Docebo Inc. (DCBO) Earnings Call Transcript

Good morning, everyone, and welcome to the Docebo's second quarter 2026 earnings call. [Operator Instructions] Right now, I'd like to turn the call over to Docebo's 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 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 fillings, 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 meanigns 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 Docebo's CEO, Alessio Artuffo; and our CFO, Brandon Farber. Krista, you can open up the line.

[Operator Instructions] Your first question comes from Robert Young with Canaccord Genuity.

First place, I'm sure there's lots of questions on this Forward Deployed Engineer model, so place I'd like to start. How is this going to work alongside the existing professional services motion? What's the impact do 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 FDE motion?

Good morning, Rob. It's Alessio. So you are correct. We are starting with hiring a foundational FDE that is intended so that we can build the playbook before we scale that practice further. The way we think about it is fairly straightforward. We think that on top of our upcoming release GA of AgentHub and Enterprise Knowledge, both planned in the early fall. We are going to build custom agent 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 validity challenge. And we are going to have these 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 AgentHub and Knowledge Enterprise (sic) [ Enterprise Knowledge ] 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 will 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. As we think about scaling, charging professional services, thus adding usage to our AI, whether that's through credits or fixed price, that's where it flips to gross margin. So it really depends on when does it get released, when do we start monetizing. So it's either going to be an R&D or COGS cost.

Okay. And then second question, just on the confidence in the second half acceleration of ARR. Maybe you could talk about where that's specifically coming from, what gets you the most excited? And then if you could touch on Q3 seasonality for the FedRAMP government opportunity alongside that, that'd be helpful. And I'll pass the line.

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 2025 during the conference call, we referred 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 broadly execution, we're headed in the direction where we thought that 2026 was going to show the results of the work we were doing. And when I unpack that, I think it's a story of 3 vectors, right? There was overall execution, where we made investments across the board over the past several years. There was a story of product with the acquisition of 365Talents and the acquisition of Zive, both. And frankly, a re-acceleration of shipping features in our core product as well, right? It's not only a story of buying technologies. And then I -- to characterize growth and re-acceleration, 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 cross-sell fashion, whether it's an implement fashion, and most times it's a hybrid of both. And shout out to partners like Deloitte and new partners like NIIT 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 net new. It's showing in expansion. It's showing international. And I like that very much because these multiple growth factors don't rely on just one segment doing all the work. And as far as the confidence for the future, it's very high. We're extremely pleased with the growth of our pipeline. We look at our pipeline in terms of deals that are significant and material in size about $500,000 and we think it's a really great time at Docebo and yes, very, very excited about the coming quarters. Now, as far as federal pipeline and quarter 3. 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 3 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.

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

Congrats on a great quarter. Alessio, I wanted to ask about the investments and decided to move into health care 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 the decision to move into health care? 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 health care organizations that you think Docebo can fill?

Yes. Awesome. Ryan, 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 health care market as we have studied it. We value this. 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 health care 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 health care 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 years of work to be in an optimal scenario to double our win rates. I think we have months of work as opposed to years of work. Now, health care 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 will tackle life sciences. Life sciences carries along a bit more complexity in terms of technical requirements, which we are already partially addressing, but we're preparing ourselves over the next 12 to 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 health care industry and we work closely with them. And also, when I mentioned the content network, health care is also a story of content, our technology being such that you can now aggregate multiple content partners and we can augment that part is going to be important for our health care customers. And listen, one further validation point. We know that in health care alone, there are organizations that are very sizable. Frankly, in ARR, they are comparable to Docebo in that range. All they do is health care, health care 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 growth factor. So, very excited about it.

Yes, super helpful context and color there. And then 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 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 horizontal applications versus moving more into vertically specific applications? Is the health care expansion being done with sort of a view of more of a, let's call it a shorter runway or limited opportunity within 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?

Yes. I think a bit the opposite of that. Like -- again, we've built Docebo up to where it is today as a horizontal player with the exception of government, which we started specializing in a while. We've always recognized that there is a greater benefit in the earlier stages of a company as being a generalist. As you grow up as a business, you realize that the generalist categorization starts 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 doing a great job with customers, you need to understand their business deeply and you need to address their needs deeply. And when you have, just for a sheer example, somebody in a sales executive capacity that at 9:00 a.m. in the morning has a conversation with a manufacturer, and at 11:00 a.m. with a security company and at 2:00 p.m. with a health care organization, 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 a motion around it. And the caveat there is, is there an 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 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.

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

Alessio, maybe a question for you on the skills side. 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?

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 365Talents. 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 6 months in, frankly, and our pipe targets, we've blown that up. We are very pleased with seeing the pipeline growth, including the 365Talents and Enterprise combined offering. While I can't tell you exactly the percentage of deals and attach rates, I don't know that that's something that we are necessarily 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, would have been -- we would not have been at the table with them had we not offered the capabilities of 365Talents. And to me that is more than an 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 ahead of schedule in that regard. I'm very pleased with our integration here. And additionally, I think the story wraps and it comes all together as we launch AgentHub 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. And again, I can't tell you how excited I am about 365Talents moving forward. More work to do. 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.

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

Hey, Erin. We have not seen that as of today. If anything, in H1, we've seen sales cycles decrease in a number of segments. Now, a lot of that is related to execution. 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 we're seeing fruits of that labor in H1. But the commentary that you're referring to of other software companies seeing elongated sales cycles is not something we're seeing today.

Sorry, Brandon, just to clarify, we were actually seeing headlines that sales cycles were decreasing, not elongating. So good to see that Docebo is seeing the same.

Your next question comes from the line of George Sutton with Craig-Hallum.

Alessio, you called out NIIT. 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. NIIT is a relatively new partner. I called them out in the context of our partner motion being a significant contributor to our ARR re-acceleration. Kudos to the partners and to our partnership teams and broadly our GTM teams for 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 regard a single partner as part of this, and NIIT is a relatively 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 it. 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 AgentHub, how can you give confidence to customers that you've built proper guardrails in to protect them?

Yes. Look, we -- 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 depth in this area. Our CTO and I have a very strong point of view on the value of Docebo operating in the enterprise space is [indiscernible] reliability and safety and security. So everything we're going to be building is going to have a strong point of view on safeguards and guardrail standards. And frankly, George, I think it's a new territory. And we're going to be working closely with our customers and their security officers to progress how we document this and how we give confidence to everyone that what we're building is as bulletproof as it can be.

Your next question comes from the line of Matthew VanVliet with Cantor Fitzgerald.

I guess as you look at expanding the product platform into health care and a couple of other areas you talked about today, and then integrating 365Talents, what is the view from here on future M&A and a broader capital allocation strategy?