Docebo Inc.

Docebo Inc (TSX: DCBO) is a Canada based company and offers a cloud-based learning platform for both internal and external enterprise learning. The company provides real-time tracking of training results, optimizing time, and reducing costs associated with traditional learning methods. The group’s offerings help users to centralize a broad range of learning materials and offer E-learning solutions, such as for partner training, social learning, employee onboarding, employee development and retention, and compliance training. The group operates across Europe, Asia and North America.

Q2FY20 Financial Highlights: DCBO declared its quarterly results, wherein the company reported an impressive top line, but failed to retain the momentum in its bottom-line, due to a surge in operating costs. The company reported its revenue at USD 14.535 million, reflecting a growth of 46.5% over the previous corresponding quarter. The increase was driven by robust growth within the subscription segment, which represents ~92.2% of the total revenue. Annual Recurring Revenue, during the second quarter, stood at USD 57.0 million, as compared to USD 36.9 million, a year ago. The company reported a net loss of USD 3.5 million, compared to a net loss of USD 2.3 million in the previous corresponding quarter. The decline in the bottom-line was primarily due to an increase in sales & marketing costs, research & development expenses and a significantly higher foreign exchange loss. The company reported a solid customer base of 2,046 at the end of Q2FY20, increased from 1,651 customers in the previous corresponding quarter.

Q2FY20 Income Statement Highlights (Source: Company Reports)

Risks: A significant portion of the Company’s revenue constitutes of recurring revenues. If the customers decided to discontinue their subscription, it might affect the group’s performance.

Stock Recommendation: The stock of DCBO delivered handsome return in the recent past a and surged ~197% so far this year. The Company has shown its mark on unique segments and witnessed exemplary customer traction, which is a key positive. During the quarter, the Company showed strong growth in its average contract value, which stood at USD 27,859 against USD 22,350, a year ago. The Company introduced a new product integration with GoTo suite of communication and collaboration tools from LogMeIn in order to provide virtual instructor-led training to remote workforces, which augers well for improved business prospects. During the quarter, the Group endorsed contracts with esteemed clients like MHR International Group, a recognized leader in the UK human capital management segment, wherein DCBO will assist with workforce learning and development technology to enhance the performance MHR’s software. We believe it’s a win-on-win situation for both the parties. The Company’s innovative products have been recognized in the recent past, which is visible from customer growth and recent collaborations. We believe the existing products are likely to cater to a larger audience in the coming days. The stock has closed above its 50-days and 100-days simple moving average of CAD 35.19 and CAD 25.67, respectively, indicating a bullish pattern. Hence considering the current price movement, growth in the customer base, increase in average contract value, we give a ‘Hold’ recommendation on the stock at the closing market price of CAD 50.48 on August 06, 2020.

DCBO Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Lightspeed POS Inc.

Lightspeed POS Inc (TSX: LSPD) provides omni-channel commerce-enabling SaaS platform. Its software platform provides customers with the functionality it needs to engage with consumers, manages their operations, accept payments, and grow their business. The company sells its platform through direct sales force in North America, Europe and Australia, supplemented by indirect channels in other countries around the world.

Recently, the company launched its flexible financing product named Lightspeed Capital in the US market in partnership with Stripe. The above product would enhance the company’s presence among the Small and Medium Businesses and would assist them in buying inventory, invest in marketing, or manage cash flows.

Q1FY21 Financial Highlights: LSPD announced its first quarter results, wherein the company posted an impressive set of numbers and reported revenue of USD 36.2 million, depicting an increase of 51% on y-o-y basis. The growth was underpinned by robust growth within the recurring software and payments segments, which grew 57% from the previous corresponding period (pcp). Net loss widened to USD 20.1 million from a net loss of USD 9.1 million in the previous corresponding quarter. Within Retail, eCommerce activity remained robust and showed 100% increase in eCommerce volumes driven by Lightspeed retailers on y-o-y basis. Retail GTV rebounded during the second half of the current quarter, driven by strong momentum by the bike, home and garden, sporting goods, and golf segments.

Q1FY21 Income Statement highlight (Source: Company Reports)

Risks: As the group would be providing financing to the merchants via Lightspeed Capital, the company is exposed to default risk.

Valuation Methodology: P/CF Based (Illustrative)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The stock of LSPD stood resilient in the recent past and soared ~56% and ~30% in the last three months and nine months, respectively. The group offers omni-channel commerce-enabling SaaS platform, and the demand has grown exponentially in the recent past, which is a key positive. Through the launch of Lightspeed Capital across the United States region, the Company would enhance its presence across the medium and small businesses, and we believe the scope of expansion is huge. After a short-term glitch during April 2020, the business took a sharp turnaround and rebounded driven by of increased digital sales and the recovery of physical sales channels resulting in an overall GTV growth during the later part of the quarter, which is commendable. The Company expects its second quarter FY21 revenue at around USD 38 million to USD 40 million while adjusted EBITDA is expected within the range of USD 7 million to USD 8 million, looks decent considering the current environment. Investors should note that the stock was trading above the 200-days simple moving average of CAD 31.90, indicating a bullish pattern. The stock gained ~14% in the last one month, and we expect the momentum to continue, underpinned by higher adaptation of digital platform across businesses. We valued the stock using the Price to CF based relative valuation approach and arrived at a target price, which suggests a lower single-digit upside potential (in % terms). For the said purpose, we have considered peers like CGI Inc, Sierra Wireless Inc, Absolute Software Corp etc. Hence, considering the aforesaid facts, we recommend a ‘Hold’ rating on the stock at the closing market price of CAD 41.07 on August 06, 2020.

LSPD Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Disclaimer

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