Docebo Inc
TSX:DCBO
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Docebo Inc
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Good morning, everyone, and welcome to the Docebo, Inc. Third Quarter 2021 Earnings Call. Today's conference is being recorded. [Operator Instructions] I'd now like to turn the conference over to Docebo's Investor Relations, Dennis Fong. Please go ahead, Dennis.
Thank you, operator. Before we begin, Docebo would like to remind listeners that certain information discussed today 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 SEDAR 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're not recognized measures and do not have standardized meanings under IFRS. Please see our MD&A 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 U.S. dollars. Now I'd like to turn the call over to Docebo's CEO, Claudio Erba.
Ciao, everybody, and thank you for joining us on our third quarter 2021 earnings call. With me today is Alessio Artuffo, our President and CRO, and I'm happy to be welcoming Sukaran Mehta, our acting CFO, on his first earning call. Over the past year, we have seen the momentum in our business accelerate, and this carried through the third quarter, as I'm excited to report another quarter of 60%-plus revenue and ARR growth. Despite the summer holiday in Europe, which in general is a headwind for us, we had recorded a net ARR addition driven by record new logo sales and strong upsell and cross-sell performance. The investments that we have made in our customer experience and success team have helped to build and support a strong pipeline of enterprise customers that have driven substantial growth in average contract value. We added 151 net new customers in the third quarter. While our growth remains balanced and broad-based across customer verticals, the frequency of the larger enterprise deals has increased as more leading organizations are turning to Docebo to solve their employee, customer and partner training needs. And in the current labor environment, where there is a [ world talent ] for skilled workers, the LMS has become an important tool to improve employee retention. In the third quarter alone, we signed significantly more new deals with ARR greater than $100,000 compared to the second quarter of 2021. In fact, nearly half of new logo business this quarter came from contract over $100,000 in ARR. Our success this quarter has not been tied to a handful of large contract wins but, as organization adopt Docebo even at departmental level, they generally have larger use cases. Consistent with our go-to-market strategy, we continue to help organizations solve both internal and external use cases, demonstrating that use cases goes above and beyond industry standard concept of a traditional LMS. Consistent with the previous quarter, greater than half of our deals in Q3 were external hybrid use cases. One of my favorite example in the third quarter is an agreement we signed with the Zoom Video Communications. As an integral part of our day-to-day life, Zoom selected Docebo as their trusted learning provider to create personalized learning experience with the ability to robustly scale and service employees, partners and customer under a single platform. Undoubtedly, this partnership will support their rapidly-growing customer base and continue to create an impactful learning journey for their audiences. We are also seeing continued success in the retail industry, where there is a need to deliver consistent training experiences across large distributed workforce. In Q3, we were delighted to partner with the Neiman-Marcus, the American chain of luxury department store, to help them provide the best-in-class learning solution to accelerate their digital transformation project. Another vertical that has been strong for us has been the biotech and healthcare sector. We added several new customers this quarter, including an agreement with Smiths Medical, a leading global manufacturer of specialty medical devices. Smiths Medical also invested in the wider Docebo Learning Suite with the selection Docebo Learning Impact. Upsell and cross-sell were also a strong contributor to our growth in the third quarter. We expanded our partnership with Deliveroo to grow the number of learners with their programs. We also tapped into the wider Docebo Learning Suite by introducing a new way to develop content using Docebo Shape and to measure the effectiveness of the learning program while benchmarking against other companies using Docebo Learning Impact. The flexibility of our platform also allows us to expand to other departments within the organization and [indiscernible]. In the third quarter, we were pleased to be awarded an agreement with a new division with one of our largest e-commerce and cloud computing customers. This year, we launched Docebo Learning Suite of products and began selling Docebo Learning Impact in the first quarter and Shape and Learning Analytics in the third quarter. Although we are now successfully selling each of those new products, we are still in the early days of this journey. And I expect the demand for our core Learn LMS platform will remain the primary driver of growth in the coming quarters. In early October, we were excited to relaunch and host our annual Inspire User Conference. This time it was virtual, and we had more than 560 customer, partner, analyst and sponsor joined us for 2 days of livestream content and insight from learning and development experts around the world. During the conference, we launched 2 new innovative models that extended the capabilities of our core LMS, Docebo Connect and Docebo Flow. Docebo Connect is a powerful tool that allows any administrator, no matter how technically skilled, to manage the data import/export process from their LMS across their enterprise tech stack using more than 400 prebuilt integrations through a low-code/no-code interface.Docebo Flow takes the power of the core Learn LMS and deliver learning in the workflow within the software environment the learners are in. So they can get the contextual knowledge they need when and where they need it. Both products are a great example on how we innovate to help organization connect to the core of their businesses, serving multiple audiences and use cases like customer education, phase enablement and front-line training and compliance. We consider our learning software a building block to integrate with every other software in the enterprise tech stack. This philosophy and approach sets us apart and has been fundamental driver in our growth. The delivery of knowledge and training is a revenue enabler for many companies, and our OEM and partnership program are designed to enable this capability. Year-to-date, we have announced 6 new agreements and expanded the partnership we have had with Bluewater and MHR that were signed in 2020. As we have consistently said in the past, working with our partner to develop and bring solution to the market takes time, but we know from our experience with our first OEM partner that the returns can become meaningful. MHR whom we added in 2020, is now in the process of ramping and becoming a more material contributor to our OEM partner business. We expect several more of our recent partner to launch commercial offerings starting in 2022. We believe this will be an exciting [ growth factor ] for us in the year to come, and we are increasing our environment to expand our partnership program further, and we'll share more details in the coming quarters. Lastly, when we spoke last quarter, I touched on some of our intention and effort around ESG. And this is a journey that we are very [ positively ] moving forward. I'm honored that Docebo was recognized in the third quarter for its CSR effort with a 2021 Tech award from TrustRadius for empowering women in technology with grow opportunities. Instilling a culture of caring is extremely important to our organization. And it is also an important factor in how we attract and retain the best talents. We have a number of internal initiatives underway, including Docebo Green Ambassadors, Docebo Pride, Docebo Women's Alliance, who are there for inclusion and diversity, recognition of World Mental day and the Day of Truth and Reconciliation, among just a few. I'm proud of the team effort in bringing environment, diversity, equality and inclusion to the forefront of our efforts as a company. With that, I will now pass the call to Sukaran to speak to the financials.
Thank you, Claudio, and good morning, everyone. For those interested, a detailed breakdown of our financial results for the 3 and 9 months ended September 30, 2021 can be found in our press release, MD&A and financial statements, which are now available on our website and are also filed on SEDAR and EDGAR. The Slide deck accompanying this earnings call was made available on our Investor Relations website this morning. For those who want to follow along, I'm starting my remarks on Slide 4. The strong momentum that we demonstrated in the first half of the year continued in the third quarter, with total revenue for the period growing to $27.1 million, an increase of 68% from the prior year. Subscription revenues were $25.1 million, representing 93% of total revenue for the quarter and up 66% from the prior year same quarter. Professional services revenue in the third quarter were $2 million, an increase of 102% from the prior year period. As Claudio noted, the $10.2 million net ARR added in the third quarter was the highest ever for Docebo and continued the robust trend of quarterly net ARR additions, as shown in Slide 4. At the end of the third quarter, we had $103.5 million in ARR, an increase of 60% over the $64.6 million in ARR at the end of third quarter of 2020. With 2,636 customers at the end of the third quarter of 2021, our company-wide average contract value, or ACV, increased to $39,000, up 23% from $32,000 at the end of the third quarter of 2020. This quarter, ACV from new customers grew to approximately $59,000 compared to approximately $46,000 in the second quarter. Nearly 80% of our new logo and cross-sell contracts were multiyear deals. One of the underlying trends that we were excited to see this quarter was the broad-based growth in enterprise deals. Almost half of the ARR generated for new logos this quarter came from deals over $100,000, and there were no deals over 7 figures in value. To further emphasize the breadth of our enterprise wins, the quantity of deals signed valued over $100,000 in ARR were almost double when compared to the second quarter. Overall, we are very pleased with the direction that our KPIs are trending, reflecting the continued progress in executing our growth strategy. Moving on to Slide 5. The gross profit margin for the third quarter was 79% of revenue, which compares to 80% for the second quarter. The slight reduction in gross profit margin is the result of the investments we've made this year in our customer success and professional services team to facilitate the rollout of our multiproduct strategy and to further enhance customer support. To be clear, these costs primarily relate to staffing, and we expect to gain leverage on these investments as our revenue scales, we expect to return to low 80%-plus gross profit margin level in the next several quarters. On Slide 6, you can see a summary of our operating expense line. Total operating expense for the third quarter increased to $19.9 million compared to $13.9 million for the prior year period. Included in the $19.9 million of operating expenses is a foreign exchange gain of $4.8 million that relate primarily to the cash on our balance sheet and is therefore, for the most part, unrealized. Operating costs, excluding this gain, were $24.7 million, slightly higher than the $23.6 million in operating costs reported on a comparable basis in the second quarter of 2021. G&A expense of $6.8 million declined as a percentage of revenue from 27% for the second quarter to 25.2% for the third quarter as we realized some further efficiencies from increased scale. Compared to the second quarter, sales and marketing expense increased slightly as a percentage of revenue to 41.2% from 40.8%. R&D expense as a percentage of revenue remained unchanged at 20.2% compared to 20.4% for the second quarter. Heading into 2022, we will continue to invest in sales and marketing, but with the long-term expectation of maintaining expenses as a percentage of total revenue in the range of 35% to 40%. We have always been efficient in the level of capital we deploy to generate organic growth. This will continue to be our approach. Leading with innovation remains core to our DNA, and R&D expenses should remain near our expectations of 20% of revenue. We reported an adjusted EBITDA loss of $2 million for the third quarter of 2021 compared to income of $0.6 million in the prior year period. We reported a net profit of $0.7 million for the third quarter of 2021 compared to $1.2 million net loss for the prior year period. As already noted, the net profit for the third quarter reflects an unrealized foreign exchange gain of $4.8 million. Finally, free cash flow was negative $1 million in the third quarter, and we continue to have a very healthy balance sheet, with net cash and cash equivalents of $216 million. Last quarter, we noted that we were finally getting to the point where we expect to begin to realize greater benefits from scale, and I think we started to see this on the G&A line in Q3. We think we will continue to see operating leverage in G&A next year. But as we finalize our 2022 budget, our focus is to continue investing to organically grow revenue as fast as we responsibly can. Our sales pipeline remains very strong and we think is the best use of invested capital, given our low customer acquisition cost, which we believe is among the best-in-class in the SaaS industry. With that, I'll turn it over to the operator now to take some questions from the analysts.
[Operator Instructions] We will take the first question from Stephanie Price from CIBC.
It sounds like the average ACV on new deals in the quarter was obviously much higher than the total ACV. It sounds like enterprise was driving that growth. Just hoping you could break that down a little bit more for us in terms of what you're seeing from enterprise this quarter versus prior quarters.
Alessio speaking. You are correct. We continue to see strength in our enterprise segment as a result of investments, but also recognition that our product is mature, scalable and strong and satisfies the needs of large organizations.When it comes to breaking down the why behind it, I'd say that there is one primary contributing factor, Stephanie, and that is our product is proven to be able to solve for multiple use cases altogether. We refer to that in our language and in the script as hybrid use cases. But when it comes down to realizing why it also is producing higher ARR and revenue, it's simply we're addressing different users' populations in organization. We're helping organizations retain their people. We're helping organizations keep their customers' experience high, that customer is educated. When you're able to do that on a frequent basis, the end users on the average contract are higher, and they're resulting in higher ACV. That is the biggest trend we're seeing. There's certainly positive momentum from very early still adoption of new products, which we are getting better and better at including in our conversations. And despite it being the early days for most of these products, we're very satisfied with the initial response of the market that we’re in.
And maybe on that Learning Suite, maybe you could talk a little bit about the sales approach for the full suite and whether you're leading with the Learning Suite or the core modules. And any color on growth of customers that are signing up for more than 1 product would be appreciated.
100%. There are several ways to look at the customer journey. And the simplest way that encompasses it all, I think, is looking at the first iteration of, let's say, the new logo posture of the company, and then at the continued expansion of our customers.We've been clear that our approach to driving the efforts of Learning Suite are not to sell the suite at all costs at this stage 1, meaning a new logo. We would much rather win the trust of our customers and then continue to do an excellent job and continue to solve problems for them rather than squeezing as much as we can upfront. Having said that, the capability of selling the suite and the way we approach it is still very learn-driven. We believe our flagship product, Learn, is the strongest in the market to satisfy enterprise needs of hybrids, and it becomes very natural, again, to then open up the conversation to other products. On the upsell front, as long as we do an excellent job at creating intimacy and coverage at the field level of our customers, which we're extremely focused on, again, we have an opportunity not only upsell, but also cross-sell across the entire customer 360 environment.
We'll now take the next question from Daniel Chan from TD Securities.
Just wondering if you can give us more color on the cross-sell agreement with that e-commerce and cloud computing customer. What will they be doing for you? And what's the agreement structure? In other words, is it like a revenue share model? Any color would be appreciated.
Dan, I'm sure you understand that when we're not public about actual logo names, there are certain restrictions that we're subject to as to what we can share. So I appreciate the question.I'd say, along with what Stephanie just asked, that success and that agreement reflect entirely our strategy. When we sign an organization, and particularly true with organizations that are of a very large magnitude geography when they have multiple businesses, one of our jobs is dedicating strategic account management to map and understand the opportunity that we have across organization. This success with this organization is a reflection of that. We have a good understanding, deep understanding of our customers' potential. And in this case, with this e-commerce and cloud provider, we were granted the opportunity to serve another business, to address their needs. So once again, I would love to give you all the color in the world, but there are certain terms that we're bound to, and I hope you understand.
Yes. But David, Claudio speaking. The way we expand through cross selling, it's common on every industry and vertical. I mean, in this case it is an e-commerce vendor, but you can imagine another industry group that have companies across the world, or division across the world, and they buy multiple Docebo instances for every parent or sister company. And this is a common use case expanding not only vertically to having more users or buying more products from the same entity or the same department, or expand horizontally, buying multiple LMSs or expanding to the extended enterprise Docebo model, more use cases through a single LMF but in multiple departments, or multiple division or multiple companies. It's very common for us.
So then, your customer wins continue to be really good. Just wondering whether you're still displacing incumbents, or whether these are mostly Greenfield opportunities?
So displacement is the pattern in all the enterprise segment. There's no doubt. There's a caveat to that; that is that, when we talk about addressing the need of hybrid of customer workforce, of improving the experience of the customers of our customers; we find that, in many instances, even large organizations are not addressing that problem yet.So there is a, if you will, green space within an environment where there are already vendors. But these vendors that are more legacy, perhaps, and that were used for compliance or internal training, we're not addressing what we believe is the full scope of the digital learning experience, again, internal and external. On the smaller markets, again, we're very fortunate. We operate horizontally across multiple industries. And we are adopted by companies of different sizes, mid-sized and enterprises both. In the smaller size of our customer base, for sure we find still that organizations are not always equipped with the best-in-class LMS or they have a very first iteration that they outgrow. And when they do outgrow it, it is our time to step in because, once again, same-store scale architecture experience and recognition in the market. We help them get one step ahead and one step further.
We will take the next question from Gavin Fairweather from Cormark.
Just on the enterprise deals, curious what's driving the pickup. Are you seeing more deals entering your funnel or a greater win rate, or both?
Win rates remain fantastic. We're very pleased with it. We believe that is a product of many factors. And for sure, there is an element of recognition in the market, because when you start adding a funnel consistent of enterprises, your brand also gets recognized as the leader. And we believe that is the case with us.There is also the true [ type of ] intentionality. We have been investing in the enterprise segment as we've continued to mature our capabilities to satisfy the needs of enterprises. We were more conservative, if you will, in that segment years ago. But as we continue to win very large organizations, our strategy has been to drive more enterprise success. And finally, I would say that our customers grow with us. That's the beauty of our business. We may have customers that have entered in our, if you will, sales funnel and became part of our family in what we would consider mid-market customers; and over time, due to adoption and continued expansion, entering our enterprise book of business because of their size growth and maturity. So overall, our posture towards enterprises is very intentional. We're staffing the organization to be really good at it, but we remain horizontal company that serves multiple industry and multiple sizes of enterprises.
And just secondly for me, been hearing from some other SaaS companies that was a bit of a slower-than-normal summer with elevated vacations and the like. Obviously, you didn't see any slowdown in your sales production, but curious for your general take on the operating environment that you saw in Q3.
We know seasonality. We understand sort of the market motions in different geographies that [indiscernible] for months. And this year was no different, frankly. We've seen there was a huge return to getting out of the house and having a normal life in many places. And what we've seen is a reflection. But again, our ability to deliver a record ARR performance and continue to grow strong pipeline we believe a testament to how solid we are and how versatile our offering is, and it's irregardless of the environment of whether people are in office or they are remote. We believe [indiscernible] satisfies both the scenarios, and we've seen that in the numbers.
We will now take the next question from Richard Tse from National Bank Financial.
In regards to these enterprise wins, my guess, and this is just a guess, is that the absolute dollars to acquire those customers is probably higher. But on a relative basis, let's say on a per-dollar of ARR, are they higher or lower? Or are they about the same as your remaining base?
Yes. Richard, I would say, in terms of the dollar acquisition for the higher enterprise customers, I don't think there's a significant jump in terms. And if you kind of do the math around our CAC ratio, looking at the sales and marketing expense over the ARR that we add in the quarter, that's tracking relatively consistent.So I think part of the story that Alessio spoke to earlier is one of the ways we continue to expand the ACV is landing and expanding that book of business within the customer base, and so we've been very efficient in doing that. But in overall landing enterprise customers, we're relatively efficient in our CAC ratios. And so I wouldn't say there's a much higher cost to acquiring those customers.
And so there is also probably a factor of sales organizational maturity. I mean, we have on-boarded and we invested a lot in sales and marketing over the past year. And now this incredible talent which we have in the organization are gaining confidence, are trained also, thanks to Docebo, to sell our products, to pitch correctly, to position correctly, to identify customer needs.So it's a mix of factors. And part of these factor are all the investment that we made, and we are continuously making to strengthen our team and our organization.
And then my second question, relative to growth, I don't know if you want to use ACV or annual recurring revenue. But if you look at the growth, can you maybe share with us the split in terms of the contribution of that growth, where it's coming from, whether it's new or from existing expansions here?
Yes. I mean, I think if you look at the ACV, Richard, I would say the primary driver for the growth in ACV, and I think the numbers you would have seen on the new book, has gone up from $46,000 within the quarter to almost $60,000. I would say the primary driver for the continuation of growth in ACV is the size of use case for our Docebo Learn product. And whether it's at department level or organization level, what we are seeing is the complexity in the hybrid application of our platform in solving our customers' needs is really what's driving the increase in ACV.And maybe a bit more color as I think Alessio you spoke about the new products. Some of the products have just been launched in the past few weeks, in the past quarter, so they haven't been a big driver in Q3. And I think we need to bear that in mind as they have been launched very recently. But we certainly think we're positive on those launches, and we have a strategy that Alessio alluded to at the start of the call. And so we'll factor or report any progress on that as we kind of get some more data in the near future.
We will now take the next question from Paul Steep from Scotia Capital.
Can you maybe just talk to how much of that enterprise channel has been driven by either OEM partners? Or has it been primarily direct, Alessio, when you've been picking up these wins? And then, maybe the second part of this, we talked lots about it, but I guess I'm just trying to understand why now. What's driven this change that's sort of lifted hybrid? Obviously, you're getting multi-department or bigger wins. Is it just simply profile? Or has there been any other changes you may be made up to even a year ago that you're now seeing the fruits of?
On the OEM front versus direct, direct remains our largest, largest contributor in terms of revenue adds. OEM is a business that we started building, and we have some incredible partnerships that continue to bear fruits. They are according to our expectations, and we have plans to continue to grow that business. Again, the biggest contributor by more than 50% is the direct channel. In the form of logo and upsell expansion growth.When it comes to the why now, why are these organizations coming to the table with more need, it's [ not in now ] a trend, Paul. We believe this trend has been an underlying trend largely underserved for a long time. Docebo started selling, in fact, the first initial what we would call hybrid today customers, 5, 6 years ago, but the market wasn't quite there yet. And we've continued to invest in this technology. We become, over time, we've gained a competitive edge over others, and our technology is now designed to satisfy that use case to a degree of flexibility that perhaps other vendors are not there. We think that there's a market posture that is also reinforced by the needs of organizations to do a better job at retaining their employees. We live in a Great Resignation world. Companies have to do extra work to keep their people happy, trained, motivated and upskilled. And on the flip side, we live in a subscription economy. And when that happens, you need to do the same exact thing that you do with your employees with your customers. Our technology is prime for both those scenarios, and enterprises across all verticals are understanding that. So we believe that, fundamentally, we're seeing just the maturity of a trend that initiated a long time ago. It [ needs ] our technology capabilities, and it's an environment, the one of the market, that just supports the need for that.
Yes. And let's not take for granted that all the industry understands that training is not only internal training and is [ LHR duty ] because most of the organization, and that's what we are learning, speaking with many big strategic vendors in several kind of conversation, is that they continuously think that learning is an HR thing due to make training for compliance, so skills and language training.So there are companies quarter-over-quarter that are realizing that their vision of online of learning, of training, was old-school and outdated, and this is helping us because we are pitching a different story since the years.
And Paul, I'll just add one point to it. I think if you think about the environment out there from a labor market perspective, and Alessio touched upon this, our Learning Suite and our platform is one of the most cost-effective ways to engage employees, improve their efficiency. And one of the most important problems out there is to decrease attrition in what we're seeing out there in the market. So that is also something to be factored in as customers think about solving and engaging their employee needs, as well as the customer needs.
You highlighted that you didn't get large, any sort of whale deals in the quarter. Should we now be thinking that the time to full deployment in an enterprise has materially shrunk, that you're going in with larger deals and that we now should see full deployments much faster than we might have thought about?
Every customer has his own use case, and every use case is unique. So there is no recipe to think that some deployment is faster or some deployment is longer. And what we are seeing is that, the more the LMS is integrated inside of the enterprise software stack, the more we need to integrate.That said, we are working to help our customers to integrate better Docebo with others, and this quarter we launched Docebo Connect, which is a pre-built integration containing probably more than 400, we call it, recipes that are pre-built integration with many other software. But this is not shortening materially the deployment onboarding and the launch of the project, but is increasing the data that we can trade inside and outside Docebo thanks to integration gateways.
And Paul, I would just add to this, we were extremely pleased with the increase. In my remarks, I noted the fact that almost half the net ARR add this quarter were deals over 6 figures. And if you look at the quantity, it gives us the consistency, and we're penetrating into the next level in a nice fashion. I think we are extremely pleased to continue to build on that success.
We will now take the next question from Martin Toner from ATB Capital Markets.
Incremental ARR was around $10 million for the second quarter in a row. Is there any reason why that ceiling or are the pieces in place for you guys to continue to increase incremental ARR quarter after quarter?
Conceptually, we see no ceilings. We believe we are designing the organization to continue to perform, and perform all together. We have plans, and the results we're bringing to the table are consistent with our plans.Our plans are to continue to grow that top line ARR. And our plans are to continue to succeed along the lines of what we've just discussed. We don't believe there's a reason why we shouldn't be seeing that $10 million number continue to grow in the future. I'm not trying to be cautious in any way, but I would say just this is the reflection of what we have planned today, and we'll continue to plan for improved performance in the future. I'll leave it at that.
Yes. And on top of that, we really believe that consistency is one of our key value. So I don't like spikes. I don't like 10, 30 and minus 20. I like 10, 11, 12 and so on.That said, internally, we do have 3 leverage, 3 pillars to increase the ARR. One is our comfort zone, our love, which is our LMS, which is living with me since 17 years, and it's also my second son, whatever. I have a daughter, and then I have another son. Let's say that the second is the OEM. OEM is an incredible product, and we are working to get more partners working on OEM, but also different ways to pitch the OEM. Don't forget that we launch the Docebo Flow, which is another way to have Docebo embedded everywhere. There is a standard terminology, which is learning in the flow of work. And the third one are the new sons and daughters we have, which are our new products, Learning Analytics, Shape, Impact and those are the new ideas we are working on. So the future for Docebo is an execution of a mix of strategy and not making only one bet on our comfort zone or only one bet in innovation that still need to prove if they are working or not.
And Martin, I'll add one more to what Claudio said. The other area that we continue to work on, as you know, is geographical expansion. We've opened a lot. And so we acquired forMetris. We've now got momentum in France. We've opened an office in Germany and built that from ground up. And there are areas in the world that we haven't tapped yet, and that will be another area of focus from growth perspective.
We will now take our next question from Robert Young from Canaccord Genuity.
So in the case where your ARR is growing, going forward, do you see that you need to expand your sales function materially? Or do you see your current sales function as sufficient to kind of grow at this order?
A great question on growth of the sales functions. We continue to grow the company organically across the board from engineering product services. And for sure, there's consideration about continuing to invest and grow in sales, notwithstanding that. Every time we add sales function, we contextually grow our demand capabilities.But our focus really is we believe that we've reported, I believe, 2,600 customers. It is really important for us to continue to delight our customers, to make sure that our customers have the best service in the industry. We really think about that day and night and try to implement the strategies that lead to that happening. And those are not in sales alone. They're across the board in the company, really. Now, when we think about growth and what Claudio said just now in the prior questions, we're distributing our success across few growth vectors. And one of those, if you will, is also our ability to continue to grow our customer penetration. In order to do that, an investment which we believe will be accelerated is validated by our learnings and is to continue to increase our share of wallet in our base. We believe our installed base, or our existing customers, deserve more coverage, which will, in turn, allow us to have a more, if you will, [indiscernible] field effort and capability in our base, because we have more stories to tell. Now we have more problems that we can solve with great technology, and it would be a pity not taking that opportunity, and therefore we're planning accordingly. So absolute more coverage in the base at all levels, sales support. Customer experience is what we aim for.
And just on the second question, I was just wondering if the inbound that you're seeing from enterprise customers and the overall demand for LMS and learning, has the velocity of cross-sell kind of increased? Have you seen that the chasm to cross-sell your modules -- the new modules to customers, have you seen that sales cycle kind of reduce?
Yes. It is true across the board that every upsell or cross-sell sales cycle has a huge benefit of having much higher velocity when compared to a new logo cycle. Look, it is no secret. You're not going to go in most instances through a new contract negotiation. There are terms pre-established, that is already a customer that is giving you faith. And if you're interested in buying more, they already have that; whereas, when you first meet somebody, you have to win the trust and faith.So there are psychological elements that result into that, and the facts and the numbers confirm your hypothesis and intuition. So we love the upsell/cross-sell business also because of the velocity element, which is, again, though, a result of our investments in customers' experience. And I continue to underscore that, because our desire is for our customers to rave about us publicly, to say that we're the best of what we do, and we're working very hard to accomplish that.
We will now take the next question from Phillip Leytes from Berenberg Capital Markets.
Can you provide some more color on how the OEM partnerships are performing? How much of the revenue for the quarter came from the OEMS? How is Ceridian performing? And how does the pace of the MHR ramp compare to the earlier days of Ceridian?
Phillip, Sukaran here. I'll speak to the overall OEM.Firstly, I'll start with Ceridian. We're very pleased with how we're performing with Ceridian, and as you know, it's a meaningful contributor to our growth story. But when I think about the other OEMs, and I would call it alliance partners that we signed in the past few quarters, I'll start with MHR. We signed MHR I think, probably a year or so ago now. And as we kind of continue to see the same story around Ceridian, with patience and working with our partners in implementing the solution that they provide to their customers, that patience over time pays dividends, and we're seeing that in MHR, which is now becoming a meaningful contributor towards the growth in our ARR. And when I think about the alliances and OEMs that we signed in the past few quarters, that patience and those dividends, with patience, we'll see some of those dividends come through in the early part of next year is what we think. All that said, I think the other factor that we also still see today is that our solution solves for multiple verticals, multiple use cases. And so it's not just from an HCM perspective. As you know, we signed an IT service managed provider and sales enablement provider. We actually do see a really good pipeline of future alliances and OEMs that we can partner with. So we are optimistic in this area.
As there are no further questions, I would like to hand the call back to Claudio for any closing remarks.
Thank you, guys, for staying with us for another quarter. Let's meet Q4. Have a nice day. And Happy Christmas, because I think that the next one will be after Christmas.
That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.