to lead to mature deals falling in December. So when we look at Q4 guide, it's a constitution of our Q3 ARR with almost little to none incremental revenues from Q4 bookings.
That's all going to impact our 2027 guidance when we provide that in February. But if you look at, just at a macro level as a whole, interestingly enough, in February, which was shortly just nine months ago, we guided 2026 revenues at the midpoint to 10.6% revenue growth. After being raised, being raised, being raised, our full year revenue growth is now projected to be 14%. On a quarterly basis, our subscription revenue was 12% in Q1, 12% in Q2, 12.4% in Q3, and we're guiding to 12.8% in Q4. So if you look at the year as a whole, it's been a strong rebound year for Docebo, and we really think we're setting ourselves up for success into 2027.
Okay, thanks. My second question, nice to see the healthcare med tech win in the quarter, and with a, I think you said specialized partner. Give us an update on the investment in that vertical. That was a thing you were highlighting last quarter, and the returns you have seen. Is this win an effect of that investment, or should we expect more focus on this vertical? No, pass the line.
We should expect more focus on the vertical moving forward. We should expect more wins in this vertical moving forward. The reason is, we are just very much getting started. What that means is, number one, we have hired the right people. This is not just a sales motion. We have staffed experts across our entire value in the company, from GTM to product and engineering. We have, more importantly, studied deeply the market and the differences that exist across the denominations, like life sciences and healthcare itself, and the subcategories of industries that exist. We have mapped our existing customers to these categories and are talking to them and understand what they need for us to be better at, i.e., where we can take our product. We have used that to influence and create a more sophisticated and vertical roadmap.
Finally, we have an operational strategy to target the right accounts in the greenfield, and we understand those accounts that are with competitive products that are currently under strain. With all of that said, now we have to execute to win in 2027 and 2028.
As a reminder, if you would like to ask a question, please press star one to raise your hand. Your next question comes from the line of George Sutton with Craig-Hallum. George, your line is open. Please go ahead.
Thank you. Guys, first I would just like to congratulate the board on the special dividend. We would rather see a special dividend than more share repurchases just because of the liquidity of the stock, so nice to see. My first question is on the launch of Knowledge, and I want a better understanding of the extent that you can go to the broader knowledge work of the enterprise. You are going to be targeting, obviously, CROs and CCOs, which are a very different sale process than just the traditional training folks. How are you teeing up for that in terms of the sales process, and what sort of ARPU do you look for as a benefit to the broadening of the organization?
Thank you, George. Let me take a step back and go back to circa 2016, 2017, which is when Docebo started, identified the need in the market that went well beyond the compliance training as we know of it today. We embraced the need in the market to have learning become a more GTM monetization-based project as well. We did that, and over the years, now more than 50% of our customers use Docebo not only for internal purposes, but for external use cases. The point being, those external use cases already are served by, supported by, budgeted with the office of the CRO and the office of the CCO. We have built, over time, a capability to go after buyers and address buyers that are not L&D. I would say that gene has already been built in the company.
Now, where we are taking it next and why it applies to Knowledge. What we have seen over the past few years, and particularly, I would say, highlighted by AI, is that learning and knowledge are blending. Meaning, buyers are telling us that their users do not just want to learn in the sense of taking structured courses, but they want to be in the flow of information. They want to have information available to them upon request. Certainly, the ChatGPT era has opened the consumers to new expectations. What did we do? We took the opportunity to extend the concept of learning to knowledge by opening up, effectively, what we can have access to a much broader set of data, the enterprise data, as opposed to the learning data. You can think of the LMS as a big database, and that database, up until yesterday, contained learning information only.
Learning is created out of a much broader set of knowledge. Now we are connecting directly to it. Now we are enabling the enterprise to be able to reach into their SharePoint information, their Salesforce information, their Confluence information, their Notion information, their Google Drive information, something that was not possible until not too long ago in a sophisticated way. Again, we are bearing the benefits of AI. Our customers are having a wildly positive response to that. We are at the very beginning of the journey. We believe that the CIO office will be more involved, and we are going to repeat the same playbook that we adopted years ago when we approached a different buyer. We are going to do the same thing, and I think it is going to be fantastic.
Thank you. Just staying on the new release, you have 600 beta customers, which sounds like a very large number of beta customers. Can you talk about the importance of the message to that?
Thank you for capturing that nuance. It is one that I particularly care a lot, strategically and in the way we think about how we build Docebo. First, let me explain two concepts of beta. There is the private beta and there is the public beta, and we have a few phases there. Once we reach public beta, we involve more people to talk to us. What is the underlying message? What is the value? The value is becoming a company that builds with an engineering-first mindset, with a company that builds with a customer-first mindset. It is during that public beta and working with those 600 customers that we get the real value, the real feedback, the real market. I would say there is always a gap between what a product management team and an engineering team can think of until you bring something to the use of the practitioners.
We put a lot of value into that, and we believe that as we do that, once we go in GA, our products are much better off. Frankly, there is a monetization component in that strategy. We want to come out of the gates very, very prepared to welcome net new customers that have already had a chance to go deep in the product and feel like they are a part of it.
Perfect. Thank you.
Your next question comes from the line of Ryan MacDonald with Needham. Ryan, your line is open. Please go ahead.
All right. Thanks for taking my questions, and congrats on a great quarter. Alessio, we've spoken a few times this year about sort of the refresh cycle that's occurring in the LMS space from sort of a forced platform modernization from one of the large legacy incumbents. It wasn't lost on me that there was a number of sort of cited competitive take this year, or in the quarter, as you talked about client wins. Just curious to hear about what you're seeing from a competitive perspective, and if you're seeing sort of a tailwind in RFP activity given the dynamics of the market.
Sure. First, let me share something philosophical at how we are around the table. We don't focus on the competition very much. We focus on ourselves. I'm a big believer that you need to establish what you think is right and go execute that, and not worry about others are doing. With that said, being educated and understanding what happens in the market is important. Here's what we see, but not necessarily focus on, okay? What we see is that buyers, the buyers that we're targeting, modern, complex enterprises, want a modern platform that can support their needs. These needs require a system with deep workflow and enterprise capabilities. Those enterprise capabilities range anywhere from the features themselves, to the security layer, to the governance model, to the ability to implement in a certain way. It's not just an engineering concept. It goes well beyond it.
It's how you build a company. When you think about the competitive landscape, and you think about features combined with all these characteristics, notwithstanding things like FedRAMP certification, that is definitely something that takes time, energy, and investment, I can't see a lot of competition out there that then brings together AI, learning, knowledge, Skills Intelligence in a highly integrated platform that can withstand the complexity of 30, 40, 50, 100,000 people organizations. That is our moat. That is our uniqueness. The reason why I love that moat, it's very hard to replicate. This is not an AI agent company that tomorrow displaces this need. The need will be there forever, but the way to get there is incredibly hard. We are there, and we're going to crush it.
Love it. Maybe as a follow-up, you also mentioned in the prepared remarks that your agents are helping you to expand who you are selling to within the enterprise, expanding from a traditional HR or CRO or CCO sale to now the CIO. Obviously, a very exciting opportunity, but it sometimes can be a bit of a double-edged sword. I am curious, how are you thinking about what is the potential incremental budget you can unlock from a CIO sale? Conversely, how do you think this affects sales cycles with selling to a new person or adding another layer in the selling motion to the sales process? Thanks.
Well, first, yeah, astute question. First, the CIO is not a new person at the table for us. The CIO is already a stakeholder that is having involved. We actually have plays in our sales process, both at net new logo and existing logo, where we address the CIO office, whether it is for a security questionnaire or for AI reviews and whatnot. So we are very used to that cadence. What the prepared remarks highlight is that the introduction of new capabilities, such as Knowledge and Agents, will probably make the CIO more relevant, and budgets that were confined to L&D and/or CRO only could potentially open up to CIO budgets as well. It is early for us to give a clear indication or a hard thesis about what the percentage will look like.
We have been focused on creating the value and working with the CIOs and these customers to really understand what they care about. That is what our focus has been so far.
Really helpful. Thanks.
Thank you.
Your next question comes from the line of Matt VanVliet with Cantor Fitzgerald. Matt, your line is open. Please go ahead.
Hey, good morning. Thanks for taking the questions. I guess, curious on how the ongoing process of cross-selling the Skills Intelligence platform to your existing customer base is going. Where are you seeing the most traction early on there, and how much does the ability to use AI and Docebo Creator sort of cross-pollinate between the two platforms to help drive some additional sales?
I will address first the Skills Intelligence and 365 cross-selling opportunity. Once again, as a step back, we completed the acquisition earlier this year, and we have been focused on integrating the products. Our whole focus was a seamless experience for our customers that chose to use both Docebo and 365Talents. Over the past couple of months, we have accelerated our product integration. We have recently released the latest version of it, which is really brilliant, and that is giving us the opportunity to continue to sell in the base and, frankly, in the greenfield as well. The way we think about that opportunity is two-way. Number one, we have customers that are looking to introduce skills in our install base, and we are having conversations with them.
But the reality is enterprises and large enterprises are the ones that so far are benefiting the most from the combination of the two. As far as our goals and our expectations, from the beginning of the year, in terms of budget, we are on track to surpass them and very excited about the future ahead. I think that's it on the sales side.
Very helpful.
You had a question on Creator as well, but I didn't quite capture it.
Yeah, just curious on how having the Skills Intelligence and sort of understanding where those gaps are can now be better met for customers using some of the AI content creation capabilities.
Yes. Thank you for that explanation. 100%. Our thesis from an agentic standpoint is that personalization in learning and knowledge is incredibly critical. Actually, personalization is one of the areas where we have very significant differentiation. You can expect agents that we're actually working on that understand the learner profile and are able to create material that address those gaps or those needs in real time using Creator as an underlying engine. In fact, we've shipped our first Creator agent that is extremely powerful. Yes, absolutely.
Very helpful. As you look towards the next few years, obviously you stood up a government vertical. Are there other verticals that you anticipate maybe having more of that support staff and kind of deep domain knowledge that's required? How should we think about that from a timeline perspective?
Yeah. Look, when we studied the healthcare verticalization, which we're about to attack as described earlier, we formed really strong opinions about where the addressable markets are and what characteristics they have, the gaps that we would need to fill from a product standpoint to become really deep in them. We have a general sense of where we could go, but the reality is we've learned to do things properly and in alignment with our budget expectations. In short, we don't want to put too much on the fire. We believe that with government now starting to pick up and healthcare starting next year, that is our focus. As we advance healthcare to the place of comfort where we believe it's really taking off, then we'll tackle on the next one.
All right. Thanks for taking the que-
Your next question comes from the line of Ken Wong with Oppenheimer. Ken, your line is open. Please go ahead.
Fantastic. I just wanted to check in to see where we are on the FDE investments. Are you guys approaching a point where you guys are fairly fully staffed there and what the customer interest has been in terms of deploying that?
For sure. When we discussed this in August, the strategy that we had outlined was to bring the FDEs directly in our largest enterprise accounts, and that strategy hasn't changed. What has changed is that as of recent, we finally staffed the founding team. We've identified the right accounts, companies that we're going to be working with, and we're going to be using the next few months, I expect the next three to six months, to validate the actual model of operation, the engagement with the customers, the monetization strategy, the boundary of where FDEs start and end, the value they create on top of agents that are created by customers or agents that are created by the FDE. In short, there's a lot that we're going to develop from a playbook standpoint. We're at the beginning of this journey. I think it's an incredible journey.
The recent release plays really nicely into that, so we're timing things nicely because on top of our pre-created agents, our customers can create no-code agents as well. We're already seeing signals of customers that raise their hand and say, "I'd love to work with somebody to help me on this process." I think over the next couple of quarters, we'll have some updates for you guys on how things are trending. But so far, everything is moving according to expectations.
Fantastic. Brandon, I wanted to just check on gross margins. You called out a higher mix of pro serv pressuring that. Just wondering if that is something that we should expect to extend into Q4 and beyond. I imagine with more enterprise, you talked about the FDE just now. We could potentially see pressure also as you guys up the adoption of AI. Any color there would be great.
Yeah. When we look at gross margin, we have the benefit internally of seeing our gross margins from a PS perspective and subs. The good news is that the gross margins on subscription business is pretty much the exact same as it has historically been. The quarterly movements in gross margin really relates to the specific professional service projects that we are performing, and also the fact that right now professional services is growing faster than subs. I do believe that into Q4, you will see a similar trend, but as we get into 2027 and start lapsing the strong year in enterprise, I would expect a little bit more consistent growth in PS to be consistent with subscription revenue, and then it would normalize and allow gross margins to start ticking back up.
Perfect. Thank you.
Your next question comes from the line of Erin Kyle with CIBC. Erin, your line is open. Please go ahead.
Hi, good morning. Thanks for taking the questions. Brandon Farber, I just wanted to follow up on the margins as well. The Q4 EBITDA guide implies margins roughly comparable to where they were in Q3, and we've been talking about reinvestment in the business in terms of the healthcare vertical and the FDE program. How should we think about margin expansion carrying into 2027 from here? Do you expect to see continued margin expansion in 2027, or should we expect 2026 exit margins to be a stable level on a go-forward basis?
Yeah. Listen, we're going to guide to EBITDA in 2027. I think our main principles of the business remain consistent. We remain disciplined capital investors. I think we're really proud of our EBITDA growth, not just EBITDA margins. This quarter, we grew EBITDA about 34% while growing the top line. We are making strategic investments, and we still see strong EBITDA margins. When we look at the different lines within our business, I think it's natural to say that we're expecting R&D to roughly stay flat as a percentage of revenue into 2027. The one area that we're remaining disciplined is G&A, as I've said it for a number of years, is that you could continue to expect leverage in that area of the business.
Without giving you a full guide, yes, you'll see some EBITDA margin expansion, and stay tuned in February for more guidance on EBITDA.
That's helpful. Thank you. For my second question, just going back to the federal pipeline, as it relates to the September period, and I know the environment's changed quite a bit in the U.S. in the last week or so, but earlier in the year in Q3, would you say that you saw any evidence that some procurement uncertainty from some of the administration's policies that were announced impacted any RFP processes, delayed anything, or is the timeline moving from pipeline in Q3 to Q4 more just the nature of it being a new market for you?
I think it's actually a nature of the agencies we are working with. We do not believe that the elections had any impact on the results in Q3. We're working with some agencies that are seeing buying potential into Q4, and we're not necessarily felt the pressure of the lose it or use it budget buying cycles. Historically, we've always mentioned Q3 will be the highest FedRAMP quarter. We're seeing that potential this year to be into Q4. But if we look into the next couple years, we continue to believe that naturally Q3 will be the highest. So this year is a bit of anomaly for us.
Thanks. I'll pass the line.
As a reminder, if you would like to ask a question, please press star one to raise your hand. Your next question comes from the line of John Shao with TD Cowen. John, your line is open. Please go ahead.
Yes. Good morning. Thanks for taking my question. Given the milestone you have with the agentic capabilities and a growing customer base, do you think in 2027 your ARR growth is going to include some of the potential uplift from the new hybrid pricing model?
I think the natural answer is yes. As customers are buying Docebo, they are no longer looking for just learning. If I think about when we started, when I started Docebo five years ago, if we signed a customer, we would have a $200,000 ticket and that would be it. We added content. That $200,000 ticket turned into $400,000. We added skills. That $200,000 ticket now turned into $600,000 ticket. We are adding knowledge. That is going to turn that $600,000 ticket to even a larger dollar ticket. We are still developing our thesis on what our ARPU growth will be and what the attach rates are, but we are already seeing pipeline into Q4. We are already seeing interest from prospects, and we will impact that into our guide when we give our revenue guide in February.
Good. Thank you. I will pass the line.
We have reached the end of our Q&A session. I will now turn the call back to Alessio Artuffo, Chief Executive Officer, for closing remarks.
Well, thank you, everyone, for being here, for your questions. As we approach, for the Americans on the call, the Thanksgiving holidays, we wish you and your families a fantastic time. We are looking forward to talking to you to report on our Q4 results in February. Stay tuned until then, and thank you again.
This concludes today's call. Thank you for attending. You may now disconnect.