Improved Average Contract Value to Drive Business Performance: Docebo Inc. (TSX: DCBO) provides a learning platform through its artificial intelligence-powered learning technology and helps its customers through its broad range of learning materials. At the end of FY19, the company reported 1,808 active customers, improved from 1,540 customers in FY18.

The company completed its initial public offering by issuing 4,687,500 common shares at a price consideration of US$56.3 million, which was used for the repayment of revolving term credit facility.

During the year, the company launched Docebo Content, which offers an extensive collection library of curated and off-the-shelf e-learning content and is accessible for mobile users too.

Financial Highlights: For the period ended 31 December 2019, DCBO posted revenue of US$ 41.44 million, up 53.1% over FY18. The increase was driven by a ~56.1% growth in subscription revenue. The company reported a higher operating loss and a higher net loss of US$ 9.81 million and US$ 11.91 million compared to US$ 8.955 million and US$ 11.651 million recorded in FY18, respectively. Higher operating expense was the driver behind the higher losses. Adjusted EBITDA minimized to US$ 6.1 million from US$ 7.9 million. The business exited the year with cash and cash equivalents of US$46.28 million, improved abruptly from $3.76 million in FY18. Total assets stood at US$63.86 million, as compared to US$13.30 million in FY18.

FY19 Income Statement Highlights (Source: Company reports)

Valuation Methodology: EV/ Sales Based Relative Valuation

Note: All forecasted figures and peers have been taken from Thomson Reuters

Stock Recommendation: The stock of DCBO is quoting at CAD 14.62 with a market capitalization of CAD 416.03 Million. The stock has corrected by 15.10% and 13.70% in the last one month and three months, respectively. The stock made a sharp recovery of 9.43% during the last five trading sessions, beating the index and sector by 7.31% and 6.47%, respectively. The stock has outperformed the index by ~8% and ~14% in the last one month and three months, respectively. During FY19, the DCBO witnessed a strong growth in average contract value and reported an increment from ~US$ 19,000 to ~US$ 26,000. The business is operated through online medium, and the contents are also available for mobile users too. We believe increasing mobile penetration would likely to enhance its customer base in the near to medium term. Going forward, the company intends to invest in customized marketing strategies and would concentrate on expanding its footprints across the globe. However, FX fluctuation poses a significant challenge to the group’s revenue. We have valued the stock using EV/Sales based relative valuation method. The stock is currently trading at an EV/Sales multiple of ~5.3x and expect it command the same multiple on the next twelve months revenue and arrived at a target price offering a lower-double digit upside potential (in % terms). Hence, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of CAD 14.62, up 8.13% as on April 03, 2020.

DCBO Price Chart (Source: Thomson Reuters)

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