Q2 2024 Docebo Inc Earnings Call

Speaker Change: Good morning, everyone, and welcome to the Docebo Q2 2024 Earnings Call. All participants are currently in listen-only mode. We will open the line for a question and answer session momentarily.

Operator: All participants are currently in listen-only mode. We will open the line for our question and answer session momentarily. Analysts can ask questions by pressing the star followed by the number one on their telephone keypad. To withdraw your question, please press star one as soon as I can time. We ask the analysts to limit themselves to two questions and return to the queue for any follow-ups. I'd now like to turn the call over to Decebo's Vice President of Investor Relations, Mike McCarthy. Please go ahead, Mike.

Speaker Change: Analysts can ask questions by pressing star followed by the number one on their telephone keypad. To withdraw your question please press star one a second time.

Speaker Change: 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.

Mike McCarthy: Thank you, operator. Early this morning, Docebo issued its Q2 2020 results. The press release, which included a link to management's prepared remarks and our quarterly investor slide deck, we're all posted to our investor relations with. 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.

Mike McCarthy: Thank you, operator. Earlier this morning, Docebo issued its Q2 2024 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.

Speaker Change: 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, the table 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. For more information, please visit www.fema.gov. Thank you.

Mike McCarthy: Such forward-looking information reflects the company's current views with respect to future events, but 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 statement. 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 CDAR and EDGAR. During the call, we will reference certain non-IFRS financial measures.

Speaker Change: 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.

Speaker Change: 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 CDAR and EDGAR.

Mike McCarthy: 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 MDNA for additional information regarding our non-IFRS natural, including reconciliation to the nearest RS measures.

Speaker Change: 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.

Speaker Change: Please see our MD&A for additional information regarding our non-IFRS financial measures.

Speaker Change: including reconciliations to the nearest IFRS measures. Please note that unless otherwise stated, all references to any financial figures are in US dollars.

Mike McCarthy: Please note that unless otherwise stated, all references to any financial figures are in U.S. Now, I'd like to turn the call over to Docebo's interim CEO, Alessio Artuffo, and our CFO, Sukaran Mehta. Operator, we're ready for the first call. Question. Thank you.

Speaker Change: Now, I'd like to turn the call over to Docebo's Interim CEO , Alessio Artuffo and our CFO , Sukaran Mehta.

Speaker Change: Operator, we're ready for the first call, question.

Speaker Change: Thank you. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again.

Speaker Change: If you are dialed in and listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.

Speaker Change: We kindly ask that you limit yourself to two questions and return to the queue for any follow-ups.

Speaker Change: Our first question today comes from the line of Suthan Sukumar with Stifel. Please go ahead.

Suthan Sukumar: Good morning, Jens and Karatana, on a strong quarter. For my first question, I wanted to touch on the Deloitte partnership. This is obviously a major name in the government's day, so great to see that name called out as a key partner here. And just kind of going through your prepared remarks, it sounds like this might be more of a strategic relationship than expected, you know, one that covers both government and commercial and reseller opportunities. Can you share a little more on the current scope and potential of this partnership?

Speaker Change: Alessio Artuffo, Brandon Farber, Sukaran Mehta, Claudio Erba, Michael McCarthy

Speaker Change: Good morning, gents, and congrats on a strong quarter.

Suthan Sukumar: For my first question, I wanted to touch on the Deloitte partnership, so this is obviously a major name in the government space, so great to see that name called out as a key partner here. And just kind of going through your prepared remarks, it sounds like...

Speaker Change: This might be more of a strategic relationship than expected, one that covers both government and commercial and reseller opportunities. Can you share a little more color on the current scope and potential of this partnership?

Unknown Executive: Good morning, everyone. Good morning, Sutton.

Alessio Artuffo: Good morning, everyone. Good morning, Suthan. Thanks for the question. Alessio speaking. In general, in terms of channel partnership advance and our strategic partners relationship, we are very, very excited.

Speaker Change: You are correct in stating that Deloitte is a marquee partnership and an absolute leader in the space. Look, they...

Speaker Change: They have an incredible human capital practice in North America, both in government and in the commercial space. If you think about

Speaker Change: The fact that they staff just over 15,000 people in the GPS practice alone and government, the public sector, that's a very impressive number. We have been working with them on this partnership for many months. This has been in the works.

Speaker Change: for quite a while, frankly.

Speaker Change: What this means for Docebo, let's just clarify first of all what CTS or Certified to Sell means in simple terms. It certifies Docebo to become an asset of Deloitte which Deloitte will white label and market throughout their

Speaker Change: respective commercial channels across both the commercial space and the government practices.

Speaker Change: So, of course, you know, we expect this to have a significant impact over time to our pipeline across both the gov and commercial space.

Speaker Change: and look another perhaps a notion that that we are very excited about because there's such a great firm that puts a lot of emphasis in

Alessio Artuffo: So, of course, we expect this to have a significant impact over time on our pipeline across both the Galvin commercial space and another, perhaps, notion that we are very excited about because there's such a great firm that puts a lot of emphasis on it. The Delegants of the processes that they run, you know, I think it's fair to say that when they work on an opportunity, they have a mechanic and a system of qualification baked into the organization that allows us to dedicate our resources to deals that are already highly screened and highly qualified, which in turn makes us a lot more efficient.

Speaker Change: The diligence of the processes that they run, you know, I think it's fair to say that when they work on an opportunity, they have a mechanic and a system of qualification baked in the organization that allows us

Speaker Change: To dedicate our resources in deals that are already highly screened and highly qualified, which in turn makes us a lot more efficient.

Speaker Change: Finally, I want to underscore our working with the leaders at Deloitte has been delightful. These are just top-notch HCM professionals, and we're just really proud of working with them and building a years-long relationship of success together.

Suthan Sukumar: Great, great. Thank you for that color.

Speaker Change: Great, great. Thank you for that color. My second question, I wanted to touch on the guidance. It was good to see the hired guide this quarter.

Speaker Change: Can you help unpack some of the moving pieces there that underlies your strength? I'm just curious if this is more a function of...

Speaker Change: a sustaining customer and win activity ahead or you know larger size of customers because I did notice an uptick there in ACV from large customers or are you seeing a lower impact from the S&B side.

Speaker Change: Yeah, morning Suthan Sukaran here. Yeah, the guidance that we provide reflects really, you know, we

Speaker Change: As we thought about our performance in the later part of this year,

Sukaran Mehta: We are seeing a relative strength, strength relative to what we got at the start of the year, specifically around our enterprise segment and some of the government customers that may come through in the later part of this year. So I'm reflecting that in my guide to kind of speak to some of the strength in that part of the segment that we work to. And this is consistent with what we said previously, right? So we've consistently focused moving up market. We should see some strength as we exit this year in that in that regards. And then to your point on the SMB side, it remains cautious. We talked about that. Those assumptions are pretty much in line with what we expected.

Suthan Sukumar: I think that's helpful. And it's a, in fact, excuse me, one last question, on day-force it, it sounds like you, you know, you guys have come to a positive resolution here. Can you, can you, can you speak to the current state of the relationship here and its potential?

Speaker Change: Thank you.

Speaker Change: Okay, great. Thanks. That's helpful. And if I could squeeze in one last question. On Day Force, it sounds like you've, you know, you guys have come to a positive resolution here. Can you speak to the current state of the relationship here and potential going forward?

Sukaran Mehta: Yeah, yeah. So, you know, in regards to DaveForce, as you can understand, in Q2, we settled the terms, which are confidentiality bound, but the legal action was resolved with DaveForce. You know, it was initiated by Docebo when DaveForce acquired Illumia, a small competitor in Europe. And really, you know, the dispute allows us to resolve it and then move forward and achieve three primary goals. You know, one, protecting the intellectual property of Docebo.

Speaker Change: Yeah, yeah. So, you know, in regards to Dave Forrest, as you can...

Speaker Change: Understand, in Q2, you know, we have settled the terms, which are confidentiality bound, but the legal action was resolved with Dayforce, you know, it was initiated by Docebo when Dayforce acquired Illumi, a small competitor in Europe .

Sukaran Mehta: Number two, you know, supporting our revenue base and the continuity of our revenue base. And number three, preserving a good partnership and a working relationship going forward. And so, you know, as you think about our channel partners, as well as, you know, including DaveForce and others, it's not only MHR and EY and DarwinBox, you know, what Alessio just alluded to in response to the Deloitte partnership; we are now creating multiple channel partners that will provide us with, you know, provide us with diversification and opportunities to grow these revenue streams.

Sukaran Mehta: And really, you know, the dispute allows us to resolve and then move forward and achieve three primary goals, you know, one, protecting the IP of Docebo, number two, you know, supporting our revenue base and continuity of our revenue base.

Speaker Change: And number three, preserving a good partnership and a working relationship going forward. And so, you know, as you think about our channel partners, as well as, you know, including Dave Forth and others, it's not only, you know, MHR and EY and DarwinBox, you know, what Alessio just alluded to in response to the Deloitte partnership, we are now creating multiple channel partners.

Speaker Change: You know, that will provide us, you know, provide us a diversification and opportunities to grow these revenue streams. And so you can expect that our goal is to continue to

Sukaran Mehta: And so, you can expect that our goal is to continue to grow these channel partners. And with the addition of our new leader, Travis Burke, who's joined the company as EVP of Corp Dev and partnerships, you know, we are certainly focusing our investments to drive more and more channel partners in the future.

Speaker Change: grow these channel partners and with the addition also of our new leader Travis Burke who's joined the company as EVP of Corp Dev and Partnerships, we are certainly focusing our investments to drive more and more channel partners in the future.

Suthan Sukumar: Great, thank you; I'll pass your life.

Speaker Change: Great. Thank you. I'll pass the line.

Operator: Our next question comes from the line of Ryan MacDonald with Needham. Please go ahead.

Speaker Change: Our next question comes from the line of Ryan MacDonald with Needham. Please go ahead.

Ryan Macdonald: Thanks for taking my questions and congrats on a great quarter. Maybe just to start with the topic of AI and generative AI. It was great to see in the prepared remarks sort of all the new solutions that are available or becoming available in the short term here. But I was intrigued by the comments around AI monetization. You just talk about your conversations with customers and sort of their appetite to pay for generative solutions with Docebo. And then, you know, how you might start thinking about pricing some of these new solutions, like the authoring solution. Thanks.

Ryan McDonald: Thanks for taking my questions and congrats on a great quarter. Maybe just to start with the topic of AI and generative AI. It was great to see in the prepared remarks sort of

Speaker Change: All of the new solutions that are available or becoming available in the short term here. But I was intrigued by the comments around AI monetization.

Speaker Change: Can you just talk about what your conversations with customers and sort of their appetite to pay for generative AI solutions with Docebo and then, you know, how you might start thinking about pricing some of these new solutions like the AI authoring solution? Thanks.

Alessio Artuffo: Good morning, Ryan. This is Alessio speaking. We're very active, and we have been for years on the AI front, as we have discussed many times. Shape was our, let's call it first, move it at the end, attempt at entering the GNI content creation market, and we did that well before the GNI boss of the past several months. In that time frame since 2021, we sold Shape to hundreds of customers, And with that alone, that's an advantage for us.

Speaker Change: We're very active and we have been for years on the AI front as we have discussed many times. SHAPE was our, let's call it, first mover attempt.

Speaker Change: at entering in the Gen-AI content creation market, and we did that well before the Gen-AI buzz of the past several months.

Speaker Change: In that time frame, since 2021, we sold shape to hundreds of customers.

Alessio Artuffo: We have learned a lot. So... We've taken a lot of those lessons and brought them back into the maturity model of our product on the AI side towards what we will be releasing shortly on the AI authoring side. We can think about that in the context of taking shape in evolving it, and you know, really, it is taking shape even stronger thanks to the feedback that our customers gave us.

Speaker Change: And with that alone, that's an advantage for us. We have learned a lot.

Speaker Change: So...

Speaker Change: We've taken a lot of those lessons and brought them back into a maturity model of our product on the AI side towards what we will be releasing shortly on the AI authoring side.

Speaker Change: We can think about that in the context of taking shape and evolving it and, you know, really it making shape even stronger thanks to the feedback that our customers gave us.

Alessio Artuffo: We have a lot of expectations for AI authoring in terms of success, and those expectations, we think of them in two ways: one, increasing our right to participate, and two, increasing our retention as well as customers, and more and more requests, a more advanced and sophisticated opportunity. But it doesn't stop at AI authoring in terms of monetization. That's just our upcoming first step.

Operator: Thank you. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are dialed in and listening via the loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your questions. We kindly ask that you limit yourselves to two questions and return to the queue for any follow-up. Our first question today comes from the line of Suthan Sukumar with Stiefel. Please go ahead.

Speaker Change: We have a lot of expectations for AI authoring in terms of success, and those expectations, we think of them in two ways. One, increasing our right to win.

Speaker Change: And two, increasing our retention as well, as customers more and more request a more advanced and sophisticated offering solution.

Speaker Change: But it doesn't stop at AI authoring in terms of monetization. That's just our upcoming first step. The next steps are going to be several, and we're at work on many fronts.

Alessio Artuffo: The next steps are going to be several, and we're at work on many fronts. One that we've spoken to and are excited about is a solution that allows for virtual role play and virtual cooking. This solution is very much Gen-AI focused; we're already at work on it, we have said that this will be an early new year development, and we have a lot of expectation for this, and it will be highly monetizable.

Speaker Change: one that we've spoken to and what're excited about is a solution that allows for the virtual roadplay and virtual coachure

Speaker Change: This solution is very much Gen-AI focused. We're already at work on it. We have said that this will be an early New Year development.

Speaker Change: And we have also about this a lot of expectation and it will be highly monetizable.

Alessio Artuffo: You can expect an acceleration of additional AI capabilities and features in the table below. And, in general, look, we think about AI features also strengthening our core platform. There are several things that Docebo does already that are AI-based, and we'll do even more, but things like semantic search, recommending content, auto-tagging content, and the big topic, the topic of skills ontology management, meaning the ability to translate skills taxonomies across It's a very complex capability that we are going to not only offer, but we are going to invest in even further because the skills economy is here, and it's a very, very pervasive need that large organizations have. But even further, generating quizzes with AI and AI-generated voiceovers and translations.

Speaker Change: Now.

Speaker Change: You can expect an acceleration of additional AI capabilities and features in Docebo.

Speaker Change: And in general, look, we think about AI features also strengthening our core platform. There are several things that Docebo does already that are AI based.

Speaker Change: And we'll do even more about things like…

Speaker Change: Semantic Search

Speaker Change: recommending content, auto-tagging content, and the big topic, the topic of skills ontology management, meaning the ability to translate skills, taxonomies across varying systems. It's a very complex capability.

Speaker Change: that we are going to not only offer but are going to invest on even further because the skills economy is here and it's a very, very pervasive need that large organizations have.

Speaker Change: But even further, generating quizzes with AI, and AI generated the voiceovers and translation.

Alessio Artuffo: There's a lot that's coming up. I would wrap up the topic of AI by saying that what we're noticing from a trend perspective is that customers are becoming more and more educated on this front. There was a lot more, I would say, but the curve is now becoming one where customers are educated and are looking for business benefits as opposed to flashy features. And this makes me very happy because the Docebo team is really focused on building products that solve real business problems. And so we will excite our customers with the products that we are currently building.

Speaker Change: There's a lot that's coming up.

Speaker Change: I would wrap the topic of AI by saying that what we're noticing from a trend perspective

Speaker Change: Is that customers are becoming more and more educated on this front?

Speaker Change: There was a lot more, I would say the curve is now becoming one where customers are educated and are looking for business benefits as opposed to flashy features.

Speaker Change: And this makes me very happy because the Docebo team is really focused at building products that solve real business problems, and so we will excite our customers with the products that we are building currently.

Ryan Macdonald: I appreciate the coloring content and am looking forward to more updates on AI at Inspire later this year. Maybe you have a follow-up question, want to ask about sort of as you continue to roll out the new pricing methodology and strategy to sort of net new customers and existing customers upon renewal. Just curious to hear sort of what sort of feedback you've been hearing from customers on the methodology thus far, any pushback. And I think there's sort of a goal here to simplify the buying process and shorten the sales cycle. So, to the extent possible, any use cases you've seen so far where you're actually sort of seeing those benefits of a shorter sales cycle.

Speaker Change: I appreciate the color and content and looking forward to more updates on AI at Inspire later this year.

Speaker Change: Maybe as a follow-up, I wanted to ask about sort of the, as you continue to roll out the new pricing methodology and strategy to sort of net new customers and existing upon renewal, just

Speaker Change: I'm curious to hear sort of what sort of feedback you've been hearing from customers on the methodology thus far, any pushback?

Speaker Change: And I think there's sort of a goal here to simplify the buying process and shorten the sales cycle. So to the extent possible, you know, any use cases you've seen so far where you're actually sort of seeing those benefits of a shorter sales cycle. Thanks.

Speaker Change: Yeah. Hi, Ryan. Morning. Sukaran here. I'll take that. You know, the pricing, so just as a summary, the pricing changes that we made went live at the start of Q2. And really what has been important to highlight is that, you know, historically the company has priced, as we look at the pricing models on an a la carte basis, and we've moved to what we call, you know, based on the value we provide the customer on the core use case. So think about it as a core bundle that we, where we sell to our customers based on their actual use case and enhance.

Sukaran Mehta: Yeah, the guidance that we provide reflects really, you know, we as we thought about the year, and we thought about our performance in the latter part of this year, we are seeing relative strength, strength relative to what we guided at the start of the year, specifically around our enterprise segment and some of the government customers that may come through in the latter part of this year. So I'm reflecting that in my guide to kind of speak to some of the strengths and that part of the segment that we work in.

Speaker Change: And any enhancements they require are part of an add-on. And so what this has done is effectively moved from what we would think as an a la carte model to driving value to the customer. And what that in effect has meant is that we are now discussing the problems that we can solve with the customer and the value Docebo brings to them.

Speaker Change: The new pricing methodology has actually been quite successful, I would say, at the onset. This is only the first quarter, so we'll provide more insights as we get through the later part of this year. What I'm certainly seeing is two things.

Speaker Change: As we are positioning our capabilities to the customer, we're not only speaking to value, but we're actually providing incremental capabilities as part of the whole package that is making the discussions much more meaningful. Number two, as you think about objection handling and overall deal discussions, this accelerates deal cycles.

Speaker Change: And so on the net new business that where this was initially rolled out to.

Speaker Change: We have certainly seen that positive impact in terms of how we approach our customers from a go-to-market perspective.

Speaker Change: And then the second thing, I will say that it's early days, but we are also, you know, like I said, on the renewal book of business, this is a much longer exercise because there's a lot of terms and conditions and all the nuances that we have to be mindful of that the previous customer signed up or the current customer signed up to.

Speaker Change: But we are actually also seeing, you know, with the new capabilities that are coming out and have come out this year, we see that an opportunity to also move a reasonably good book of our business to the U.S. I think with the capabilities that are coming on board as well.

Ryan Macdonald: I just want to appreciate the color of hop back in the cube because that's it again.

DeKalb: Excellent. Appreciate it. I'll call her. I'll hop back in the queue.

Operator: Our next question comes from the line of George Sutton with Craig Hallam. Please go ahead.

Speaker Change: Thank you. Thank you.

Speaker Change: Our next question comes from the line of George Sutton with Craig Hallam. Please go ahead.

George Sutton: Thank you, and nice results. So I'm curious if we could talk about the FedRAMP timing. You mentioned it's on track. I'm curious if we could talk about the best guess in terms of when that would go live and then just remind us what the potential opportunities that would expand would be from that.

george satton: Thank you, and nice results. So, I'm curious if we could talk about the FedRAMP timing, you mentioned it's on track, I'm curious if we could talk about best guess in terms of when that would go live, and then just remind us what the potential opportunities that would expand would be from that.

Alessio Artuffo: Good morning, I'm Alessio speaking. Chertho, FedRAMP, and government in general are a very, very hot topic these days in Docebo. They are a big area of excitement. And to answer your question, our efforts in terms of expectations and timing are very consistent with our plans. Now, in terms of an exact date, nobody really can put an exact date on this because there are a lot of external factors that we can absolutely influence but not ultimately control.

Alessio Artuffo: Good morning, Alessio speaking.

Speaker Change: Sure, so...

Speaker Change: FedRAMP and government in general are a very, very hot topic these days in Docebo. They are a big area of excitement.

Speaker Change: And to answer your question, our efforts in terms of expectations and timing are very consistent with our planning.

Speaker Change: Now, in terms of an exact date, nobody really can put an exact date to this because there are a lot of external factors that we can absolutely influence, but not ultimately control.

Alessio Artuffo: Art gold to be a clear and secure response and to swiftly move to be granted authority to operate, which effectively opens up the gates to accessing FedRAMP opportunities in the market. What we've done over the past few months is completed our systems and processes and controls readiness, so we are ready for a sponsor to take us and pick us the select us and go through the process together.

Speaker Change: Our goal, to be clear, is to secure a sponsor.

Speaker Change: and to swiftly move to be granted an authority to operate, which effectively opens up the gates of accessing

Speaker Change: the fad ramp opportunities in the market now

Speaker Change: What we've done over the past few months, and we have completed, is our systems and processes and controls readiness. So we are ready for a sponsor to take us and to pick us, select us, and go through the process together.

Alessio Artuffo: The great news is that we feel that we're having the right conversations with agencies and that these conversations will yield the outcome that we want, in terms of impact. You know, in the past three years alone, from a new budget allocation to new initiatives in LMS that we were able to find, more than $200 million have been spent on new initiatives. This, again, does not include reoccurring data.

Speaker Change: The great news is that we feel that we have, we're having the right conversations with agencies, and that these conversations will yield the outcome that we want.

Speaker Change: In terms of impact.

Speaker Change: You know, in the past three years alone, from a new budget allocation to new initiatives in LMS that we were able to find, more than $200 million were spent on new initiatives. This, again, does not include reoccurring data.

Alessio Artuffo: And, and, you know, that alone gives us a very good perspective as to the massive opportunity, particularly because, when we think about the competition in the commercial space, we outperform them beat. Functionally speaking, every day, um, Yeah, during the quarter, in terms of we just spoke about the Deloitte success, I think in this context. Once we get FedRAMP approved, that will accelerate even further opportunities with the Lloyds, thanks to the CTS program and further evolution of that partnership.

Speaker Change: And, you know, that alone gives us a very good perspective as to the massive opportunity, particularly because

Speaker Change: The competition that operates within the space currently is one that, when we think about the same competition in the commercial space, we outperform, outbeat

Speaker Change: Functionally speaking, every day.

Speaker Change: Yeah, during the quarter, in terms of, we just spoke to the Deloitte success, I think in this context.

Speaker Change: Once we get FedRAMP

Speaker Change: Approved.

Speaker Change: That accelerates even further our opportunities with Deloitte, thanks to the CTS program and further evolution of that partnership.

Alessio Artuffo: But even directly, Docebo, irrespective of Deloitte, just to be clear, has built a government engine and a government team that is fighting on all cylinders, not just in federal but also in the other massive opportunity, which is state, local, and education, where we're growing our pipeline and winning business, and our percentage of revenue relative to our total revenue continues to grow. Yes, Fed Ramp is a big priority. We are on it, but I also want to remind you of the bigger opportunity that it's led us to, which is here, it's now, and we're executing on it.

Speaker Change: But even directly, Docebo, irrespective of the law, just to be clear, has built a government engine and a government team.

Speaker Change: There is fighting on all cylinders, not just in federal, but also in the other massive opportunity, which is state, local, and education, where we're growing our pipeline and winning business, and our percentage of revenue relative to our total revenue continues to grow. And so,

Speaker Change: Yes, FedRAMP is a big priority.

Speaker Change: We are on it, but I also want to remind of the big opportunity that is LED, which is here, it's now, and we're executing on it.

George Sutton: Perfect. One other thing that I found interesting, the Communities module seems like a very practical way to expand more aggressively into the external market, which is so important. Can you just give us a sense of what this is replacing or what significance this has in terms of a new capability?

Speaker Change: Perfect. One other thing that I found interesting, the communities module seems like a very practical way to expand more aggressively into the external market, which is so important. Can you just give us a sense of what this is replacing or what significance this is in terms of a new capability? Thank you.

Alessio Artuffo: So, BAM! Covenanty is a... was, first of all, from a thesis standpoint, the feature, the set of capabilities of communities was very, very intended to support our CX or customer experience capabilities and support its success and penetration in the market. If I look back at this quarter's new logos, as well as this quarter's significance in sales, on my whiteboard, there's a lot of CX on it. And so.

Speaker Change: perfect

Speaker Change: Communities

Speaker Change: was the first of all from a feasist and pointer

Speaker Change: The feature, the set of capabilities of communities was very, very intended to support our CX, or customer experience, capabilities and supporting its success and penetration in the market.

Speaker Change: If I look back at this quarter's new logos, as well as this quarter's significance of selves,

Speaker Change: On my whiteboard, there's a lot of CX on it.

Alessio Artuffo: That is just reflective of the fact that our strategy, which has always been to become the platform that addresses the needs of organizations on both the CX and EX side, is playing in the direction that we want it to. How does Communities fit in this? An LMS allows primarily for learning, delivery, and dissemination. What it doesn't necessarily cater to is a deep form of collaboration among audiences involved in the learning process.

Speaker Change: And so...

Speaker Change: That is just reflective of the fact that our strategy

Speaker Change: That has always been to become the platform that addresses the needs of organizations on both the CX and EX side is playing in the direction that we want it. How does Communities fit in this?

Speaker Change: An LMS allows primarily for learning, delivery, and dissemination.

Speaker Change: What it doesn't cater to necessarily is a deep form of collaboration of audiences involved in the learning processes.

Alessio Artuffo: There are various scenarios and use cases that we've learned from our customers where a community technology is necessary in the context of a learning experience. We have a top-year system integrator that you can implement these use cases. So, Chapo itself, as is so in community, is a softer company for its own cost.

Speaker Change: There are various scenarios and use cases that we've learned of our customers where a community technology is necessary in the context of a learning experience.

Speaker Change: We have top tier system integrators that implement these use cases. Docebo itself has its own community as a software company for its own customers.

Alessio Artuffo: It was very clear that this... Capabiliti is a pervasive need, and so we bought peer boards, which was a small company, and built on top of it. Market readiness and ability to market communities will start on August 15. We feel very, very excited about it. We are going to really focus on its success at launch but also the continued iteration to build features after features after features at a great pace for our customers.

Speaker Change: It was very clear that this

Speaker Change: Capability is a pervasive need, and so we bought PeerBoard that was a small company and built on top of it.

Speaker Change: Market readiness and ability to market communities will start on August 15th.

Speaker Change: We feel very, very excited about it. We are going to...

Speaker Change: really focused on its success at launch, but also the continued iteration to build features after feature after feature at a great pace for our customers. And I want to say.

Alessio Artuffo: And I want to say the Beta Programme as the running for these new modules and products, and the community's early days results of those battles were very encouraging with many funders or companies saying, we're going to buy you in that. So, of course, it's early days, and it's early to say exact figures for this module, but I'm hoping you can appreciate how any ties to our long-term strategy further differentiates us and creates an opportunity to increase our right to win and our average ACV.

Speaker Change: Beta programs have been running for these new modules and products, and the community's early days results of those betas have been very encouraging, with many end-raisers or companies saying, we want to buy during beta.

Speaker Change: So, of course, it's early days.

Speaker Change: And it's early to say exact figures for this module, but I'm hoping you can appreciate how A ties to our long-term strategy, further differentiates us, and creates an opportunity to increase our right to win and our average ACV.

George Sutton: Perfect good stuff, thank you.

Operator: Our next question comes from the line of Josh Baer with Morgan Stanley. Please go ahead. Thanks for the question, and congratulations on a great quarter.

Speaker Change: Perfect, good stuff, thank you.

Speaker Change: Our next question comes from the line of Josh Baer with Morgan Stanley . Please go ahead.

Josh Baer: Thanks for the question, and congrats on a great quarter. Looking at the growth pillars, you got external and enterprise government, broader distribution, partnerships, and channels. I was wondering where wall-to-wall, LMS deployments fit in, is that a focus area, or are you seeing traction in ripping and replacing like a C vendors for wall-to-wall, LMS, or is the focus more to land and expand, adding use cases, departments, and products over time.

Speaker Change: Thanks for the question, and congrats on a great quarter. Looking at the growth pillars, we've got external and enterprise, government, broader distribution, partnerships, and channels. I'm wondering where wall-to-wall LMS deployments

Speaker Change: Is that a focus area, or are you seeing traction in ripping and replacing legacy vendors for wall-to-wall LMS, or is the focus more land and expand, adding use cases, departments, and products over time?

Josh: Hi Josh.

Alessio Artuffo: Our focus is really to position ourselves as the platform that you know suits the needs of larger organizations across multiple use cases. One interesting data point is, for every 10 customers we have signed in the past quarter, Of them, I've chosen Docebo for two or more use cases. Pum, I think that the other data point that I'd like to emphasize in the context of your question, and I want to address the wall-to-wall or end-to-end concept.

Speaker Change: Our focus is really to position ourselves as the platform that, you know,

Sukaran Mehta: Yes, Ryan Maureen, and Sukaran here, I'll take that, you know, as a pricing, so just as a summary of the pricing changes that we made at the start of Q2, and really what it is important to highlight is that, you know, historically, the company has priced as we look at the pricing models and all our card bases, and we've moved to what we call, you know, based on the value we provide the So think about it as a core bundle that we sell to our customers based on their actual use case and enhancement, and any enhancement they require is part of an add-on.

Speaker Change: suits the needs of large organizations across multiple use cases. One interesting data point is

Speaker Change: For every 10 customers we have signed in the past quarter, 8 of them have chosen Docebo for 2 or more use cases.

Speaker Change: I think that the other data point that I'd like to underscore in the context of your question, and I want to address the wall-to-wall or end-to-end concept, is if I think back of the investments we put in place in order to grow

Alessio Artuffo: If I think back on the investments we put in place in order to grow, our average customer profile, a deal customer profile, and make the table. More Super Bowls for companies that want to implement multiple youth cases, just think about the fact that in the past 24 months, in the past few years, our new logo is TV Group. About 70% of what was the score of $71,000, and that's not, that's not.

Speaker Change: our average customer profile, ideal customer profile, and make Docebo more suitable for companies that want to implement multiple use cases. Just think about the fact that in the past 24 months,

Speaker Change: In the past two years, our new logo ECV grew.

Speaker Change: about 70% to what was this quarter, $71,000.

Alessio Artuffo: Consistent with our decision to grow our business by embracing more E.X. employee experience base use cases and C.X. use cases, i.e., we're investing, putting money at work in the product to strengthen its capabilities. There are Crossboats, the EXID, employee experience, and CSI. There is no doubt in my mind that this is the number one differentiating factor today for Docebo. This ability to really cover the majority of the use cases and to be a feature-rich platform.

Speaker Change: Inconsistent with our decision to grow our business by embracing more EX, Employee Experience Based Use Cases and CX Use Cases.

Speaker Change: i.e. we're investing, putting money at work in the product to strengthen capabilities,

Speaker Change: that are across both the EX side, employee experience, and CF side.

Speaker Change: There is no doubt in my mind that

Speaker Change: This is the number one differentiating factor today of Docebo, this ability to really cover the majority of the use cases and to be a feature-rich platform.

Alessio Artuffo: The thing that I obsess about a lot is maintaining this competitive advantage, and in order to maintain it and to grow it, our job and our focus is to continue to grow the capabilities of our platform in both areas, making, effectively, that bar that we've set very high, always harder and harder and harder to reach for those competitors that try to reach us in terms of competitiveness, I think. Yeah, that wraps it up from up to me.

Speaker Change: The thing that I obsess about a lot is maintaining this competitive advantage.

Speaker Change: And in order to maintain it and to grow it, our job and our focus is to continue to grow the capabilities of our platform.

Speaker Change: In both areas, making effectively that bar that we've set very high, always harder and harder and harder to reach for those competitors that try to reach us in terms of competitiveness.

Speaker Change: I think. Okay.

Josh Baer: Yeah, that's really helpful, thank you. And then I was just hoping that you could comment, I know Enterprise and Government are very strong, and I was just hoping you could give an update on what you're seeing in the SMB, just as far as the seed optimizations, any state-like stabilization there, same better words. Hey, Josh, morning, Sukar.

Speaker Change: it

Speaker Change: Yeah, that wraps it up for me.

Speaker Change: yeah that that's really helpful thank you and then was just hoping that

Speaker Change: you could comment a no enterprise and government very strong was just hoping you could give an update on on what you're seeing the m b just as far as that the seat optimizations any step like stabilization there are saying better worse thanks

Sukaran Mehta: Hey, Josh morning, Sukaran here, I'll take that one. Yeah, I would say it's pretty much consistent, but we saw what we saw last time, our remains cautious, it's a cautious fire, as you think about the renewals cycles, you know, the macro is probably more in our world, more sensitive to that type of customer. So it remains consistent from our perspective, but I think what's important also from what we speak into is that the focus from our company perspective is being, you know, we've talked about moving a market, mid to large enterprise customers and government and our investments, whether you think about inbound, outbound system integrators, channel partners are driving the pipeline in the right place, meaning where we have the right to win and multiple, multiple use cases that we can serve in these organizations.

Sukaran Mehta: Hey, Josh, Morning Sukaran here. I'll take that one. Yeah, I would say it's pretty much consistent. What we saw, what we saw last quarter remains cautious. It's a cautious buyer as you think about the renewal cycles.

Sukaran Mehta: You know, the macro is probably more, in our world, more sensitive to that type of customer, so it remains consistent from our perspective. But I think

Speaker Change: What's important also from what we're speaking to is that the focus from a company perspective is being, you know, we've talked about moving apart mid-to-large enterprise customers and government and our investments, whether you think about inbound, outbound, system integrators, channel partners.

Speaker Change: are driving the pipeline in the right place, meaning where we have the right to win and multiple use cases that we can serve in these organizations.

Speaker Change: And so, we'll continue to execute in that regards. I think what you're also seeing, one thing that's important in this cycle is that, of course,

Speaker Change: Every company is trying to make sure that they have enough of a pipeline coverage so you have to drive a slightly higher pipeline, but we're also doing it in a way that is...

Speaker Change: that is efficient because do you think about system integrators and others that drive my pipeline outside of the the low end of the market more in the midmarket large enterprise government they also bring advanced age of pipeline too so i think

Speaker Change: those are important factors as you think through theseal cycles how we generate that pipeline where we're moving you know the numers that areunless you spoke about are important as we move forward in in the next few quarters you'll see that our focus

Speaker Change: It's not necessarily on customer count per se, it's more on the quality of the revenue that we bring in and sustain over an extended period of time from an LTV to CAC perspective, and that's where

Speaker Change: the assembly market we pualledout in the past we'll continue to serve that market from a competitive landscape perspective and but our more primary focus remains midmarket large enterprise nment

Operator: Our next question comes from the line of Robert Young with Canacord Genuity. Please go ahead.

Speaker Change: Great, thank you.

Speaker Change: our next question comes from the line of robert young with canaccorduity please go ahead

Robert Young: Hi, good morning. I just wanted to get a little more context from you on the steady decline in the customer ads per quarter, and I know you addressed that around the shift towards mid-market and larger, but I mean, for someone who's looking at these numbers and perhaps taking away a more negative Pigway here, and given that ACV really hasn't inflected up over the last couple of quarters, I'm curious about how you look at that on a quarter or a quarter basis that continued drop in new customer ads, just maybe a summary of what's going on there.

Robert Young: hi good morning just wanted to get a little more context from from you on the the state decline in the customer ads per quarter and i know you've j you address that around

Speaker Change: And given that ACV really hasn't inflected up over the last couple of quarters,

Speaker Change: I'm curious about how you look at that on a quarter-over-quarter basis, that continued drop in new customer ads. Just maybe a summary of what's going on there.

Sukaran Mehta: Yeah, Rob, I think this is a good question, an important one, you know, for us as a business, and as I just spoke to the response to Josh's question earlier before you, we are focused on driving our business where we see the best-in-class unit economics and where the growth is from an ACB perspective. Actually, the one quick point is ACB has gone up since last quarter from 59 to 71K. So, if you look at Q4 being the strongest quarter, we are actually at the same levels as Q4 this quarter too from an ACB perspective.

Speaker Change: Yeah, Rob, I think, yeah, this is a good question, an important one, you know, for us as a business, and as I just spoke to the response to Josh's question earlier before you with that.

Speaker Change: we are focused on driving our business

Speaker Change: where we know we see the best in-class unit economics and where the growth is from an accd perspective actually the one quick point is acv is gone up since last quarter from fifty nine to seventy one k so if you look at

Sukaran Mehta: But the reality is that as we move forward in the business, you know, the customers that we add are not necessarily a good indicator relative to the growth we are showing overall from a revenue perspective. You know, if you just look at the enterprise customer cohorts, the customers that I speak about, the mid-to-large enterprise customers, we grew that business 30% year over year. And I can potentially have one large enterprise customer wipe out 10 to 20 SMB customers in one win.

Speaker Change: Q4 being the strongest quarter, we actually are at the same level as Q4 this quarter too.

Speaker Change: from an accd perspective but

Robert Young: But the reality is that as we move forward in the business, you know...

Robert Young: The customers that we add...

Speaker Change: is not necessarily a good indicator relative to the growth we are showing overall from a revenue perspective. You know, if you just look at the enterprise customer cohorts, the customers that I speak about, the mid to large enterprise customers, we grew that business 30% year over year.

Speaker Change: and i can you know we can can potentially have one large in or right customer wipe out ten to twenty s sm customers in one win so if you try andto do the map around customer at the acv i don't think that's necessarily going to be a good indicator of looking at the business going forward

Sukaran Mehta: So, if you try and do the math around customer ads and ACB, I don't think that's necessarily going to be a good indicator of how the business is going forward. And so, that's really where I would kind of highlight the view because historically, I understand that over the last four years when we started giving this disclosure, it was important. But as we move forward and add large enterprise mid-market customers, I think you can expect that the customer ad will become less relevant rather than the revenue we add overall.

Speaker Change: And so that that that's really where I would kind of kind of highlight the view because historically I understand over the last four years when we started giving this

Speaker Change: This disclosure, it was important, but as we move forward and add large enterprise mid-market customers, I think you can expect that the customer ad becomes less relevant rather than the revenue we add overall.

Robert Young: Okay, and then you had some large deals in the quarter, and the press release looked like larger deals. As you look at the pipeline, would you say that there are very large deals, like mega deals, sort of on long lines like Amazon, Google, etc., that are still in the pipeline? And like, are there any in the current quarter that would have been, you know, close to that size? Maybe you just sort out the different cohorts of size of customers in the pipeline that you can help me with in any way, and I'll pass the line. Yeah, Rob, just generally.

Speaker Change: Okay, and then you had some large deals in the quarter and the press release looked like larger deals.

Speaker Change: if a look at the pipeline

Speaker Change: Would you say that there are very large deals, like mega deals, sort of along the lines of Amazon, Google, etc.?

Speaker Change: that are still in the pipeline and like are there any in the current quarter that would have been close to that size maybe you just sort break out to the different courts of size of customers in the pipeline that if you can't in anyway and i'll last line

Sukaran Mehta: Yeah, Rob, just generally, you should think about the customer deals that are in the pipeline, I'll speak to those in a second, but the ones that were in the quarter, these are large customers, large six-figure deals. And also, one of the things that's important with the customers we serve is that, if you look at an example like Databricks this quarter, we continue to expand. It's not just about what we get at the beginning; we continue to expand, especially if you think about the CX learning, whether it's customer ed or partner ed. You will see that the customers, as they see their products and capabilities being delivered from a learning perspective to their end users, that adoption also increases.

Speaker Change: Yeah, Rob, just generally, you should think about the customer deals that are in the pipeline. I'll speak to in a second, but the ones that were in the quarter.

Speaker Change: These are large customers, large, six-figure deals, you know, and also one of the things that's important with the customers we serve is that, you know, if you look at an example like Databricks this quarter, we continue to expand

Speaker Change: It's not just about what we get in the onset, we continue to expand, especially as you think about the...

Speaker Change: CX Learning, whether it's customer ed, partner ed.

Speaker Change: You will see that the customers, as they see their products and capabilities being delivered from a learning perspective to their end users, that adoption also increases. So, you know, the Databricks team is important to be mindful of as you think about the names that, for example, Axon this quarter, or the cybersecurity company that we also won this quarter.

Sukaran Mehta: So, the Databricks team is important to be mindful of as you think about the names that, for example, Axon this quarter or the cybersecurity company that we also won this quarter. These are customer education platforms that will expand over time. But to answer your question, this quarter, these are healthy six-figure deals, closer to seven-figure. And also, the pipeline, I've said this before, as we look at the pipeline, there are certainly large opportunities in the pipeline. We call them strategic, meaning seven figures and above.

Speaker Change: These are customer education platforms that will expand over time, but to answer your question, this quarter, these are healthy six-figure deals, closer to seven-figure, and also

Speaker Change: the pipeline i've said this before you know as we look at the pipeline that are there are certainly large opportunities in the pipelines we call them and strategic meaning seven figures in above in a things for those type of opportunities

Sukaran Mehta: And I think for those types of opportunities, as we get closer and absolutely certain of the timing of the closure of those deals, until that moment, I certainly don't forecast them, but you are right, there are certainly a number of opportunities that are large in our pipeline that we are excited about, both in government and enterprise customers.

Speaker Change: As we get closer...

Speaker Change: An absolute certain in the timing of the closure of those deals until that moment, you know, I certainly don't forecast them, but...

Speaker Change: you are right there are certainly a number of opportunities that are large in our pipeline that we are excited about both in government and enterprise customers

Operator: Our next question comes from the line of Erin Kyle with CIBC. Please go ahead.

Speaker Change: Thank you.

Speaker Change: Thanks.

Speaker Change: Our next question comes from the line of Aaron Kyle with CIBC. Please go ahead.

Erin Kyle: Hi, good morning; it's Erin Kyle on for Stephanie Price. Maybe if I could just ask a question on your capital allocation priorities when it comes to M&A versus share buybacks, and how are you thinking about check-ins at this point? And then, maybe just related, if you could talk about your appetite for M&A versus making organic growth investments as well.

Speaker Change: Hi, good morning. It's Erin Kylong for Stephanie Price.

Erin Kylong: Maybe if I could just ask a question on your capital allocation priorities when it comes to M&A versus share buybacks, and how are you thinking about check-ins at this point? And then maybe just related, if you could talk about your appetite for M&A versus making organic growth investments as well.

Speaker Change: sure iron

Speaker Change: Look uh....

Speaker Change: In the past, for sure, we have not approached M&A with very sizable acquisitions. That's a fact.

Alessio Artuffo: We have focused our efforts on continuing to build our platform from within and have brought on board smaller entities like peer boards and, as you go, to accelerate our advanced strategic initiatives like communities, as we discuss just now, and then the edu go from the very strategic, very important for AI acceleration. But what do we see today? You know, we have both our capital structure and free cash flow generation. They provide us with a great deal of opportunity and flexibility. One of the things that we said recently is that we brought on board a gentleman by the name of Travis Burke. Uh, who is there?

Speaker Change: We have focused our efforts on continuing to build our platform from within and have brought on board smaller entities like PeerBoard and EduGo to accelerate our advance in strategic

Speaker Change: Aspects like communities, as we discussed just now, and on the edu-goal front, the very strategic, very important for AI acceleration.

Speaker Change: But where we sit today, you know, we have both our capital structure and free cash flow generation. They provide us with a great deal of opportunity and flexibility both.

Speaker Change: One of the things that we said recently that we brought on board a gentleman by the name of Travis Burke.

Alessio Artuffo: Very Senior Corporate at Professional to really help us in the Dean, Definition, and Execution of our Hope That Plants. At this point, look, we're really thinking very deeply about quality investments; they have to feed our long-term vision for the business. The Priority Year Erin is creating value for customers and value for prospects, enriching our solution and growing it horizontally, and winning more market share. What I would really not keen to do is to double, triple, and triple overlapped capabilities because we have seen what that does on the receiving end by talking to customers that are working with companies that are doing that, and we ourselves are reaping the benefits of that strategy.

Speaker Change: whoisa

Speaker Change: very senior corporate ed professional to really help us

Speaker Change: in the definition and execution of our cope that plants

Speaker Change: So

Speaker Change: at this point look we

Speaker Change: We're really thinking very deeply about quality investments. They have to fit our long-term vision for the business.

Speaker Change: The priority here, Aaron, is creating value. Value for the customers and value for the prospects.

Aaron Kyle: and reaching our solution and growing it or izonally and wining need more market share what i would we are not keen to do is to double triple overlap capabilities

Aaron Kyle: because we have seen what that does on the receiving end by talking to customers that are working with companies that are doing that and we ourselves are reaping the benefits of that strategy.

Erin Kyle: [inaudible] Thank you. That's helpful to cover there. And then maybe I can just switch gears.

Speaker Change: Okay, thank you. Yeah, yeah. I'm sorry.

Speaker Change: Thank you, that's helpful color there.

Sukaran Mehta: And then maybe I can just switch gears, question for you Sukaran, on cost optimization. So it looks like your G&A expense declined as a percentage of revenue by about 50 basis points this quarter.

Sukaran Mehta: Is that sort of the pace you should be modeling for a DNA optimization sort of quarter over quarter or how should we think about that? And is there a longer term target that you can point to here?

Erin Kyle: Question for you, Sukaran, on cost optimization. So it's like your G&A expense declined as a percentage of revenue by about 50 basis points this quarter. Is that sort of the pace you should be modeling for G&A optimization, sort of quarter over quarter? Or how should we think about that? And is there a longer-term target that you can point to here?

Sukaran Mehta: Yeah, it's a good question. I mean, maybe you're asking me a good question prior to Inspire without giving me some update during the session.

Speaker Change: yeahit's a good question mean maybe you're asking a good question prior to inspire what i' gi some update there at the in the sessction but i think they'was simple way to think about g n na businesses

Sukaran Mehta: But I think the simple way to think about G&A in this business is, you know, you've seen for the last six to seven quarters, G&A has been either held flat or actually down on an absolute dollar basis. And I think you can just see that this is the gift that should keep giving from an operating leverage perspective. And, you know, will be an important lever as we kind of continue to show operating leverage. So I think that's really the simple way to think about it. Generally, the absolute dollar should be relatively flat.

Speaker Change: You know, you've seen for the last six to seven quarters, GNA has been either held flat or actually down on an absolute dollar basis. And I think...

Speaker Change: You can get it.

Speaker Change: This is the gift that should keep giving from an operating leverage perspective.

Aaron Kyle: wewillll be an important lever as we kind of continue to show him operating leverage so ithink that's really the simple way to think about it is know generally

Sukaran Mehta: And we've executed that by, and the reason for that, most importantly, is also because we've made significant investments in systems and capabilities that, from an automation perspective, whether it's finance, HR, and even in sales and marketing, the efficiencies that you're seeing are because of the major rollout we had last year from a Salesforce 2.0 rollout perspective. And so that is where G&A is going to continue to deliver from an operational leverage perspective.

Aaron Kyle: The absolute dollar should be relatively flat, and we've executed that by, and the reason for that, most importantly, is also because we've made significant investments in systems and capabilities

Aaron Kyle: That from an automation perspective, whether it's finance, HR, and even in sales and marketing, the efficiencies that you're seeing is because of the major rollout we had last year from a Salesforce 2.0 rollout perspective.

Aaron Kyle: And so, that is where G&A is going to continue to deliver from an execution operating leverage perspective. And so, you know, hopefully that gives you enough color for now. I'll provide more color as we speak at Inspire, but G&A, you can expect, will be held relatively flat and will just be the, you know, as growth of business from a revenue perspective, it's just the operating leverage that comes through the system.

Sukaran Mehta: And so, you know, hopefully that gives you enough color for now. I'll provide more color as we speak at Inspire, but G&A, you can expect will be held relatively flat and will just be the cost of growing the business from a revenue perspective. It's just the operating leverage that comes through the system.

Erin Kyle: Yeah, that's helpful for sure. Thanks for taking my questions. I'll pass the line. Our next question comes from the line of Daniel Chan with PD Cowan. Please go ahead.

Speaker Change: yeah that's helpful for sure thanks forparticularking my questions all possiblely

Speaker Change: Our next question comes from the line of Daniel Chan with TD Cowen. Please go ahead. Hi, good morning. You're doing better than what we've seen from some HCM peers. Why do you think that is, and do you anticipate potentially higher unemployment to be a headwind to your momentum?

Operator: Hi, good morning. You're doing better than what we've seen from some HCM peers. Why do you think that is? And do you anticipate potentially higher unemployment to be a headwind to your momentum?

Speaker Change: Hi, Daniel.

Speaker Change: Thanks for that comment and it goes back for me to the strategy that I was referring to before.

Speaker Change: the reason why we are is that we are focused strategically on what

Speaker Change: Somebody was referred to before as the wall-to-wall logic.

Speaker Change: or end-to-end logic. We reap the benefits of going in organizations and addressing the needs of both employees and then a world that is made of customers, partners, and various other entities that surround our customer ecosystem.

Alessio Artuffo: that we've communicated, that's a partner-driven play. If I think of data breaks, that there's again a massive customer experience play in it. And so... Thanks, think about this.

Speaker Change: If I think about the Exxon win, which we have communicated,

Speaker Change: That is an example of a combined customer education and employees use case. If I think about USA Hockey that we've communicated, that's a partner-driven play. If I think of Databricks, there's again a massive customer experience play in it.

Daniel Chan: 65% alone of ARR is attached to the CX-I-Breviews case. That means, in simple terms, when more than 50% of our business is supported by this capability of playing as an integral function of the go-to-market mission critical of the companies we work with. I believe that is one of the key ingredients, if not the key ingredient, for us to have an advantage over those HCM players that are, by any means, focused on the end-user persona being an employee only.

Speaker Change: And so...

Speaker Change: Think about this.

Speaker Change: 65% alone of our ARR is attached to the CX slash hybrid use cases.

Speaker Change: that means in simple terms well more than fifty percent of our business is supported by this capability of playing a

Speaker Change: Integral function of the go-to-market, mission-critical of the companies we work with. I believe that is...

Speaker Change: One of the key ingredients, if not the key ingredient, for us to have an advantage over those HTM players that are, by any means, focused on the end-user persona being an employee only.

Daniel Chan: Yeah, thank you, that makes a lot of sense, and maybe another question on government timing: do you anticipate any impact from the coming U.S. elections on the time of your government opportunities? Is there any risk? Things Pods from here, both from the Fed Ram Certification program or even R.C. Perspectives. Thank you. We don't know the result, but like we said, from a timing standpoint of things, nobody knows exactly when, it's very hard to predict an exact date, but we believe that the processes that we are running are quite independent from the outcome of that, and therefore we don't expect a major impact.

Speaker Change: and many more. Thank you. Thank you.

Speaker Change: Yeah, thank you. That makes a lot of sense. And maybe another question on the government timing. Do you anticipate any impact from the coming U.S. elections on the timing of your government opportunities? Is there any risk things pause from here, both from a FedRAMP certification or even RFP perspective? Thank you.

Speaker Change: We don't believe so.

Speaker Change: We, like we said, from a timing standpoint of things, nobody knows exactly, it's very hard to predict an exact date, but we believe that the processes that we are running are quite independent from the outcome of that.

Speaker Change: and therefore don't expect major impact

Alessio Artuffo: Our next question comes from the line of Richard Sey with National Bank Financial. Please go ahead.

Speaker Change: that's good to hear thank you

richard say: our next question comes from a line of richard say with national bank financial please go ahead

Operator: Yes, as you kind of continue to shift towards larger enterprises, can you help us understand the timing of how your existing base of smaller customers will tail off? Like, I'm sure it's not going to be immediate, but like, just trying to figure that out from a modeling perspective.

richard say: Yes, as you kind of continue to shift towards larger enterprise, can you help us understand the timing, how your existing base of smaller customers will tail off, like I'm sure it's not going to be immediate, but like just trying to figure that out from a modeling perspective.

Richard Tse: Yeah, Richard, I'll take that one. Sukaran here. I think it's important to emphasize that we will continue to play in the lower end of the market for a couple of reasons. One is, that is a market where we will certainly learn about the competitive landscape, who's the next capabilities or Docebo, and what is up and coming. And second, with the capital and the investments we make from an R&D perspective, it keeps us on our toes. And so that strategy remains consistent.

Speaker Change: yeah the richher i take that one occurred here i think i think it's important to an underscore

Speaker Change: We will continue to play in the lower end of the market.

Speaker Change: from a couple of reasons one is that is a market where we will certainly learn

Speaker Change: about how the competitive landscape who's the next capabilities or the chaable and that is up and coming and that big picker and second with the capital and theinvestments we make from an ror perspective it keeps us on our toes

Sukaran Mehta: What we will see is that the customer, even from a pricing perspective, this quarter. What I didn't articulate earlier was that even from a pricing and capabilities point of view, we have simplified our go-to-market activities for the SMB customer and ensured that our investments are aligned to drive the right LTV to CAC in that lower end of the market. So you will still see us in that market, but if you ask us where the incremental growth is going to come from, and that's how we think about the business from a growth perspective, the incremental growth and the investments are to drive superior unit economics in the mid-market large enterprise and government business.

Speaker Change: And so that strategy remains.

Speaker Change: Consistent, what we will see is that the customer that even from a pricing perspective this quarter, what I didn't articulate earlier was that even from a pricing and capabilities point of view we have

Speaker Change: simplify our go-to-market motions for the SMB customer.

Speaker Change: and ensured that our investments are aligned to drive the right l t v to cac in that lower in the market so you will still see us play in that market but if you ask us where the incremental growth is going to come from and that's how and how we think about the business

Speaker Change: from a growth perspective, the incremental growth and the investments are to drive

Sukaran Mehta: So what I want to make sure everyone understands is that we will still play in that space. We will continue to build features around that, supporting the lower end of the market, but we are being very thoughtful about LTV to CAC and how we want to ensure that the business is run to drive the best in class unit economics and revenue growth. And that's kind of how you think about it. It's certainly not going to be the case that we were going to. We're going to go away from that side of the business because that's really what gives us a competitive edge as well.

Speaker Change: The Superior Unit Economics in the Mid-Market Large Enterprise and Government Business. So, what I want to make sure everyone understands is we will still play in that space. We will continue to build features around that supporting the lower end of the market.

Speaker Change: But we are being very thoughtful about LTV2CAC and how we want to ensure that the business is run to drive the best-in-class unit economics and revenue growth. And that's kind of how, you know, you should think about it. It's certainly not going to be the case that we're going to

Speaker Change: We're going to go away from that side of the business because that's really what gives us the competitive edge as well.

Speaker Change: Okay. And then with respect to the net new wins, can you help us understand, you know, what channels they're coming from, or perhaps the mix of channels, partner versus direct or other?

Sukaran Mehta: Sure. So in terms of net deal, we answer, we [inaudible] We continue to source the majority of our business directly, no doubt. We continue to grow our pipeline with a focus on the mid-enterprise with large enterprises. We are very excited about the trend in that regard for the quarters to come in terms of pipeline growth percentage.

Speaker Change: sure so in terms of nnatgy windins we

Speaker Change: We continue to source the majority of our business directly, no doubt.

Speaker Change: We continue to grow our pipeline with a focus on the mid-enterprise to large enterprise.

Speaker Change: We are very excited about trends in that regard for the quarters to come in terms of pipeline growth percentage.

Operator: Relative to the Enterprise Phase, very critical as in the contribution of our size. We need Lloyd, but we also continue to work with different sizes across the multiple fronts and geals. I would say our enterprise posture is strengthened by the fact that we work with these integrators, not only on the generation side, but also giving them opportunities for services. Geep is also an advantage. Because some companies have high, complex needs, not just for implementing the LMS, but it's part of a much bigger digital transformation. So working with these SIs is a critical component of our strategy. Our next question comes from the line of Kevin Kumar with Goldman Sachs. Please go ahead.

Speaker Change: relative to the enterprise space

Speaker Change: very critical as the the contribution of our size we named the loyit but we also continue to work with different exercise across the multiple fronance and geo

Speaker Change: I would say our enterprise posture is strengthened by the fact that working with these integrators, not only on the generation side, but also giving them opportunities for services.

Gibb: Gibb is as an advantage.

Gibb: because some companies iye complex need not just of implementingin glemas but it's part of a much bigger digital transformation so working with this ad size is a critical component of our strtorge

Gibb: Okay, thank you.

Speaker Change: Our next question comes from the line of Kevin Kumar with Goldman Sachs. Please go ahead.

Kevin Kumar: To take my question,

Speaker Change: taking the question

Kevin Kumar: i want to askking another one on date for just just trying to better understand the impact to the model of gear ing anything you can share in terms of how large the partnership iss today and and how you're thinking about the short and medium term impacts to to the revenue contribution moving forwardthank

Sukaran Mehta: Yeah, yeah. Hi Kevin. Morning, Sukaran here.

Sukaran Mehta: Yeah. Yeah. Hi, Kevin. Morning. Sukaran here. Like I said, I think just I'll start with the point that, you know, we resolved the legal action with Dave Forza, as you can understand, the terms of the settlement are confidentiality bound.

Kevin Kumar: Like I said, I think I'll start with the point that, you know, we resolved the legal action with DaveForce, and as you can understand, the terms of the settlement are confidentiality bound. What I would say is that, you know, whilst we resolved the action with DaveForce, we initiated it as part of their acquisition of Illumi. You know, the main goal for us was to protect the IP, continue the revenue base, and preserve a good working relationship and partnership going forward.

Kevin Kumar: pe

Speaker Change: What I would say is that, you know, once we, you know, we've resolved the action with Dave Force, we initiated it as part of their acquisition of Illumi.

Speaker Change: The main goal for us was to protect the IP, continue the revenue base, and preserve a good working relationship and partnership going forward. I think the answer is at this point, any of the discussions that we've had as part of the settlement terms.

Kevin Kumar: I think the answer is at this point, any of the discussions that we've had as part of the settlement terms for 2024, you've seen that embedded in my guidance. And as we work through some of these settlement terms and have that information in the next few months, we'll provide some of the outlier guidance at that point. But you can imagine that that part of this relationship is to continue to, you know, our focus is to continue to build more and more channel partners.

Speaker Change: In 2024, you've seen that embedded in my guidance, and as we work through some of these settlement terms and have that information in the next few months, we'll provide some of the outlier guidance at that point. But you can imagine that.

Speaker Change: That part of this relationship is to continue to, you know, our focus is to continue to build more and more channel partners. You know, we've obviously spoken about the fact that EY, DarwinBox, and MHR are the ones that we continue to ramp. But now with the announcement of Deloitte as another channel partner, we are driving a much larger partner channel as well as diversification of the revenue stream.

Kevin Kumar: You know, we've obviously spoken about the fact that EY, DarwinBox, and MHR are the ones that we continue to ramp. But now, with the announcement of Deloitte as another channel partner, we are driving a much larger partner channel as well as diversification of the revenue stream. So, that's how we think about the business. I would say that we are thinking through the settlement terms, and we'll provide some more updates on the outliers as we provide guidance for next year. Got it. Thank you. Our next question comes from the line of Martin Toner with ATB. Please go ahead.

Speaker Change: That's how we think about the business. I would say that we think through the settlement terms. We'll provide some more updates on the out-years as we provide guidance for next year.

Speaker Change: Got it. Thank you.

Operator: Our next question comes from the line of Martin Toner with ATV. Please go ahead.

Speaker Change: Our next question comes from the line of Martin Toner with ATB. Please go ahead.

Speaker Change: night' incremental a rgum in the quarter can you talk to can talk to you know what the pipelines look like has it improved in the quaridter and where your thoughts are going forward

Martin Toner: Sir, I'm Martin. The life's speaking. So. As I mentioned before, pipeline trends continue to grow very positively. Late last year, we made further efficiency improvements to our demand and business development engine. And unsurprisingly, these improvements, according to our expectation, started manifesting in the enterprise, the qualitative enterprise pipeline that is, you know, coming up in this H2. I would say, you know, I would outline some themes from that pipeline that I believe are very interesting. The number one theme that we see is that... You know, we've always been very focused.

Speaker Change: i black

Speaker Change: Sure, I'm Martin, nice to speak to you.

Speaker Change: So,

Speaker Change: As I mentioned before, pipeline trends continue to grow very positively.

Speaker Change: Late last year, we made further efficiency improvements to our demand and business development engine.

Speaker Change: And, unsurprisingly, these improvements, according to our expectation, started manifesting in a qualitative enterprise pipeline that is coming up in this H2.

Speaker Change: I would say, you know, I would outline some themes from that pipeline that I believe are very interesting. The number one theme that we see is that...

Alessio Artuffo: We've always had a lot of success in the software and IT verticals. Cybersecurity, even recently, being an incredibly strong vertical, we have recently signed two worldwide leaders in that sector, back-to-back. I'm...

Speaker Change: we've always been very focused we've always had a lot of success in the software and it verticals fther security even recently being an incredibly strong vertical we have signed in that sector two worldwide leaders recently back to back

Alessio Artuffo: I would say the other trend that has been very interesting that we're seeing clearly in our pipeline constitution is that post-COVID, there's been a resurgence in onshoring activities, and this has given us great opportunities to support the supply chains that require the need for reskilling and upskilling. Another aspect that is becoming very clear, as we know the opportunity for Chebo is the pervasiveness of all-time customers who want to implement a go-to market revenue play in their use case.

Speaker Change: um

Speaker Change: I would say the other trend that has been very interesting that we're seeing clearly in our pipeline constitution is that post-COVID there's been a resurgence in onshoring activities.

Speaker Change: and this has given us good opportunities to support the supply chains that required they need for riskilling and obskilling

Speaker Change: Another aspect that is becoming very clear as a win opportunity for Docebo

Speaker Change: is the pervasiveness of how many times customers want to implement a go-to-market revenue play in their use case. And when they do, our e-commerce capabilities play a critical role.

Speaker Change: Hundreds of millions of dollars have been transacted on Docebo. This is a data point that we reflect on a lot and that represents very clearly how our customers are using Docebo, not just as a training platform, but also as a monetization platform itself.

Alessio Artuffo: The Chables have been praised in my opinion over the years as we've been growing as an horizontal platform; that means we've sold and been successful in various industries. As we grow our footprint, we recognize that in order to maintain high efficiency and high quality of revenue, we need to become better and better and better at our posture in certain strategic segments. And we've taken steps toward that. We are doing really well in the thin server financial services vertical, for example; we've been investing in it with some level of visualization in the past year. And look, we've seen banks, asset managers, insurance companies, very, very eager to modernize the tech sector. Their approach to scaling and scaling, historically, was based on, if you will, more legacy technologies.

Speaker Change: And finally, I want to underscore a couple of things relative to verticals. Docebo has been praised, in my opinion, over the years as we have been growing as a horizontal platform. That means we've sold and been successful in various industries.

Speaker Change: As we grow our footprint, we recognize that in order to maintain high efficiency and high quality of revenue, we need to become better and better and better at our posture in certain strategic segments, and we've taken steps towards that.

Speaker Change: We are doing really well in the FinServ financial services vertical, for example. We've been investing in it with some level of specialization in the past year.

Speaker Change: and look we've seen banks asset managers of insurance insurance companies

Speaker Change: Very, very eager to modernize their tech stack, their approach to skilling and reskilling that historically was based on, if you will, more legacy technologies.

Alessio Artuffo: Then finally, I'll wrap it up with one topic, actually two, I would say one that we're really excited about is that our customers and prospects talk to us a lot about skilling and reskilling. We're thinking a lot of attention to this, and we see, essentially, as we see ourselves as an enablement technology that allows Martin to go up to skill and journey with customers and employees. And so, you know, really think about the brokering platform for up skimming.

Speaker Change: Then finally, I'll wrap it with one topic, actually two. I would say one that we're really excited about is that our customers and prospects talk to us a lot about skilling and reskilling.

Speaker Change: We're paying a lot of attention to this. We see ourselves as an enablement technology that allows mapping of upskilling journey of our customers and employees.

Speaker Change: And so, you know, really think of us as a brokering platform for upskilling.

Alessio Artuffo: And to close on this point of pipeline and trends, I would say government. Government is a very, very significant contributor to our pipeline. It's accelerating according to our plans. No particular surprises, but we're very pleased to see the growth of our pipeline in government. For now, limited to the slag market, which is where we have the current right to win. And as we further feather and posture, there is going to be even more to come. So we're very thrilled. Thank you.

Speaker Change: And to close on this point of pipeline and trends, I would say government. Government is a very, very...

Speaker Change: Significant contribute to our pipeline, it's accelerating according to our plans. No particular surprises, but we're very pleased to see the growth of our pipeline in government. For now, limited to the slag market, which is where we have the current right to win. And as we further feather and posture, there's going to be even more to come.

Speaker Change: so what are going thrreal thank you

Speaker Change: Thanks for that, Alessio. That's all for me.

Alessio Artuffo: We have no further questions at this time. I will now turn the call back to Docebo's CEO, Alessio Artuffo, for any closing remarks.

Speaker Change: We have no further questions at this time. I will now turn the call back to Docebo's CEO Alessio Artuffo for any closing remarks.

Alessio Artuffo: Well, we thank you for having me with us again in getting another earnings call. We always love to share our story and keep you updated on our success and building the best learning company in the world. I want to remind you that we have our customer conference set for September 9th through 11th in Dallas, US. We warmly await the analyst community to join us there and to learn more about what we're up to. We will be unveiling some really interesting initiatives that the Chef is taking for the future, and we really look forward to seeing you there. Thank you for being with us today.

Alessio Artuffo: what we thank you for everything with today again get another inst all we always love to share our story and to keep you posted with our success and building the best in company in the world i want to remind you that we have customer conference that for september nineinth through eleven in dallas u us we warmly away the analyis community to join us there and to you know learn more about what re up to we will be baing really interesting initi that the taking for the future and really look forward to sing there thank you for being with us today

Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.

Speaker Change: This concludes today's conference call. Thank you for your participation. You may now disconnect.

Richard Tse: Okay, and then with respect to the net new ones, can you help us understand what channels they're coming from or perhaps the next channels, partner versus director, or others?

Daniel Chan: Hi Daniel. Thanks for the comment. And it goes back, for me, to the strategy that I was referring to before. The reason why we are is that we are focused strategically on what... We reap the benefits of going into organizations and addressing the needs of both employees and then a world that is made up of customers, partners, and various other entities that surround our customer ecosystem. You know, if I think about the Exxon win, which we have communicated, that is an example of its combined customer education and employees' use case. If I think about the U.S., A. O.K.

Alessio Artuffo: Sure, Iron Owen, Good morning, Good morning, Look-um-um-um-um-um-um. In the past, for sure, we have not approached M&A with very sizable acquisitions. That's a fact.

Alessio Artuffo: Thanks for the question, Alessio speaking. In terms of a channel of partnership, advanced in our strategic partners relationship, we are very, very excited. You are correct in stating that the law is a marquee partnership and, you know, an absolute leader in the states. Look, they have an incredible human capital practice in North America, both in government and in the commercial states. If you think about the fact that they staff just over 15,000 people in the GPS practice alone, and government, the public sector, that's a very impressive number.

Alessio Artuffo: And when they do, our e-commerce capabilities play a critical role. Hundreds of millions of dollars have been transacted on Chebo. This is a data point that we think about a lot, and that shows very clearly how our customers are using Chebo, not just as a training platform, but also as a monetization platform itself. And finally, I want to emphasize a couple of things relative to verticals.

Alessio Artuffo: You know, finally, I want to underscore our working with the leaders at Deloitte as being life full; these are just top notch HCM professionals, and we're just really proud of working with them and building a year's longer relationship of success together.

Suthan Sukumar: My second question, I want to touch on on the on guidance is get to see the higher guide this quarter. Can you help unpack, you know, some of the moon pieces there that underlies your strength, you know, kind of this curious if this is a more function of sustaining customer when activity ahead, or, you know, larger size of customers, because I did notice an update there in ACV from large customers, or you see, you know, lower impact from the S&B side. Yeah.

Sukaran Mehta: And this is consistent with what we said previously, right? So we've consistently focused on moving a packet, and we should see some strength as we exit this year in that regard. And then, and to your point on the SMB side, it remains cautious. We talked about that, those assumptions are pretty much in line with what we expect. Nguyen, and I'm going to be back next week. Thank you.

Sukaran Mehta: And so what this has done is effectively moved from what we think as an all-acquard model to driving value to the customer, and what that, in effect, has meant is that we are now discussing the problems that we can solve with the customer and the value that sharing brings to them. You know, the new pricing methodology has actually been quite successful, I would say, from the onset. This is only the first quarter, so we'll provide more insights as we get through the latter part of this year. You know, what I'm certainly seeing is two things.

Alessio Artuffo: We've been working with them on this partnership for many months. This has been in the works for quite a while, frankly. What this means for the Chepo, you know, let's just clarify first of all what CTS or certified to sell means. In simple terms, it certifies the Chepo to become an asset of the loit, which the loit will wide-label and market throughout their restatic commercial channels, across both the commercial space and the government practice.

Sukaran Mehta: And so we'll continue to execute in that regard. I think one thing that's important in this cycle is that, of course, every company is trying to make sure that they have enough pipeline coverage, so you have to drive a slightly higher pipeline. But we're also doing it, you know, in a way that is efficient because you think about system integrators and others that drive my pipeline outside of the low end of the market, more in the mid market, large enterprise, and government.

Sukaran Mehta: One, as we are positioning our capabilities to the customer, we're not only speaking to value, but we're actually providing incremental capabilities. As part of the whole package, that is making the discussions more meaningful. Number two, as you think about objection handling and overall deal discussions to express these cycles. And so on the net new business, where this was initially rolled out to, we have certainly seen that positive impact in terms of how we approach our customers from a go-to market perspective.

Sukaran Mehta: And they also bring an advanced stage of pipeline too, so I think those are important factors that you think through these cycles, how we generate that pipeline, where we're moving, you know, there are the numbers that are less important as we move forward more in the next few quarters. You'll see that our focus is not necessarily on customer towns per se, it's more on the quality of the revenue that we bring in and sustain over an extended period of time for me And that's where the SMB market, you know, we fell out in the past; we'll continue to serve that market from a competitive landscape perspective. And, and, but our, you know, our more primary focus remains mid market, large enterprise, and government.

Sukaran Mehta: And then the second thing I will say that it's early days, but we are also, you know, like I said, on the renewal book of business. This is a much, much longer exercise because there are a lot of terms and conditions and all the nuances that we have to remind ourselves for us that the previous customer sign that all the current customers sign up to. But we are actually also seeing, you know, with the new capabilities that are coming out and have come out this year, we see that as an opportunity to also move a reasonably good book of our business. I think with the capabilities are coming on board as well.