DCBO - Circling Back On Docebo

2024-01-02 04:37:08 ET

Summary

• Today, we revisit Docebo Inc., a learning management software company that provides an AI-powered learning platform.
• The company is delivering solid and consistent revenue growth in the mid-20s, is slightly profitable, and has a clean balance sheet.
• Docebo is well-positioned to continue to benefit from the growth in the virtual work force. An updated analysis follows in the paragraphs below.

You can never be overdressed or overeducated .”? Oscar Wilde

Today, we put Docebo Inc. ( DCBO ) i n the spotlight for the first time since our original article on this provider of e-learning back in April of 2022. We passed on an investment recommendation at that time citing valuation. The shares trade slightly above the levels when the original research on Docebo was posted. Docebo is seeing consistent revenue growth in the mid-20s. The company also recently announced a CEO transition plan. An updated analysis of the company follows below.

Company Overview:

Docebo Inc. is headquartered in Toronto, Canada and operates as a learning management software company that provides artificial intelligence ((AI))-powered learning platform. Docebo is a leader in enabling the fast-growing digital learning transformation within organizations via its cloud-based e-learning and training platform and allows clients to centralize their learning materials from peer enterprises and learners into one learning management system. The company gets nearly 95% of its overall revenue from recurring subscription fees. The stock trades at just over $48.00 a share and sports an approximate market capitalization of just less than $1.6 billion.

Third Quarter Results:

Docebo posted its Q3 numbers on November 9th. The company delivered non-GAAP earnings of 15 cents a share, a nickel a share above the consensus. Net income fell to $4 million from $10.3 million from the same period a year ago.

Revenues rose almost 26% on a year-over-year basis to $46.5 million, largely in line with forecasts. Sales from subscription services rose 27% over the same period a year ago to $43.6 million and made up 94% of overall revenues for the quarter. Annual Recurring Revenue or ARR rose 26% from 3Q2022 to $181.8 million. Customer count ended the quarter at 3,679, an increase of 444 customers from the third quarter of 2022. Average contract value rose to $49,416 from $44,561.

Analyst Commentary & Balance Sheet:

Since third quarter results were posted, eight analyst firms including Stifel Nicolaus and Morgan Stanley have reiterated Buy/Outperform ratings on the stock. Several of these contained minor price target upward revisions and it should be noted. Price targets proffered range from $53 to $71 a share. Goldman Sachs maintained its Hold rating and $44 price target on the equity.

The company ended the third quarter with just under $220 million worth of cash and marketable securities on its balance sheet and listed no long-term debt. Free cash flow for the third quarter came in at $8.4 million, compared to just $600,000 from the same period a year ago. Late in November, Docebo announced that it would issue a substantial issuer bid. This will enable the company to repurchase for cancellation up to $100,000,000 of its outstanding common shares at a price of $55.00 each.

Verdict:

Docebo made 21 cents a share on $143 million in revenue in FY2022. The current analyst firm consensus has profits slipping to just six cents a share in FY2023 even as sales rise to some $180 million. They project profits to rebound to 49 cents a share in FY2024 as revenues rise an additional 23%.

The company has more than solid and consistent revenue growth, a clean balance sheet, is reducing share count, and should continue to benefit from the growth in the virtual workforce. That said, Docebo is just slightly profitable and trades for nearly nine times revenues and approximately 100 times FY2024E earnings per share. Hardly in bargain territory. Therefore, I will continue to pass on any investment recommendation around DCBO until valuation metrics become more compelling.

Learning is an ornament in prosperity, a refuge in adversity, and a provision in old age .”? Aristotle

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