Q3 2025 Docebo Inc Earnings Call
Speaker #2: Good morning , everyone , and welcome to the Docebo Inc. Q3 2025 Earnings Call . All participants are currently in a listen only mode .
Speaker #2: We will open up the lines for a question and answer session momentarily . Analysts can ask questions by pressing star , followed by one on their telephone keypads .
Speaker #2: We ask that analysts please limit themselves to two questions and return to the Q for any follow ups . I'd now like to turn the call over to Docebo Inc. vice President of Investor Relations Mike McCarthy .
Speaker #2: Please go ahead, Mike.
Speaker #3: Thank you . Earlier this morning issued its Q3 2025 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 #3: 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 , notable would like to remind listeners that certain information discussed may be forward looking in nature .
Speaker #3: Such forward looking information reflects the company's current views with respect to future events . Any such information is subject to risks , uncertainties and assumptions that could cause actual results to differ materially from those projected in the forward looking statements .
Speaker #3: For more information on risks, uncertainties, and assumptions relating to forward-looking statements, please refer to the tables in public filings, which are available on CD-R and EDGAR.
Speaker #3: 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 #3: Please see our MDA for additional information regarding our non-IFRS financial measures , including reconciliations to the nearest IFRS measures . Please note that unless otherwise stated , all references to any financial figures are in US dollars .
Speaker #3: Now , I'd like to turn the call over to Docebo Inc. CEO Alessio Tufo and our Brandon Plummer . Operator . We're now able to take questions .
Speaker #2: Thank you . Just as a reminder to ask a question , please press star , followed by one on your telephone keypad . And we ask that you please limit yourself to two questions and return to the queue for any follow ups .
Speaker #2: Thank you . Our first question comes from George Sutton from Craig-hallum . Please go ahead . Your line is open .
Speaker #4: Thank you . Nice results . So it all comes down to RR . So I wondered if we could start there . It was up 2.5 million sequentially .
Speaker #4: Can you just unpack the components ?
Speaker #5: Morning , George . Good morning . As you are suggesting , we are quite pleased with the results this quarter . The way we think about it is our business actually grew 14% year over year by excluding the different business and I understand that we haven't disclosed this in the past , but I would add to that that this is the second sequential quarter in which we've seen this growth happening .
Speaker #5: Again , excluding the . And in a minute , we'll tee up . Why this matters . What I'm really pleased by is the fundamentals and the execution of that led to this result .
Speaker #5: A trend that I can continue , that I continue to see . In the future . First , we've seen our mid-market business exceeding performance and expectations .
Speaker #5: This has happened due to the changes and evolution brought in by our new leadership team . And changes that we had performed at leadership level in the quarters , in the past .
Speaker #5: We're starting to reap the benefits of those improvements , not only in terms of people , but also framework processes and improved , improved pipeline practices .
Speaker #5: Secondly , we've seen , frankly , against the seasonality and a near performance also exceeding expectations , something that has pleased us very much with the key logos , very material ones signed in EMEA during the quarter .
Speaker #5: And finally , not to be forgotten , our core business retention continues to improve . We also think this is a very important component and a part of the storytelling .
Speaker #5: Notwithstanding all of the above are . Turn with our with force accelerated faster than expected and the results are just the reflection of that .
Speaker #4: Perfect . Just one other thing on FedRAMP , obviously impressive to see the winds pretty early . Curious if that's earlier than you had expected or on track .
Speaker #4: And then we are sitting here in the US with a government that's not effectively open . I'm just curious how that impacts the opportunity .
Speaker #6: Great . So .
Speaker #5: We were very pleased to be achieving already two new federal customers shortly after our May dated FedRAMP listing . We believe that an impressive outcome , considering that originally our thesis was to start winning federal business in fiscal 2026 , a more back dated in the second half because that is more aligned with our federal purchases .
Speaker #5: Not only have we expanded an account with the Department of Energy, which we were very pleased about, but we have also been working closely with our partner, Deloitte, to secure the business of the Air Force Cyber Academy.
Speaker #5: In addition to that , outside of federal , which I understand is the headline , given the complexity of doing deals in federal in such a short time frame , we have continued to execute well .
Speaker #5: Also on the state and local side , and that trend is expected to continue as as it pertains to government shutdown . Actually , we've been building pipeline at a very impressive pace , both in federal and fled .
Speaker #5: Fortunately , if you will , the government shut down , did not affect the seasonal buying cycle that occurred with the deals that we disclosed .
Speaker #5: And I would say quarter for historically for federal deals is a very slow quarter because budget gets spent in quarter three . Our quarter three and in quarter four organizations and federal organizations take a pause , typically from purchases reigniting in our fiscal year 2026 , by which time we expect the shutdown to have been addressed .
Speaker #5: I would also add, NT, by saying our progress in Sled is tied to our progress in federal. Why? Because we're seeing organizations in the state and local demand.
Speaker #5: The more and more frequently a barrier of entry of state ramp , which we do address via FedRAMP certification . So to heat up our investment in FedRAMP is playing a dual role here .
Speaker #5: Not only it's allowing us to increase them , but it's allowing us to win more in the sled market , creating a great competitive differentiator for future .
Speaker #4: Perfect . Thank you .
Speaker #2: Our next question comes from Kenneth Wong from Oppenheimer . Please go ahead . Your line is open .
Speaker #7: Fantastic . Thanks for taking my question . Alessio . I wanted to maybe dive into that . The . FedRAMP sled dynamic a little more .
Speaker #7: As you think about the guidance that you guys put out there for . For Q , I realize it's a kind of seasonally low quarter , but any any heightened conservatism in terms of what's coming in from the pipeline on the public sector side , just given that there is that shutdown .
Speaker #5: Like I said , I wouldn't say that we have seen a direct correlation between the pipeline outcomes and government shutdown on our side .
Speaker #5: You know , we're we're very , very focused on diversifying where we execute across state , local education . It's a big market .
Speaker #5: We're seeing a more response and more , if you will . You know , interest coming from civilian organizations . And the other thing I can say is that our technology favoring the use of the Chivo for both internal use cases , but also external use cases , opens up to a new opportunity that in the market of government has been tart in terms of offering .
Speaker #5: So I believe that our continuous pipeline execution is really the the reflection of good timing , good execution and great product market fit .
Speaker #5: .
Speaker #8: And Brandon here just want to add and great to have you on the call . You know , if you think about it , we started down the government route of building the business from the ground zero roughly two years ago .
Speaker #8: And part of that was building relationships with various federal departments. While we were building and looking to achieve FedRAMP authorization, we were able to demo and showcase our platform and have interest from different federal departments.
Speaker #8: So while we see the shutdown temporarily , you know , impacting the ability to generate new pipeline , we are very confident in the relationships we've built over the past two years .
Speaker #8: And that will enable us to start winning material contracts in Q3 of 2026 .
Speaker #7: Perfect . And then maybe we'd love to get an update on the enterprise side . Looks like both customer accounts and kind of are coming from from from large 100,000 K customers was pretty strong .
Speaker #7: Would just love to get a sense of kind of how the pipeline was shaping up today . This quarter . What did sales cycles look like , any extensions there as we head into the fourth quarter , and any thoughts on whether or not you might see some sort of a budget flush from from customers going into Q4 ?
Speaker #6: Yeah . So .
Speaker #5: You things on enterprise . Enterprise is a very critical area for us . And we continue to increase customers over $100,000 sequentially , which is a strong sign of execution in our enterprise segment .
Speaker #5: But also in our mid-market segment . That is able to to sign customers with multiple use cases and multiple modules and very healthy ACV .
Speaker #5: Additionally , on enterprise , I would say the following . In general , we see , you know , we continue to see elongation in the market .
Speaker #5: This is continuing to happen . But you're right . Historically , quarter for us is the strongest quarter within the enterprise segment . For us .
Speaker #5: And we continue to expect that going into this quarter. A couple of notes that I would make are on some enterprise wins, notable in this quarter.
Speaker #5: I was very impressed with the ability to sign a multinational like Veolia . This kind of ease up not only the the India business , but also the capability of more use cases and you know , this is an organization with more than 200,000 employees headquartered in France .
Speaker #5: And additionally , I would say our ability to expand upon Amazon , which is a customer of ours that we've had for a while .
Speaker #5: This is our third department that we're signing in the quarter . Is is very significant . So both on the new logo side and expansion side , we're very , very happy about the results .
Speaker #5: And expect a strong quarter for and I would say , you know , important in the enterprise story is the system integrator story .
Speaker #5: We have invested heavily in partnership programs and system integrator programs to support enterprise motion. The large majority of the deals that we're doing in enterprise have a system integrator attached to them.
Speaker #5: And so that's the result of years of work .
Speaker #7: Appreciate the color. Thanks a lot, guys.
Speaker #2: Our next question comes from Ryan MacDonald from Needham and Company . Please go ahead . Your line is open .
Speaker #4: Hey good morning and .
Speaker #9: Thanks for the questions . Congrats on a great quarter . Alessio . Very much appreciate that . Obviously the enterprise is really the driving force around growth , moving forward .
Speaker #9: But can we get a bit more color on sort of the OEM wind down the de force , wind down , obviously you mentioned it sort of occurred a bit faster than you expected in the quarter , but as we think about fourth quarter and into next year , can you just help us get a bit of a better understanding on the trajectory there ?
Speaker #9: And you know what opportunities you might have to sort of compete more directly within that base of customers? Thanks.
Speaker #8: Hey Ryan , it's Brandon . I'll take that question . So just taking a step back and just looking back as a reminder .
Speaker #8: Day four started OEM and white labeling Docebo back in 2019 . And there are very successful selling Docebo as an LMS and got as big as roughly 9 to 10% of our total IRR at a specific point in time .
Speaker #8: Back in early 2024 , Docebo Inc. Lumi , which we all know at that specific point in time , there were an LMS provider in Europe focused mainly on the SMB market .
Speaker #8: Subsequent to the acquisition , Docebo initiated legal action and was quickly resolved with de force . Really , the goal of that lawsuit was three outcomes .
Speaker #8: Number one , protecting our IP . Number two , supporting the contributor of a revenue base . And number three , preserving our day to day relationship with day four , how we're looking at it on a go forward basis .
Speaker #8: We continue to expect economic benefits to flow to Docebo . And the contract to wind down over extended period of time , provide a little bit more color .
Speaker #8: We anticipate the force to represent approximately 3.5% to 4.5% of our total revenues in 2026, and 1% to 2% of our total revenues in 2027.
Speaker #8: And become immaterial thereafter . It's , you know , just to leave on a positive note . It is important to note in the current quarter and since 2024 , we've continued to grow .
Speaker #8: We've continued to diversify our revenue base away from de four. We're pleased with the growth we had this quarter, excluding de force of 14%.
Speaker #9: Appreciate all the color there , Brandon . That's very helpful . Maybe my second question . I wanted to talk on AI as we've sort of spoken with companies and a number of companies rolling out AI strategies , it feels like there's sort of three buckets in which organizations are trying to sort of monetize AI efforts today .
Speaker #9: It's first seems to be in improved customer retention and sort of renewal rates . The second tends to be in sort of building in more , higher annual price increases as you deliver more value with AI .
Speaker #9: And then the third tends to be sort of separate SKUs or modules that are AI-specific modules that you can start to charge for.
Speaker #9: I'm just curious , as you think about the three buckets where you're seeing the benefits from AI , and at least in the shareholder letter , it seems like with these AI credits rolling out , it seems like you're getting a head start on that third bucket going into next year .
Speaker #9: So would love a little bit more color on that as well . Thanks .
Speaker #5: Great , great . Three breakdown of the three . Sei areas of return of AI . We we very much agree with those three areas .
Speaker #5: I would say that having started with AI several years ago , our focus has certainly been more on the creating value and infusing AI in the product everywhere we can .
Speaker #5: More lately , originally , when we approached AI years ago , we were creating features that were supported by AI , mostly to provide a better customer experience .
Speaker #5: I.e. getting to the outcome faster , but at that time , monetization strategies were not a priority . As we have matured , the enormous during every day at really rapid pace , our posture on AI , I can say that your category number two and category number three are the ones that we think of very much .
Speaker #5: You are correct in saying that we've recently introduced an AI credit-based system that aims at managing through this credit-based system.
Speaker #5: Our AI pricing , the way it would work is for modules like AI , Virtual Coach and AI video Presenter . A consumption model whereby our customers using these modules consume credits that run against the package .
Speaker #5: They would they would buy a product . We don't have a long history of doing this . We've recently started this , but we are seeing is to continue to roll in AI capabilities against this model to make it more meaningful from a monetization standpoint in the future .
Speaker #5: But then , you know , we also believe that continuing to provide AI capabilities will give us an edge against the competition , which will allow us and help us defend a premium of our product against the competition .
Speaker #5: As a result . And finally , I would say retention is remains an evergreen goal that we have . So we infuse AI features everywhere , every single product manager in the company is required to think AI first as they build a new products and revise existing features so that our customers have a better experience with the product .
Speaker #9: Excellent . I appreciate the color there . Alessio . Thanks .
Speaker #6: Thank you .
Speaker #2: Our next question comes from Robert Young from Canaccord Genuity . Please go ahead . Your line is open .
Speaker #10: Hi . Good morning . You said in the prepared remarks that you'd seen the second consecutive quarter of improved retention and that I assume that's with the OEM piece aside .
Speaker #10: So I was wondering if you could , you know , dig deeper into that , if you could update us on where churn is , where the elements of churn are , if that's improving and then you know where you think that's going to go , 26 .
Speaker #8: Okay , Rob , it's Brandon , you know , as you know , we only disclosed Gnrh-r on annual basis . So we we won't go into specific numbers .
Speaker #8: But you are right. We did see two consecutive quarters in a row of retention improvements. Whether you look at it from a growth retention or net retention perspective, this is actually very consistent with what we have been saying for the past few quarters.
Speaker #8: We knew in Q1 we had a , you know , a large renewal base that would bring it down and we'd only go up from there , you know , one thing that is important to mention is that we did lapse the large Thompson routers downgrade that happened in Q3 of last year of roughly $2 million .
Speaker #8: So obviously that did result in improvement . And , you know , to be completely transparent , we do expect that metric to go down next quarter because of the AWS downgrade .
Speaker #8: So , you know , a couple of things that I'd say is we have a renewed focus on retention . We are putting together account mapping for every at risk customer and making sure we're proactive and not reactive .
Speaker #8: And we feel really good about the programs we have in place to continue strong retention metrics in the future .
Speaker #10: Okay , thanks for that . And then you noted the AWS Skill Builder roll off . Is there . How is that hand over progressing ?
Speaker #10: Is there a potential for a subcontract to support contract in 2026 , or is that going to disengage completely as you expect ?
Speaker #8: Hey Rob , we expect that to completely disengage December 31st .
Speaker #10: Okay , thanks . I'll pass .
Speaker #2: Our next question comes from Josh Baer from Morgan Stanley . Please go ahead . Your line is open .
Speaker #11: Thanks, and congrats on reaching a 20% EBITDA margin early. That's something that you guys have been talking about for a long time.
Speaker #11: Want to just follow up with a couple more on the OEM? Just curious what that percentage was last quarter. Do you have that?
Speaker #8: Sorry. Maybe if I could just rephrase. Are you asking for what R growth was excluding Day for?
Speaker #11: No . The the percentage of IRR . So 6.2 this quarter . Just wondering what it was last quarter .
Speaker #8: You know instead of giving you that exact metric , what I can give you is what our error , our excluding day force was last quarter , which was roughly 13.9% okay .
Speaker #8: 13.9 .
Speaker #11: For Q2 . Also . .
Speaker #8: Correct . Correct .
Speaker #11: Okay . Cool . Yeah , I guess I'm just wondering like why it was like a greater wind down than expected . Is it was it , you know , day force led ?
Speaker #11: Was it customer led any contacts there . And then I did want to just follow up . Like is is it a lot of smaller customers notice like there was a big jump again in average contract value .
Speaker #11: So some really nice acceleration there . Wondering if it's if it's related . I know you also had success more broadly in enterprise , but in part want to get a better sense of like , does this average contract value continue accelerating or should we expect that to slow down ?
Speaker #11: And then when we do get the total customer count at the end of the year, should we expect that to move lower due to this de force?
Speaker #11: Thanks .
Speaker #8: Yeah , a lot of what you just said is , is bang on . So our HCV this quarter did grow as a result of the de force wind down .
Speaker #8: If you think about the customers that typically get attracted to an RF system , plus an LMS , they tend to be a customer who use it for 1 to 2 use cases , which is onboarded and compliance .
Speaker #8: And those average tickets tend to be materially lower than a customer that would sign directly with Delcevo for multiple different use cases. So you should expect and you should model that our ACV with De Force is materially lower than a customer.
Speaker #8: That signs directly with Docebo Inc. regarding customer accounts , you should expect that our customer count overall will be down , and that is a result of the wind down of de force .
Speaker #11: Okay , that's all really clear and helpful . Thanks , Brandon .
Speaker #2: Our next question comes from Yifu Li from Cantor Fitzgerald . Please go ahead . Your line is open .
Speaker #12: Good morning , Alexia and Brandon . Congrats on the strong three Q2 print in a busy week of earnings . So to start with you , Alex , I want to go over the AI product vision .
Speaker #12: We understand from inspire . Alexia your model is to build a product that delivers value to customers . First , and they will eventually pay .
Speaker #12: And you can monetize it . Right . So looking at the new product lineup , whether the Harmony support , AI authoring , virtual coaching , Copilot , etc.
Speaker #12: , so which of these products , Alexia , would you say is closer to ? Monetization potential ? And also on the second part of this question , Alexia , in the end of your prepared remarks , you talked about redefining the future of learning , and I understand you like to solicit continuous feedback from your customers .
Speaker #12: What are the key things you've you know , you've learned from your customer and stakeholders that you want to apply to your product roadmap for the end of this year , in 2026 .
Speaker #12: And I also have a follow up with Brandon after this .
Speaker #5: Lovely questions . Let's get started . Fun starts on AI and product . First , let me share that you are correct . Our vision around our harmony ecosystem is very ambitious and we have executed so far .
Speaker #5: Harmony searched from its recent launch as already powered about a half a million searches , half a million queries , which is a very a very positive result against our expectations .
Speaker #5: This is this is not only stopping with Serp . Search was just the beginning of a journey where we want to get harmony to become the extension of our customers harmony , in fact , was now evolved into a copilot .
Speaker #5: Logic . The goal is to improve the productivity and the self-servicing of capabilities in the platform so you can go into chatbot and ask Harmony to perform tasks for you and help you identify how to get things done in the product .
Speaker #5: And harmony will either point you to it or do it for you . This is just a the beginning of a journey towards full platform automation , which is a longer term vision that we have that we are , that we're going to pursue in terms of .
Speaker #5: You know , creator , which you mentioned , I think your question was around which capability do I think will contribute the most to monetization and .
Speaker #12: The earlier .
Speaker #6: Yes . Yeah .
Speaker #5: Creator is the engine behind the experience creation in the chatbot , which includes as part of it , our AI virtual coach . The ability to create simulations and to simulate any scenario from , you know , customer service , leadership and sales enablement , something that we have evolved this past month by releasing a new version of creator , which in sorry , of Virtual Coach , that initially was addressing only the sales enablement , enablement use case .
Speaker #5: Now that module is well rounded up and allows an organization to map simulation scenarios against any custom role play scenario . They want to implement .
Speaker #5: So we do expect creator and virtual coach to be great contributor to monetization strategy in the future .
Speaker #12: Got it , got .
Speaker #6: It .
Speaker #12: Thanks for that , Alexa . Yeah , sorry about that . Yeah .
Speaker #6: No , I was .
Speaker #5: Just going to wrap up by saying our roadmap reflects our belief that a platform from a differentiation standpoint , you ask about the customers and what we're hearing .
Speaker #5: We're hearing customers saying they want a more ability to create personalized experiences . They want to do less clicking and to be able to create content at a more rapid pace in automated way .
Speaker #5: That's what we're executing with harmony and with creator .
Speaker #12: Got it . Thanks for the comprehensive response , Alexa , I want to follow up on the obviously you guys made the customer wins , especially I want to focus on the industrial one .
Speaker #12: The 200,000 seat . Right . Obviously you're leaning more towards the system integrator channels similar to other tier one SaaS software companies . I just wanted to get your sense on like what types of partnerships are you engaging ?
Speaker #12: I know Deloitte is a big one , right ? What's working and what needs work on . And then I'll just ask the financial question as well .
Speaker #12: Brandon , on the financial side , I'm just looking at the KPIs for like new logo HD one K is flat year over year , but up 8% quarter over quarter .
Speaker #12: But you know , in terms of the story , it seems like you guys are going up or enterprise . Right ? So why why is that metric ?
Speaker #12: You know , flat year over year . And that's it for me . Thank you Alex . And Brandon .
Speaker #8: I'll kick it off on the last part of that question . So how we look at ACV is , you know , given the fact that we're seeing extremely strong success in mid-market and this is two quarters in a row where we've seen that strength and we've we're seeing leading indicators that that strength will continue into Q4 .
Speaker #8: That is impacting obviously , the ACV , as we have larger , you know , larger concentration of customer accounts coming in at the mid-market .
Speaker #8: When you think about the enterprise space , you tend to have lower number of customer wins , but at a larger ACV . So during the quarter , we actually did have really strong performance of units that had very healthy acvs .
Speaker #8: You know , upwards of , you know , let's call it 500 K ACV and seasonally , we do expect Q4 to be strong enterprise quarter .
Speaker #8: And we do expect that to go up in Q4 as well .
Speaker #5: On the first part of the question you asked about how you how we view the market of system integrators , and you mentioned the big logo that we we mentioned earlier .
Speaker #5: I would say a few things in the past calls . We've outlined , how we've made such great strides in partnering with the Accenture and Deloitte caliber type of system integrators that work is continuous , and we continue to advance our relationship with them and really formally progress our status as partner type within those organizations , which in turn will only give us more penetration in the go to market efforts , but also remember , it's not only a matter of pipeline creation , it's also the ability for them to support us in complex implementations , which has an incredible amount of value with the large enterprises .
Speaker #5: I would add a different type of color in the skull by saying that not only we've been working with these very large system integrators , but also regionally , internationally , we've identified a number of system integrators that are leaders in their respective markets .
Speaker #5: And so when you think about wins like that , the the state administration school of Latvia , we would have not been able to do that with a critical regional partner .
Speaker #5: That helped us become the de facto platform for the entire public sector of the of of the country , of Latvia . And so as we continue to expand with these regional and more focused system integrators , we expect deals like these to become to become a more and more frequent .
Speaker #5: .
Speaker #12: Okay . Thanks again . Alexia and Brandon . And congrats .
Speaker #2: Our next question from Aaron , Kyle from CIBC . Please go ahead . Your line is open .
Speaker #13: Hi . Good morning , Alicia and Brandon . Thanks for taking the questions . I just had a question on how we should be thinking about the margin profile here into 2026 .
Speaker #13: As you continue to expand the federal pipeline and opportunity here , do you expect to see an increased spend in in sales and marketing or the 20% margin in Q4 ?
Speaker #13: I guess my question is, how sustainable is that? Do you think going forward?
Speaker #8: The way we're thinking about EBITDA margin , and it is important to note , we do have a bit of seasonality in EBITDA where we do expect Q3 and Q4 to always be stronger than Q1 and Q2 , given Q2 , we have our , you know , big Inspire event in Q1 .
Speaker #8: We tend to have seasonally higher payroll costs . How we're thinking about EBITDA going forward . We do think we're fairly staffed from sales and marketing perspective .
Speaker #8: We've invested and spent money in government over the past two years , and we've staffed that team up for success . We do have pipeline targets , coverage ratios that , once it exceeds those ratios , will certainly accelerate hiring .
Speaker #8: But for now , the government team is fully staffed . How are we thinking about EBITDA margins going forward ? We do post in our investor deck every quarter .
Speaker #8: Goals from from a spend levels . And you know , one number to call out is we're at 20% EBITDA today . Our DNA as a percentage of revenue is roughly 15% .
Speaker #8: And our long term or mid-term goal is 9 to 11% . So if you think about incremental 5% leverage in DNA alone , that gets you to 25% margin over , a mid to long term basis .
Speaker #8: And that's without sacrificing any investments we have to make in R&D . And sales and marketing .
Speaker #13: Thanks , Brandon . That's helpful . Color there . Maybe you can just ask one more just on the professional services revenue in the quarter was a bit higher than we had expected .
Speaker #13: Is that related to the strength in the mid-market ? And if that's the case , should we expect that to to trend higher in Q4 and going forward , as well as you see that mid-market strength continue ?
Speaker #8: Yeah , it's a great question . So what we're seeing is that the type of customers in mid-market that tend to be attracted to chatbot , our customers that have complex onboarding needs and complex use cases , and with complex use cases tend to lead to more of a hands on onboarding experience .
Speaker #8: What I would say is that while we're pleased with the professional revenue growth , it's not a line item . We're focused on .
Speaker #8: We're really focused on growing high-margin, accretive subscription revenue, and we're very comfortable with handing off professional services revenues to our partners, such as Deloitte and Accenture.
Speaker #13: Thanks , Brandon . I will pass the line .
Speaker #2: Our next question comes from Suthan Sukumar from Stifel . Please go ahead . Your line is open .
Speaker #14: Good morning guys . I my first question I wanted to touch on the Amazon expansion . You know , I thought that was a positive read on sort of the state of the that relationship .
Speaker #14: Can you can you speak a little bit about , you know , aside from the AWS contract , you know , what what use cases you are involved with at Amazon and how you expect that relationship to to evolve going forward .
Speaker #5: Sure . So first , let me underscore the fact I'm very pleased with the fact that not withstanding Amazon divesting from us on the skills builders initiative , we continue to attract the business of other Amazon companies who continue to entrust us with our products and services .
Speaker #5: I think that's a testament also to the great work that we've done over the years . With Amazon Skill Builder , because if we had done so , you would presume that the reference calls that would happen in order to sign with the table would would bring these Amazon companies to make different decisions .
Speaker #5: So I think that's that's a little bit of alternate to , to clear up any doubt remaining . I would say on the on the current win , we did sign Amazon Health , which is the healthcare division of Amazon .
Speaker #5: It's a it's a very important win for us because not only it adds another Amazon logo to our customer base , but also it's a perfect fit for our products and services .
Speaker #5: They are going to be using the chatbot for both customer experience , doing customer and partner education , effectively supporting healthcare professionals with technology partners and service teams , and then on the employee side , they're going to be using the chatbot for self enablement , onboarding , leadership development , and professional development and compliance .
Speaker #5: What we know is that organizations that use the table for more than 4 or 5 use cases have the best metrics in terms of unit economics and retention .
Speaker #5: And so we love when we can bring in companies that effectively become so sticky . And , you know , on the competition side , you guys usually ask that and want to know .
Speaker #5: Unsurprisingly , we did overcome the other competitors , both on the mid-market and I would say legacy enterprise side .
Speaker #8: One thing I'd add is that this new use case with Amazon , they were not interested in a short term relationship with us .
Speaker #8: They did sign for five year contract , which just shows the strength of relationship with Amazon .
Speaker #14: Okay , great . Thank you . That's that's great color . Second question I just wanted to kind of touch on the grilled profile .
Speaker #14: You know you guys are AR is now down to 10% year over year . But when you exclude day for 14% I think that does speak to the strong underlying growth momentum in the business .
Speaker #14: Can you remind us what the impact of the AWS contract roll-off would be to IRR? And more broadly, you know what?
Speaker #14: What would need to happen for growth to continue accelerating from here . You know , I'm just going to keep in mind that you guys have a new CRO in the seat .
Speaker #14: You know , just curious what sort of changes and and priorities and priorities are , are playing out here to to support that growth rate acceleration .
Speaker #8: I'll start off and pass it off to the AWS impact , consistent with last quarter's is approximately $4 million hit to Ara , which will come out December 31st .
Speaker #5: So on the on the question of Reacceleration , look , I think you were on in your observation and I would underscore that our CRO and CMO have been in seat for a towards the time frame in the past 90 days alone , though I have seen , you know , them making a significant impact .
Speaker #5: Kyle and Mark hopefully are listening to us today . I'm going to say good things about their work . I've been very impressed with the level of sophistication that we've been able to already inject in our revenue architecture .
Speaker #5: There are a lot of practical details that are being improved, from forecasting methodology to customer success methodology. We are investing significantly in optimizing our spend on the marketing side, becoming leaders in this AI referral traffic.
Speaker #5: Generation , which is , you know , a big , a big aspect . And a marketing digital marketing is changing a lot in from the post .
Speaker #5: Everything on SEO . So there execution has been sharp and I'm seeing already the beginning of a trajectory that will will continue in the year to come .
Speaker #5: In terms of , you know , Re-exploration is achieved through a few things that we're pursuing . I would highlight for areas that we are particularly focused on .
Speaker #5: The first one is an evergreen . era As I say , always improving our retention metrics . And that is not just improving our retention , but also improving our net dollar retention by strengthening our expansion engine .
Speaker #5: We're very focused on this , and we're seeing positive momentum in the pipeline in this business . The second one that I would mention is performance in the mid-market .
Speaker #5: As we mentioned , we are executing really well as a result of a mix of things people and processes , and we expect this performance to continue in the quarters to come .
Speaker #5: The third one that I would mention is , again , government . We've only seen the beginning of a journey that started in May with federal , and we'll continue strong into 2026 alongside our continued execution in Sled and finally , we have been working on strengthening our enterprise momentum and pipeline .
Speaker #5: We're starting to see the results of that . We expect . Good signals in quarter four , but we believe 2026 will be the year of enterprise at the chatbot .
Speaker #14: Okay , great . Thank you for taking my questions , guys . I'll pass the line .
Speaker #2: Our next question comes from Richard SE from National Bank Capital Markets . Please go ahead . Your line is open .
Speaker #15: Yes . Thank you . I just want to go back to this AI sort of product portfolio . Can you help us understand your assumptions around how your attach rates are going to scale with those products and with that , how the revenue profile will lift alongside that ?
Speaker #8: Hey , Richard , I'm going to wait to answer that question for inspire , where we'll have an investor update and talk a little bit more about how we're envisioning AI credits impact overall business .
Speaker #8: The one thing that I would say is that , you know , we will have RR that will lag a little bit in linearity with our typical , you know , nice ratable revenue , as we'll recognize RR credits as it's consumed .
Speaker #8: So , you know , the the biggest impact is if we sign a new customer with that has an AI credit bundle , they won't start consuming it until after onboarding .
Speaker #8: But we definitely see AI credits as a very strong way to lift our RR . And have expansion within our existing customer base .
Speaker #15: Okay , that's fair . And then I guess the other question is around partnerships . You've been spending a lot of time talking today about see , partnerships .
Speaker #15: I think a few years ago at your conference , you showcased a Microsoft from a technology standpoint . So when you sort of look at those two types of partnerships , what's your sort of perspective on each in terms of driving lifetime value ?
Speaker #15: I was under the impression that sort of the integration with Microsoft tends to make it stickier and potential to expand those offerings . And if that's the case , are you pursuing those type of partnerships as well ?
Speaker #15: In addition to these Rs .
Speaker #5: Our technology partnerships are an important part of our partnership pieces . We on the on the Microsoft side , I believe you may be referring to our module called Microsoft Teams , which is a module that allows customers to use teams to connect the to it .
Speaker #5: It's a module that we're seeing having success in organizations that Microsoft heavy in terms of , you know , our overall technology partnerships , what we're favoring and what we're leading with are capabilities that our customers can use to extend the value of of the platform .
Speaker #5: To give you an example , we have integrated with the chatbot tightly technologies are like syllable for virtual labs or honor lock for proctoring .
Speaker #5: I would say , you know , our partnership focus remains the more on the go to market side . And as far as the technology side , we will continue to invest to an extent with the integrations with the core platforms like teams , slack and others .
Speaker #15: Got it. Thank you.
Speaker #2: We have no further questions . I would like to turn the call back over to Alessio or Tufo for closing remarks .
Speaker #5: Thank you very much for attending and for helping us tell the story of another exciting quarter . As we look forward to seeing you at the end of February for our Q4 results .
Speaker #5: Thank you .