Docebo (DCBO) Q3 2026 Earnings Call Transcript

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DATE

Friday, Nov. 6, 2026

CALL PARTICIPANTS

• Vice President of Investor Relations - Michael W. McCarthy
• Chief Executive Officer - Alessio Artuffo
• Chief Financial Officer - Brandon Farber

TAKEAWAYS

• Subscription Revenue -- $65.2 million, an increase of 12% year over year despite a 1 percentage point negative impact from the strengthening US dollar.
• Total Revenue -- $70.3 million, representing 14% growth compared to the prior year.
• Gross Profit -- $55.8 million, or 79.3% of revenue compared to 80.3% last year, driven by a higher mix of professional services projects.
• Net Income -- $9.4 million, or $0.38 per share, compared to $6.1 million or $0.21 per share in the comparative period last year.
• Adjusted Net Income -- $14.0 million, or $0.56 per share, up from $9.9 million or $0.34 per share in the prior year.
• Annual Recurring Revenue (ARR) -- $261.5 million, an increase of 11% versus last year driven by consistent enterprise demand and new customer wins.
• Special Dividend -- $60 million, or $2.42 per share, funded through debt capacity to return excess capital to shareholders given predictable subscription cash flows.
• Debt Capacity -- $150 million, increased from $90 million to facilitate the one-time special dividend payment.
• Net Debt to EBITDA Ratio -- 1.9x, based on net debt of $108 million and projected adjusted EBITDA of $56 million.
• Share Repurchases -- $82 million for 4.1 million shares in 2026, as the company historically utilized buybacks to generate value.
• Average Repurchase Price -- $19.97 per share, the mean cost for shares bought back throughout the fiscal year.
• Adjusted EBITDA -- $16.7 million, representing 23.7% of total revenue compared to 20.1% in the prior year.
• Cash Flow from Operating Activities -- $4.1 million, down from $5.3 million in the comparative period last year.
• Free Cash Flow -- $6.1 million, or 8.7% of total revenue, representing a slight decrease in margin from 9.2% last year.
• Average Contract Value (ACV) -- $77,900, a 24% increase from $62,800 last year driven by a shift toward larger enterprise customers and multi-product adoption.
• Largest OEM Customer -- 2.1% of total ARR, down from 6.2% year over year as the customer continues to reduce its subscription levels.
• Borrowings -- $88.2 million as of Sept. 30, 2026, compared to cash and cash equivalents of $42.5 million.
• Q4 Revenue Guidance -- $71.9 million to $72.1 million, reflecting a heavy enterprise pipeline with deals typically maturing in December.
• Q4 Subscription Revenue Guidance -- $66.5 million to $66.7 million, based on Q3 ending ARR adjusted for current foreign exchange trends.
• Q4 Adjusted EBITDA Guidance -- $16.9 million to $17.1 million, maintaining margins consistent with recent performance.
• Full Year 2026 Revenue Guidance -- $276.7 million, raised from initial targets of 10.6% growth following a stronger rebound in the business.
• Full Year 2026 Adjusted EBITDA Guidance -- $55.8 million, representing disciplined capital investment across the fiscal year.
• Professional Services Revenue -- $5.1 million, an increase of 42.2% year over year as enterprise implementation projects outpaced subscription growth.
• Subscription Revenue Growth Year to Date -- 12.1% for the nine months ended Sept. 30, 2026, reflecting consistent execution.
• Working Capital -- Negative $34.2 million, a decrease of $39.7 million from the prior year.

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RISKS

• Farber noted that "October is US dollar strengthened a little bit, so we lost some ARR on FX," which impacts short-term revenue projections and guidance.
• Artuffo stated that procurement processes in the government segment are "trivial at times," which contributed to delays in closing significant deals during the quarter.
• Farber noted that professional services growing faster than subscription revenue has resulted in "quarterly movements in gross margin" and temporary margin pressure.

SUMMARY

Docebo Inc. (NASDAQ:DCBO) reported third quarter results featuring 14% total revenue growth and the declaration of a $60 million one-time special dividend. Management reported that the company is unifying skills intelligence, learning, and knowledge into a single workforce readiness platform to support performance in the flow of work. The company reported that average contract value increased 24% year over year to $77,900, driven by the expansion of multi-product enterprise agreements and a move into regulated verticals. Management raised full-year 2026 total revenue guidance to $276.7 million, representing approximately 14% growth compared to an initial target of 10.6%.

• CEO Artuffo stated, "We are really building a much more diverse public sector, state, and local government relationship also through partners," including relationships with firms like Deloitte.
• Management reported over 600 beta customers for new AI-driven products, providing market feedback for products before they reach general availability.
• CEO Artuffo noted that more than 50% of the customer base uses the platform for external use cases, allowing the company to access budgets from Chief Revenue Officers and Chief Customer Officers.
• The company is expanding its vertical strategy by launching a dedicated healthcare and med-tech initiative for 2027 following the initial rollout of the government vertical.
• CEO Artuffo stated, "We have staffed experts across our entire, you know, value in the company from GTM to product and engineering," to support specialized market needs.
• CFO Farber indicated that the company expects research and development expenses to remain roughly flat as a percentage of revenue into 2027 while maintaining general and administrative cost discipline.
• Management reported that the new Knowledge module allows enterprises to connect directly to data sets including SharePoint, Salesforce, Confluence, and Google Drive.

INDUSTRY GLOSSARY

• LMS: Learning Management System, a software application for the administration, documentation, tracking, and delivery of educational courses or training programs.
• ARR: Annual Recurring Revenue, the value of the recurring revenue components of a company's term subscriptions normalized to a single year.
• OEM: Original Equipment Manufacturer, referring to partners that embed and resell the Docebo learning platform within their own products.
• ACV: Average Contract Value, the average annual revenue generated per customer contract.
• SLED: State, Local, and Education, a segment of the public sector market.
• FedRAMP: Federal Risk and Authorization Management Program, a government-wide program that provides a standardized approach to security assessment for cloud products and services.
• SKU: Stock Keeping Unit, a distinct type of item for sale.
• Agentic AI: Artificial intelligence systems designed to act as agents that can autonomously or semi-autonomously perform tasks or make decisions.

Full Conference Call Transcript

Operator: And welcome to the Docebo Third Quarter 26 Earnings Call. All participants are currently in listen-only mode. We will open the line for a question and answer session momentarily. Analysts, you can ask questions by pressing *1 to raise your hand. To withdraw your question, press *1 again. We ask that analysts please limit themselves to 2 questions and return to the queue for any follow ups. I would now like to turn the call over to Docebo's Vice President of Investor Relations, Michael W. McCarthy. Please go ahead, Mike.

Michael W. McCarthy: Thank you, Jillian. Earlier this morning, Docebo issued Q3 26 earnings results. The press release, which included a link to management's prepared remarks in our quarterly investor slide deck, were all posted to our Investor Relations website. This morning's call will allow participants to ask questions about our results, and the written commentary that management provided this morning. Before we begin this morning's Q&A, Docebo would like to remind listeners that certain information discussed may be forward looking in nature. Such forward looking information reflects the company's current views with respect to future events. Any such information is subject to risks, uncertainties, and assumptions that could cause actual results to differ materially from those projected in the forward looking statements.

For more information on the risks, uncertainties and assumptions relating to forward looking statements, please refer to Docebo's public filings which are available on SEDARR and EDGAR. During the call, we will reference certain non IFRS financial measures. Although we believe these measures provide useful supplemental information about our financial performance, they are not recognized measures and do not have standardized meanings under IFRS. Please see our MD and A for additional information regarding 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. Now I would like to turn the call over to Docebo's CEO, Alessio Artuffo and our CFO, Brandon Farber.

Jillian, please open the line for questions.

Operator: We will now begin the question and answer session. As a reminder, please limit yourself to 2 questions and return to the queue for any follow ups. Please standby while we compile the Q&A roster. Your first question comes from the line of Suthan Sukumar with Stifel. Suthan, your line is open. Please go ahead.

Suthan Sukumar: Good morning, gents, and, congrats on another strong quarter. Good to see consistent execution here. For my first question, I wanted to touch on the on the government segment. I did not catch much of an update this quarter. Can you give us a look at what current operational traction is looking like? And what is your outlook going forward post the US midterm elections?

Alessio Artuffo: Good morning, everyone. Alessio speaking. Hi Suthan. Thank you for the question, and thank you for the comment on the quarter. Very proud of the team. Regarding government, we are very pleased with how things are progressing on our end. We introduced government as our very first verticalization, and our strategy started to play out. We entered Q3 with a very strong pipeline and a consistent pipeline build, frankly, above our expectations. We had anticipated this would happen. And as a result, we had started our plan to staff up the team to continue to meet the goals that we are setting forth in the future.

And as far as, you know, when you approach a new market, it is also an opportunity to learn. And among the learning opportunity is that the procurement processes across both SLED, state and local, and federal are, let's say, trivial at times. While we have progressed very positively, during Q3, very significant deals. We were hoping to, get some of them in the quarter itself. But we have great confidence they are going to still come in the fiscal year. And 1 more thing. When we speak about government, we tend to focus a lot on federal. But as a reminder, we are really building a much more diverse public sector, state, and local government relationship also through partners.

And, you know, with relationships like Deloitte, we feel like we are very well positioned to continue to succeed in this new vertical. Stay tuned for more news coming next quarter.

Suthan Sukumar: Okay. Thank you. Appreciate the update. For my second question, I wanted to touch on the special dividend that you guys announced. Obviously, this is a positive vote of confidence from you and the board. How are you guys thinking about deleveraging, and, what does this mean for M&A capacity from here?

Brandon Farber: Hey, Suthan. So, you know, just taking a step back, So, you know, as you mentioned, we announced today an approximate $60 million 1-time special dividend The dividend will be funded from our remaining debt capacity taking us from $90 million to $150 million of debt. That leaves us in a net debt position of $108 million with an adjusted EBITDA or projected adjusted EBITDA of $56 million. So that is that is a net debt to EBITDA ratio of 1.9x. So I think the ultimate question is, you know, why dividend? Why now? If you if you actually look at our capital allocation priorities, they have really remained consistent. So, you know, number 1, invest back in business.

We are investing in health care. We are investing in FTE. We are going to continue to hire in the government. We are doing that with still projected 20% plus EBITDA margins. that is gonna grow into 2027 and beyond. Acquisitions, you brought it up. We have done 2 acquisitions in 2026. And funny enough for Docebo, that is a lot. We continue to believe that we are at heart an organic growth story. And we will always be opportunistic. In M&A, but when we look at the next 12 months, we are really heads down on execution. And that leaves our third priority is returning cash to shareholders. And, you know, listen.

We have historically aggressively done that from buybacks. In 2026 alone, we spent $82 million to repurchase 4.1 million shares an average price of $19.97, which has frankly generated value for shareholders. If you look at the last SIB we did a couple months ago, only $2.5 million was filled of a possible $70 million. So we looked at today. You know, we looked at our balance sheet flexibility. We looked at our excess capital. And we felt like returning cash to shareholders via dividend was the best use of cash. And, you know, it really speaks to the confidence we have in the business right now. Not only us, but the board.

And when we look at our business, it is highly recurring in nature. Subscription business, highly predictable cash flow, that is growing and will continue to grow. Thank you, guys.

Suthan Sukumar: I will pass the line.

Operator: Your next question comes from the line of Robert Young with Canaccord Genuity. Robert, your line is open. Please go ahead.

Robert Young: Hi, good morning. Thanks for taking the question. I would like you to unpack the guidance a little bit. It seems conservative. After the read on the, like, the confident tone in the prepared remarks. You just noted a strong pipeline ahead of your own internal expectations, and then you have got seasonality benefit in Q4 as I understand it. And then new AI products in market. And so maybe if you could just give a little bit of context for us on how you arrived at the guidance, on and, you know, what is driving it?

Brandon Farber: Robert, if you think about the Q3 guide, it is 1 of the easiest of the year, but it is also the hardest. Why do I say that? It really gives you no insight into how the business is doing. In the short and midterm perspective. You know? And why do I say that? Well, when we guide to Q4, we start. Our starting point is what was our Q3 error? We look at the number of days Q4, and then we unpack what happened in October. Happened in October is US dollar strengthened a little bit, so we lost some ARR on FX.

And when we look at our pipeline, which is heavy enterprise in Q4, that tends to lead to mature deals falling in December. So when we look at Q4 guide, it is a constitution of our Q3 ARR with almost little to none incremental revenues from Q4 bookings. that is all gonna impact our 2027 guidance when we provide that in February. If you look at just at a macro, interestingly enough, in February, which was surely just 9 months ago, we guided 2026 revenues at the midpoint to 10.6% revenue growth. After being raised, being raised, being raised, or full year revenue growth is now projected to be 14% plus.

On a quarterly basis, our subscription revenue was 12% in Q1, 12% in Q2, 12.4% in Q3, and we are guiding to 12.8% in Q4. So if you look at the year as a whole, you know, it is been a strong rebound year for Docebo. And we really think we are setting ourselves up for success into 2027 and beyond.

Robert Young: Okay. Thanks. And my second question, nice to see the health care med tech win in the quarter and with, I think you said specialized partners. So give us an update on the investment in that vertical. That was a thing you were highlighting last quarter, and the returns you are seeing. Is this win a an effect of that investment, or should we expect more focus on this vertical?

Alessio Artuffo: No. that is fine. We should expect more focus on the vertical moving forward. We should expect more wins in this vertical moving forward. The reason is we are just very much getting started. What that means is, number 1, we have hired the right people. This is not just a sales motion. We have staffed experts across our entire, you know, value in the company from GTM to product and engineering. We have, more importantly, studied deeply the market and the differences that exist across the denominations like life sciences and health care itself and the subcategories of industries that exist.

We have mapped our existing customers to these categories and are talking to them and understand what they need, for us to be better at it. I e, where we can take our product. We have used that to influence and create a more sophisticated and vertical road map. And finally, we have an operational strategy to target the right accounts in the greenfield And we understand those accounts that are with competitive products that are currently under strain. And with all of that said, now we have to execute to win in 2027 and 2028.

Operator: As a reminder, if you would like to ask Your next question comes from the line of George Sutton with Craig Hallum. George, your line is open. Please go ahead.

George Sutton: Thank you. Guys, first, I would just like to congratulate the Board on the special dividend. We would rather see a special dividend than more share repurchases just because of the liquidity of the stock. So nice to see. My first question is on the launch of Knowledge. And I want a better understanding of the extent that you can go to the broader knowledge work of the enterprise and you are going to be targeting obviously, CROs and CCOs, which are a very different sale process than just the traditional training folks.

So how are you teeing up for that in terms of the sales process And what sort of ARPU do you look for as a benefit to the broadening of the organization?

Alessio Artuffo: Thank you, George. Let me take a step back and, go back to circa 2016, 2020 which is when Docebo, started identifying the need in the market that went well beyond the compliance training as we know of it today. And we embraced the need in the market for learning to become a more GTM monetization based project as well. We did that And over the years, now more than 50% of our customers use Docebo not only for internal purposes, but for external use cases, And the point being those external use cases already are served by, supported by, budgeted with the office of the CRO and the office of the CCO.

We have built over time a capability to go after buyers and address buyers that are not l and I would say that gene has already been built in the company. Now where we are taking it next and why it applies to knowledge. What we have seen over the past few years and in particularly I would say, highlighted by AI is that learning and knowledge are blending. Meaning, buyers are telling us that their users do not just want to learn in the sense of taking structured courses. But they want to be in the flow of information. They want to have information available to them upon request.

And, certainly, the chat GPT era has opened the consumers to new expectations. So how. What do we do? We took the opportunity to extend the concept of learning to knowledge by opening up effectively what we can have access to a much broader set of data. The enterprise data, as opposed to the learning data. You can think of the LMS as a big database. And that database, up until yesterday, contained learning information only. But learning is created out of a much broader set of knowledge. Now we are connecting directly to it.

Now we are enabling the enterprise to be able to reach into their SharePoint information, their Salesforce information, their Confluence information, their Notion information, their Google Drive information, something that was impossible. Until not too long ago in a sophisticated way Again, we are bearing the benefits of AI. Our customers are having a wildly positive response to that. We are at the very beginning of the journey, We believe that the CIO office will be more involved and we are going to repeat the same playbook that we adopted years ago when we approached a different buyer. We are going to do the same thing, and I think it is going to be fantastic.

George Sutton: Thank you. And just staying on the new release, You have 600-plus beta customers, which sounds like a very large number of beta customers. Can you talk about the importance of the message to that?

Alessio Artuffo: Thank you for capturing that nuance. it is 1 that I particularly care a lot strategically and in the way we think about how we build the Docebo. First, let me explain 2 concepts of beta. there is the private beta and there is the public beta. And we have a few phases there. Once we reach public beta, we involve more people to talk to us. And what is the underlying message? What is the value? The value is becoming a company that builds you know, on. With an engineering first mindset with a company that builds with a customer first mindset.

It is during that, public beta and working with those 600-plus customers that we get the real value, the real feedback, the real market you know, I would say that there is there is always a gap between what a product management team and an engineering team can think of until you bring something to the use of the practitioners. And so we put a lot of value into that, and we believe that as we do that, once we go to GA, our products are much better off. And frankly, there is a there is a monetization component in that strategy.

We want to come out of the gates very, very prepared to welcome net new customers that have already had a chance to go deep in the product and feel like they are a part of it.

George Sutton: Perfect. Thank you.

Operator: Your next question comes from the line of Ryan MacDonald with Needham. Ryan, your line is open. Please go ahead.

Ryan MacDonald: Hi. Thanks for taking my questions, and congrats on a great quarter. Alessio, we have spoken a few times this year about sort of the refresh cycle that is occurring in the LMS space from sort of a forced platform modernization from 1 of the large legacy incumbents It was not lost on me that there was a number of cited competitive takes this year or in the quarter. As you talked about client wins. So just curious to hear about what you are seeing from a competitive perspective and if you are seeing sort of a tailwind in RFP activity given the dynamics of the market?

Alessio Artuffo: Sure. So first, let me share something philosophical. How we run Docebo. We do not focus on the competition very much. We focus on ourselves. I am a big believer that you need to establish what you think is right and go execute that and not worry about what others are doing. But with that said, being educated and understanding what happens in the market is important. And here's what we see, but not necessarily focused on. Okay? What we see is that buyers, the buyers that we are targeting, modern, complex, enterprises, want a modern platform that can support their needs. And these needs require a system with deep workflow and enterprise capabilities.

Those enterprise capabilities range anywhere from the features themselves the security layer to the governance model, to the ability to implement in a certain way, it is not just an engineering concept. It goes well beyond. it is how you build a company. And when you think about the competitive landscape, and you think about features combined with all these characteristics, you know, notwithstanding things like FedRAMP certification, that is definitely something that takes time, energy, and investment.

You know, there is not a lot of I cannot see a lot of competition out there that then brings together AI learning, knowledge, skills intelligence in a highly integrated platform that can withstand the complexity of 30 thousand 40 thousand 50 thousand 100 thousand people organization. That is our mode. That is our uniqueness. And the reason why I love that moat is very hard to replicate. This is not an AI agent company that tomorrow, displaces this need. The need will be there forever. But the way to get there is incredibly hard. We are there, and we are going to crush it.

Ryan MacDonald: Got it. Maybe as a follow-up, you also mentioned, in the prepared remarks that your agents are helping you to expand who you are selling to within the enterprise, sort of expanding from a traditional HR or CRO or CCO sale to now include the CIO? Obviously, a very exciting opportunity, but it sometimes can be a bit of a double edged sword. So I am curious, how are you thinking about what is the potential incremental budget you can unlock from a CIO sale? And then conversely, how do you think this affects sales cycles? You know, with selling to a new person or adding another layer in the selling motion to the sales process. Thanks.

Alessio Artuffo: Yeah. As to the question. So first, the CIO is not a new person at the table for us. The CIO is already a stakeholder that is heavily involved We actually have plays in our sales process both at net new logo and existing logo where we address the CIO office. Whether it is for a security questionnaire or for AI reviews and whatnot. So we are very used to that cadence. What the prepared remarks highlight is that the introduction of new capabilities such as knowledge and agents will probably make the CIO more relevant. And budgets that were confined to L&D and or CRO only could you know, potentially open up to CRO budgets as well.

It is early for us to give a, you know, a clear or hard thesis about what the percentage will look like. And we have been focused on creating the value. And working with the CIOs and these customers to understand what they care about. that is what our focus has been so far.

Ryan MacDonald: Really helpful. Thanks. Thank you.

Operator: Your next question comes from the line of Matthew Van Vliet with Cantor Fitzgerald. Matthew, your line is open. Please go ahead.

Matthew VanVliet: Hey, good morning. Thanks for taking the questions. I guess curious on how the ongoing process of cross selling the skills intelligence platform to your existing customer base is going? Where are you seeing the most traction early on there? And how much does the, ability to use AI and content creator sort of cross pollinate between the 2 platforms to help drive some additional sales?

Alessio Artuffo: So I will address first the skills intelligence and 365 cross selling opportunity Once again, as a step back, we completed the acquisition earlier this year. And, we have been focused on integrating the products. Our whole focus was a seamless experience for our customers, that chose to use both Docebo and 365Talents. Over the past few months, we have accelerated you know, our product integration. We have, recently released the latest version of it, which is really brilliant. And that is giving us the opportunity to continue to sell into the base and, frankly, in the greenfield as well. The way we think about that opportunity is twofold.

Number 1, we have customers that are, looking to introduce skills in our in our install base. And we are having conversations with them. But you know, the reality is enterprises and large enterprises are the ones that are so far are benefiting the most. From the combination of the 2. And as far as our goals, and our expectations, we from the beginning of the year in terms of budget, we are on track to surpass them. And very excited about the future ahead. I think that said on the first side, You had a question on Creator as well, but I did not quite capture it.

Matthew VanVliet: Yeah. Just curious on how having this skills intelligence and sort of understanding where those gaps are can now be better met for customers using some of the AI content creation, capabilities?

Alessio Artuffo: Yes. Yes. Thank you for that explanation. 100%. So our thesis From an agentic standpoint is that personalization in learning and knowledge is critical. And, actually, personalization is 1 of the areas where we have very significant differentiation. So you can expect agents that we are actually working on that understand the profile, the learner profile, and are able to create material that address those gaps or those needs in real time using Creator as an underlying engine. In fact, we have shipped our first Creator agent that is extremely powerful. So, yeah, absolutely.

Matthew VanVliet: Very helpful. And then, I guess, as you look towards the next few years, obviously, stood up a government vertical. Are there other verticals that you anticipate maybe having more of that support staff and kind of deep domain knowledge that is required, and how should we think about that from a timeline perspective?

Alessio Artuffo: Yeah. Look. When we studied when we studied the health care vertical, which we are about to attack as described earlier, we formed really strong opinions about, you know, where the addressable markets are and what characteristics they have. Gaps that we would need to fill from a product standpoint to become really deep in them, So we have a general sense of where we could go. But the reality is we. We have also learned to do things you know, properly and in alignment with, you know, our budget expectations. So in short, we do not want to put too much on the fire.

We believe that with government now starting to pick up and health care starting next year, that is our focus. And as we advance health care to the place of comfort where we believe it is really taking off, then we will tackle on the next 1.

Operator: Alright. Thanks for taking the Your next question comes from the line of Ken Wong with Oppenheimer. Ken, your line is open. Please go ahead.

Ken Wong: Fantastic. I just wanted to check-in to see where we are on the FTE investments. Are you guys approaching a point where you guys are fairly fully staffed there, and what the customer interest has been in terms of deploying that?

Alessio Artuffo: For sure. So when we discussed this in August, we the strategy that we had outlined was to bring the FTEs, you know, directly in our largest enterprise accounts. And that strategy has not has not changed. What has changed is that as of recent, we finally staffed the founding team Yep.

We have identified the right accounts, companies that are going to be working with, And we are gonna be using the next few months, I expect, the next 3 to 6 months to validate the actual model of operation the engagement with the customers, the monetization strategy, the boundary of where FTEs start and end, the values they create, on top of agents that are created by or agents that are created by the FTE. In short, there is a lot that we are going to develop from a playbook standpoint. We are at the beginning of this journey. I think it is an incredible journey. The recent release plays really nicely into that.

So we are timing things nicely because on top of our pre created agents, our customers can create no code agents as well. And we are already seeing signals of customers that raise their hand and say, I would love to work with somebody to help me on this process. So I think over the next couple of quarters, we will have some updates for you guys on how things are trending. But so far, everything is moving according to expectations.

Ken Wong: Fantastic. And then, Brandon, I wanted to just check on gross margins. You called out sort of a higher mix of ProServe pressuring that. Just wondering if that is something that we should expect to extend into Q4 and beyond I imagine, with more enterprise, you talked about the FTE just now. You know, we could potentially see pressure also as you guys up the adoption of AI? Any color there would be great.

Brandon Farber: Yeah. So when we look at gross margin, we have the benefit internally of seeing our gross margins from a PS perspective itself. You know, good news is that the gross margins on subscription business is pretty much the exact same as it has historically been. But the quarterly movements in gross margin really relates to the specific professional service projects that we are performing. And also the fact that right now professional services is growing faster than sub.

I do believe that into Q4, you will see a similar trend But as we get into 2027 and beyond and beyond and start to lap the strong year in enterprise, I would expect a little bit more consistent growth in PS. To be consistent with subscription revenue, and then it would normalize and allow gross margins to start ticking back up.

Ken Wong: Perfect. Thank you.

Operator: Your next question comes from the line of Erin Kyle with CIBC. Erin, your line is open. Please go ahead.

Erin Kyle: Good morning. Thanks for taking the questions. Brandon, just wanted to follow-up on the margins as well. The Q4 EBITDA guide implies margins roughly comparable to where they were in Q3. And we have been talking about reinvestment in the business in terms of the healthcare vertical and the FTE program. So how should we think about sort of margin expansion carrying into 2027 and beyond from here? Do you expect to see continued margin expansion in 2027 and beyond? Or should we expect 2026 exit margins to kind of be a stable level on a go forward basis?

Brandon Farber: Yeah. Listen, we are going to guide to EBITDA in 2027 and beyond. I think our main principles of the business remain consistent. We remain disciplined. capital investors. I think we are really proud of our EBITDA growth, not just EBITDA margin. So we are this quarter, we grew EBITDA by 34% while growing the top line. We are making strategic investments, and we still see strong EBITDA margins And when we look at the different lines within our business, you know, I think it is natural to say that we are expecting R&D to roughly stay flat as a percentage of revenue into 2027 and beyond.

And the 1 area that we are remaining disciplined is G&A, as you know, said it for a number of years is that you can continue to see leverage in that area of the business. So without giving you a full guide, yes, you will see some EBITDA margin expansion. And, you know, stay tuned in February for more guidance on EBITDA.

Erin Kyle: that is helpful. Thank you. And then maybe for my second question, just going back to the federal pipeline, As it relates to sort of the September period, and I know the environment's changed quite a bit in The US in the last week or so. But earlier in the year in Q3, would you say that you saw any evidence that some procurement uncertainty from some of the administration's policies that were announced impacted any RFP processes, delayed anything, or is it kind of the timeline moving from pipelining Q3 to Q4 more just the nature of it being a new market for you?

Brandon Farber: I think it is actually a nature of the agencies we are working with. We do not believe that the elections had any impact on the results in Q3. We are working with some agencies that you know, are seeing buying potential into Q4 and we are not necessarily felt the pressure of the lose it or use it budget buying cycles. So, you know, historically, we have always mentioned Q3 will be the highest. FedRAMP. Quarter. We are seeing that potential this year to be into Q4. But if we look into the next couple years, we continue to believe that next Q3 will be the highest. So this year is a bit of anomaly for us.

Erin Kyle: Thanks. I will pass the line.

Operator: As a reminder, if you would like to ask a question, please press Your next question comes from the line of John Shao with TD Cowen. John, your line is open. Please go ahead.

John Shao: Yes. Good morning, gents thanks for taking my question. So given the milestone you have with the new capabilities and a growing customer base, do you think in 2027 and beyond, your ARR growth is going to include some of the potential uplift from, you know, the new hybrid pricing model?

Brandon Farber: I think the natural answer is yes. You know, as customers are buying Docebo, you know, they are no longer looking for just learning. You know, if I think about when we started. You know, when I started Docebo 5 years ago, you know, if we signed a customer, you know, we would have a $100 thousand or $200 thousand ticket, and that would be it. You know, we added content. That $200 thousand ticket turned into $400 thousand. We added skills. That $200 thousand ticket now turned into a $600 thousand ticket. We are adding knowledge. that is going to turn that $600 thousand ticket into even the larger dollar ticket.

You know, we are still developing our thesis on what the ARPU growth will be and, you know, what the attach rates are. But we are already seeing pipeline into Q4. We are already seeing interest from prospects. And, you know, we will we will impact that into our guide when we give our revenue guide in February.

John Shao: Okay. Thank you. I will pass the line.

Operator: We have reached the end of our q and a session. I will now turn the call back to Alessio Artuffo, Chief Executive Officer for closing remarks.

Alessio Artuffo: Well, thank you, everyone, for being here for your questions as we approach for the Americans on the call, the Thanksgiving holidays, we wish you and your families a fantastic time. We are looking forward to talking to you to report on our Q4 results in February. Stay tuned until then, and thank you again.

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

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