Docebo's Q3 2025 Earnings Call: Contradictions in Retention, Churn, AWS Impact, and Big Tech Expansion

Guidance:

• Federal/state pipeline: FedRAMP wins already early; expect material federal contracts in FY2026 and continued state/local momentum.
• Seasonality: Q4 is historically seasonally low for federal but strong for enterprise; management expects a strong Q4 and that 2026 will be the "year of enterprise."
• Dayforce wind-down: Dayforce ~3.5–4.5% of revenue in 2026, 1–2% in 2027, then immaterial.
• AI monetization: rolling out AI credit consumption model for modules (Virtual Coach, Video Presenter); ARR recognition may lag credits until consumption.
• Margins: current 20% EBITDA; G&A ~15% with mid-term target 9–11% implying potential ~25% EBITDA over time.

Business Commentary:

* Revenue Growth and ARR Performance: - Docebo reported an increase in ARR by $2.5 million sequentially, with a year-over-year growth of 14% excluding the Dayforce business. - This growth was driven by improvements in mid-market business performance, exceeding expectations in EMEA, and better retention rates, overshadowed by accelerated churn with the Dayforce segment..

• Federal and State/Local Business Expansion:
• Docebo secured two new federal customers shortly after achieving FedRAMP authorization and expanded an account with the Department of Energy.

• The company's investment in FedRAMP certification is creating a competitive differentiator, opening opportunities in state and local markets, and is expected to contribute significantly to future growth.

• Enterprise and Mid-Market Growth:

• Docebo increased customer counts and ARR from large customers, with notable wins like Veolia and Amazon Health.

• Growth in these segments was facilitated by strong execution in mid-market, improved pipeline practices, and strategic partnerships with system integrators to support enterprise momentum..

• AI and Monetization Strategy:

• Docebo introduced AI credits, aiming to manage AI pricing and drive revenue through modules like AI Virtual Coach.
• The company is focused on creating value with AI features to enhance customer experience and retention, with monetization strategies evolving alongside product capabilities.

Sentiment Analysis:

Overall Tone: Positive

• Management: "we are quite pleased with the results this quarter" and said business grew "14% year over year by excluding the Dayforce business." They highlighted "two new federal customers shortly after our May-dated FedRAMP listing," a signed 5-year Amazon Health deal, and achieving "20% EBITDA today," while projecting 2026 as the "year of enterprise."

Q&A:

• Question from George Sutton (Craig-Hallum Capital Group): ARR was up $2.5M sequentially — can you unpack the components driving that change?
  Response: Excluding Dayforce, ARR grew 14% YoY driven by mid-market strength, stronger EMEA performance and improved retention; Dayforce churn accelerated faster than expected.

• Question from Kenneth Wong (Oppenheimer): Given the government shutdown, is there conservatism in public-sector pipeline for Q4 and how is enterprise pipeline/sales cycle shaping up?
  Response: Shutdown hasn't materially hurt pipeline; FedRAMP expanded state/local and federal opportunities, enterprise customers >$100k are increasing, cycles have elongated but Q4 is expected to be strong and SI partnerships are accelerating enterprise wins.

• Question from Ryan McDonald (Needham & Company): Can you detail the Dayforce OEM wind-down trajectory and opportunities to compete within that base? Also, where are AI monetization benefits surfacing across retention, pricing, or separate SKUs?
  Response: Dayforce is winding down to ~3.5–4.5% of revenue in 2026, 1–2% in 2027 and then immaterial; AI monetization will lean on credits/consumption (e.g., Virtual Coach) with Creator/Virtual Coach targeted as primary monetizable offerings.

• Question from Robert Young (Canaccord Genuity): You noted two consecutive quarters of improved retention — can you update on churn elements and outlook into 2026? Also, what is the AWS Skill Builder handover status?
  Response: Retention trends improved but will be impacted next quarter by the AWS downgrade; AWS Skill Builder will completely disengage December 31.

• Question from Josh Baer (Morgan Stanley): What was Dayforce's ARR percentage last quarter and why was the wind-down greater than expected; implications for customer counts and average contract value?
  Response: ARR excluding Dayforce was ~13.9% last quarter; Dayforce customers tended to be lower-HCV, so their exit reduced total customer counts but increased average contract value as direct Docebo customers have materially higher HCVs.

• Question from Yifu Lee (Cantor Fitzgerald): Which AI products are closest to monetization (Harmony Search/Support/Creator/Virtual Coach/Copilot)? What customer feedback is shaping the roadmap and why is HCV flat YoY?
  Response: Creator and Virtual Coach are viewed as closest to monetization via the credit model; customers demand personalized, quickly created content (driving Harmony/Creator), and HCV is flat YoY due to strong mid-market unit growth with enterprise HCV expected to lift in Q4.

• Question from Erin Kyle (CIBC): How should we think about margin profile into 2026 given government expansion — is the 20% EBITDA sustainable and will S&M spend rise?
  Response: 20% EBITDA reflects seasonality and current staffing; with G&A at ~15% and a mid-term target of 9–11% management expects roughly +5% leverage (toward ~25% EBITDA) over time without sacrificing R&D or sales investments; government team is currently fully staffed.

• Question from Susan Sukumar (Stifel): On the Amazon expansion, what use cases will Amazon Health use Docebo for and how will that relationship evolve? Also, what is the AWS roll-off impact to ARR and what must happen to re-accelerate growth?
  Response: Amazon Health signed a five-year deal using Docebo for external customer/partner education and internal employee use cases (sales enablement, onboarding, compliance), signaling multi-use stickiness; AWS Skill Builder roll-off is ~ $4M ARR removal Dec 31; re-acceleration relies on retention, mid-market strength, government/FedRAMP and enterprise execution.

• Question from Richard Tse (National Bank): How will AI attach rates and revenue scale with new products, and how do SI partnerships compare to technology partnerships (e.g., Microsoft) for driving lifetime value?
  Response: AI credits are expected to drive expansion/NRR though ARR may lag until consumption; go-to-market SI partnerships are the primary driver of complex enterprise implementations and lifetime value, while tech integrations (Teams, proctoring, labs) support extensibility.

Contradiction Point 1

Retention and Churn Trends

It involves changes in the company's retention and churn trends, which are crucial for assessing customer satisfaction and financial stability.

Update on churn improvements and retention trends? - Robert Young(Canaccord Genuity)

2025Q3: We saw two consecutive quarters of improved retention. We lapped a large downgrade in Q3 2022. We expect retention to go down next quarter due to AWS downgrade. - Brandon Farber(CFO)

What assumptions support the guidance increase, and is net retention improving? - Robert Young(Canaccord Genuity)

2025Q2: Expecting improved retention; Q3 net retention is expected to improve before a dip in Q4 due to AWS loss. FedRAMP contributions are out of this year's guidance. - Brandon Farber(CFO)

Contradiction Point 2

Big Tech Expansion and AWS Loss Impact

It highlights the impact of new big tech expansion deals on the company's revenue and its relationship with AWS, which are critical for understanding the company's growth strategy and revenue streams.

Can you clarify the OEM wind down with Dayforce and its impact on ARR? - Ryan McDonald(Needham & Company)

2025Q3: Dayforce represented 9%-10% of ARR at its peak. We expect it to be 3.5-4.5% in 2026 and immaterial thereafter. ARR growth excluding Dayforce was 14%. - Brandon Farber(CFO)

What is the size and scope of the big tech expansion deal and potential for additional growth? - Suthan Sukumar(Stifel)

2025Q2: Large 6-figure deal, underpenetrated within the customer. Opportunity exists in expanding to customer experience use cases beyond the current two use cases. - Brandon Farber(CFO)

Contradiction Point 3

AWS Relationship and Impact on Revenue

It highlights the perceived stability of the relationship with AWS and the impact of their decision on revenue, which are critical factors for investor confidence and strategic planning.

Can you provide an update on FedRAMP and public sector dynamics, and how the government shutdown impacts the pipeline? - Kenneth Wong (Oppenheimer)

2025Q3: The relationship with AWS remains strong. Amazon AWS stayed with Docebo for their full contract term. Although they decided to build internally, it's a testament to the value Docebo provided. - Alessio Artuffo(CEO)

How does AWS's decision to build internally instead of using Docebo's product impact the business? - Suthan Sukumar (Stifel)

2025Q1: AWS has not chosen another external product, but rather built their own solutions. Docebo remains confident in its ability to win large technology companies due to its experience. - Alessio Artuffo(CEO)

Contradiction Point 4

Churn and Retention Dynamics

It concerns the trends in customer retention and churn, which are key metrics for assessing the health of the business and its growth prospects.

Can you update us on churn and retention trends? - Robert Young (Canaccord Genuity)

2025Q3: We saw two consecutive quarters of improved retention. We lapped a large downgrade in Q3 2022. We expect retention to go down next quarter due to AWS downgrade. - Brandon Farber(CFO)

Why was the full-year guidance reduced, and could you elaborate on churn rates and expectations for the large customer pipeline? - Robert Young (Canaccord Genuity)

2025Q1: Churn rates are stable, and professional services are expected to decline year-over-year. - Brandon Farber(CFO)

Contradiction Point 5

Churn and Retention Dynamics / Sales Cycle Dynamics

It involves the evolving dynamics of churn, retention, and sales cycles, which are critical for understanding the company's customer base stability, growth trajectory, and revenue growth.

Can you provide an update on churn and retention trends? - Robert Young (Canaccord Genuity)

2025Q3: We saw two consecutive quarters of improved retention. We lapped a large downgrade in Q3 2022. We expect retention to go down next quarter due to AWS downgrade. - Brandon Farber(CFO)

Were there any deal delays in Q3, and will Q4 and Q1 see strong enterprise performance? - Christian Sgro (Eight Capital)

2022Q3: We have strong NDRR metrics, indicating we are integral to our customer base. The focus is on growing accounts and increasing customer revenue. - Sukaran Mehta(CFO)