Good morning, everyone, and welcome to the Docebo Q4 2023 Earnings Call. All participants are currently in listen-only mode. We will open the line for a question-and-answer session for analysts following the presentation. Instructions will be provided at that time for research analysts to ask questions. We ask that analysts please limit themselves to two questions and return to the queue for any follow-ups. I'd now like to turn the call over to Docebo's Vice President of Investor Relations, Mike McCarthy. Please go ahead, Mike.

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 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 are 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 measure. 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.

Hello, everybody, and thank you for joining us for our fourth earnings call. With me today are Alessio Artuffo, our President and COO; and Sukaran Mehta, our CFO. I will begin our call this morning with a short summary of Docebo success over the past year. Alessio will provide a more detailed overview of Q4 highlights, and Sukaran will review our finance performance. Our key growth metrics showed the continued improvement as a result of the investments we are making. Docebo is becoming more effective in identifying the needs of enterprise customer and progressing through their organization to close deals. Overall, our profitable growth strategy resulted in a strong subscription revenue growth of 28% in Q4. Additionally, we achieved an adjusted EBITDA margin of 13.2%, and a free cash flow margin of 14.2% as we ended the year. I'm also proud to say that during the year, we completed two important tuck-in acquisition that brought strategic technology and valuable domain expertise to our product development team, particularly in the field of AI. PeerBoard and Edugo has been successfully integrated within the expected timeline, and their contribution to the Docebo platform will start to be visible in the marketplace later this year. This positive financial and operational results enable us to make strategic investments in our future growth and maintain our industry leadership position through innovation. It's from this position of strength that the leadership team and I felt it was the right time for me to transition into the role of Chief Innovation Officer. In my role, some of the key areas we will focus include: identifying novel ideas and trends in the L&D space and finding ways for Docebo to leverage them; advising Alessio and Fabio the innovation idea for early-stage products, including product positioning, feature creation and improvement; leading and doing deep research serving as one of the Decebo industry expert [indiscernible] for Decebo positioning as a leader in innovation; and providing ongoing mentorship to the executive leadership team and Board on important technology development and positioning matters. As I pass the baton to Alessio, I'm filled with excitement as I transition into my new position. It's [exuberating] (ph) to think about the future and the incredible possibilities that lies ahead. As Docebo continues to grow and develop, I am certain that there will be even larger and more exciting achievement waiting to be realized. Now, I would like to turn the call over to Alessio.

Thank you, Claudio, and good morning, everyone. As I step into this interim CEO role at Docebo, I would be remiss if I did not mention how fortunate Docebo has been to be led by Claudio and what an honor it is for me to continue to grow the company following its legacy of success. Before discussing the business performance and our improved market position, I would like to briefly share our strategic perspective on the macro trends we saw this quarter. After that, I will go over some of our key performance indicators for the quarter. Macro trends in quarter four aligned with our expectations, and we expect that 2024 will follow a similar pattern. We expect that significant enterprise deals will continue to receive close scrutiny from the C-suite. Our improved execution within the enterprise go-to-market ecosystem is helping us tackle these challenges. Our larger customers who have multiple use cases now view their investments in learning as strategic and mission critical. SMB and first-time LMS customers continue to approach their decisions with caution. That said, we continue to penetrate mid to large organizations with complex and multiple use cases, leading with a solution that delivers a fast ROI and add value to our customers. Geographically, we observed a positive trend in Europe, indicating a potential improvement in the market. We will continue to monitor this closely as the year progresses. North America, on the other hand, continues to maintain its strong performance, showcasing its resilience in the face of broader challenges. Now to the quarter four highlights. We're excited to report that subscription revenue increased by 28% and total revenues grew by 27% in quarter four, with total revenues exceeding the upper end of our guidance range. ARR, as of December 31, 2023, of $194.3 million increased…

Thank you, Alessio, and good morning, everyone. For those interested, a detailed breakdown of our financial results for the three months and fiscal year ended 31st December 2023 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. Subscription revenues were $46.5 million, representing 94% of total revenue for the quarter and an increase of 28% from the prior year. Total revenue for the fourth quarter grew to $49.3 million, an increase of 27% from the prior year and exceeded our guided range. Annual recurring revenue at the close of Q4 was $194.3 million, an increase of 24% or 23% after adjusting for the positive impact of approximately 1 percentage point given the weakening of the U.S. dollar relative to other foreign currencies. We added 80 net new customers in Q4 and ended the quarter with a total of 3,759 customers, an increase of 11% year-over-year. Average contract value was approximately $52,000 for the fourth quarter, an increase from $49,000 in the third quarter of 2023 and an increase of 12% year-over-year. The growth in average contract value is being driven by our continued expansion into the enterprise customer segment with average contract value of $100,000 and above. Net retention for the year came in at 104%, down from the prior year. Gross retention remained relatively flat compared to the prior year and gross profit margin for the fourth quarter improved by 40 basis points year-over-year to 81.2% of revenue and was relatively consistent with the prior quarter. Total operating expenses for the fourth quarter increased to $38.9 million from $31.5 million in the prior-year period. G&A as a percentage of revenue decreased to 17.4% for the fourth quarter compared to 17.9% for the…

Certainly. [Operator Instructions] Your first question comes from Ryan MacDonald with Needham. Please go ahead.

Hi. Thanks for taking my questions, and congrats on a great quarter. Maybe to start on just the strong execution in the quarter, lots of great new customer wins with a top four U.S. financial services company, some great expansion. Curious as you're looking at sort of the pipeline and maybe some of the success in fourth quarter, how -- what you're seeing sort of drive that in terms of improved execution and productivity from the direct sales force versus some additional benefit from the growing SI channel relationships and how you see that sort of balance in the pipeline looking into 2024?

Good morning, Ryan, and thank you for the question. Alessio speaking. I'll take your question. So, a few things on the enterprise motion. The one thing that I'd like to emphasize is that as we mentioned in prior calls, one of the big factors for us has been maturing our execution by demonstrating value at the point of sale. The way we do this today is a lot better than we used to do it one year ago. How do we do it? It's via value engineering methodology and team that is fully ramped in the company. This has helped us achieve really good results with logos that we closed in quarter four. You mentioned the significant financial services organization that we won, but I would also include in this upsells of the caliber of Pirelli, where we had to demonstrate specific value in order to add the certain use cases. As we think about the pipeline, I think our job is to continue to extract value from the business. There's a lot of greenfield available and we are really doubling down on our execution on the demand side, not only with our stronger branding and marketing team execution, but also by adding our sales in the territories, work the territories really in a very well-coordinated manner. We've been focusing on this a lot. I hope this helps.

Yes, absolutely. Very helpful. Maybe just as a follow-up then. Wanted to discuss sort of the OEM channel. Obviously, about last month's Ceridian, which is obviously a big OEM channel partner for you, acquired a business called eloomi, which is the sort of LMS/LXP provider at the low end of the market. Obviously, I think the OEM channel has been an important one for you in terms of driving growth. As you think about sort of expectations into '24, I know you're not guiding for the full year, but maybe what your sort of thoughts were in terms of the growth algorithm of how much growth you're expecting to be driven from the OEM channel this year? And how that changes, if at all, in your mind now that Ceridian is sort of buying, I guess, a competitive solution to maybe go to market with internally or more directly than through partnership going forward? Thanks.

100%. So, first off, let me lead by saying that Docebo and Dayforce have established a strong and enduring working relationship since becoming partners several years ago. Number two, I would say the important to note, the leadership of the two companies are working together on this positioning that you mentioned, and so we expect further discussions with them. We don't anticipate any impact that is material on revenue for fiscal year '24 at this time. And with regards to kind of other partners that we're working with, first off, we continue to work on a really healthy pipeline of new OEMs. But the work that we're doing with organizations like E&Y and Darwinbox and MHR is very significant. We are seeing very good traction. We're intrigued also by the fact that Darwinbox operates in a region that for us will be strategic in the future and they're extremely focused on the APAC market. So, this is very good for us. Finally, I would say I would roll into this conversation our efforts in strategic partnerships and channel in general, because we're seeing tremendous amount of traction on our sites. Look, we don't guide specifically on OEM versus other channels. But this remains -- the channel in general remains the priority and a growth pillar for us in the future.

Appreciate the color. Congrats on...

Thanks, Ryan. I was just going to jump in just to clarify that, from our perspective, like Alessio said, we do not anticipate any material impact to revenue for FY 2024, and we are comfortable with how the consensus has been built.

Excellent. Thank you.

Your next question comes from Rob Young with Canaccord Genuity. Please go ahead.

Hi, good morning. Thanks for taking the questions. I know that you added $12.5 million of ARR on only 80 customers. And so, I wanted to dig into that trend. Is there any underlying churn there or -- because it seems like the average customer value quite a bit higher, I think you said $71,000 on incremental customers. And so, there's a bit of a disconnect there. And then, maybe just talk about the big jump in average customer value this quarter.

Sukaran, would you like to take this?

Yeah. Good morning, Rob. It's a good call out, yeah. It's very consistent with what we spoke about in the last few quarters. If you think about the fact that we've been continuously focusing on supporting, the sweet spot for us continues to be the mid-market to the large enterprise customers as well as penetrating into the government segment. We also saw a win that we noted in our press release with the Texas State win. In effect what is consistently happening as we move upmarket is that you're going to continue to see Docebo focus on stronger unit economics in the mid to large -- mid-enterprise to large-enterprise segment. And we are very strategically focused on driving sales in the SMB commercial space as we call it where we see an opportunity to grow that customer into multiple use cases and drive higher ACV. But we've spoken about this from an overall unit economics perspective, we will invest our growth dollars to drive higher ACV in categories or in segments where we can have multiple use cases and multiple products and modules supporting those customers. And that's really what's playing out here. You can kind of see in the numbers from a channel perspective as well, you're seeing that more enterprise and mid-market customers are participating into the growth in the last three quarters or so, and that's pretty much what's driving the ACV higher. Of course, there's a certain -- we call it, there's a small element of churn that comes through us just not supporting as much as the SMB customer. That is a lower ticket value. If it is a lower ticket value, we will try and make sure that we either extract additional value for them, but there could be some incremental churn that comes from that number, but majority of this is driving through our focus in the mid- to large-enterprise customers, which you don't need the quantity, but you get the quality from an ACV perspective and higher ACV.

Okay. Thanks. And then, second question for me will be on the expansion with the large big five technology company. It seems as though these expansions on these large deals are coming quicker. And so, if I'm right on that, what's driving it? Is it just better go-to-market with your cross-selling effort, or is it some market function, or is it consolidation? What's happening? And are you seeing this sort of cross-sell come through more quickly than in the past? And I'll pass the line.

Yeah. No, actually I would say, Rob, that in the instance of this expansion that's relatively quick on this customer, it's not uncommon for us to uncover further needs in the initial phases of, if you will, onboarding implementation, integration especially with large customers that have complex use cases and an organizational complexity of needs that may arise at the point of sale, but also sometimes surface after the point of sale. So, we actually see this quite frequently. With that said, what we are referring to as expansion here is additional modules, right, additional modules, additional technology, additional SKUs to the existing contract and not necessarily selling into, say, subs and/or separate entities of the customer. We just essentially became even more sticky and added more technology to the original contract.

Okay. But is the trend towards faster cross-sell, is that not a function? It seems like Bojangles this quarter, this large cut, it just seems as though you're expanding more quickly than in the past in the same customer.

It is intentional. There is more intentionality in continuing to execute on the expansion side. This is one of the, if you will, output of the work we're putting into it. As Sukaran said before, the land-and-expand strategy with the amazing customer that we have is a pillar of growth and these are a couple of good applied examples.

Okay. Thanks a lot. I'll pass the line.

Thank you so much.

Your next question comes from Suthan Sukumar with Stifel. Please go ahead.

Good morning, gents, and congrats again on another impressive quarter. The first question for me is on the U.S. government opportunity. Could you guys provide an update on kind of how you're thinking about the timeline is here for full certification and the progress on the pipeline build side of things that you're able to do in the meantime? And do you guys foresee any impact here from the U.S. election?

Hello, Suthan. Alessio speaking. So, we are incredibly focused on this as you may imagine. It's a big undertaking from an effort standpoint of our teams that have done an amazing job. In terms of our federal certification, which is what I think we're talking about primarily, is we're progressing really well and we are actually very optimistic in securing the sponsor shortly. We have more than one option to do so. And so, we're very -- yeah, we want to surface the cautious yet a bit optimism in securing the sponsor. And why is this important? Because the pathway through a sponsorship yields a faster timeline to certification as opposed to a standard application process, which has a more delayed timeline in a matter of several months compared to the sponsored one. I would say even ahead of getting the certification though, I want to surface that we're continuing to win material business and material deals in the space more on the SLED side, state and local. And I would say in this regard working with SIs that are in the market has been critical for us. So, we've mentioned in the past working with specific strategic SIs and that those collaborations are getting just deeper and deeper and spilling over to the commercial side of those same SIs. So, in an interesting way, this focus on government has led us to get in deep with SIs starting from the government door, but opening up doors on the commercial side that perhaps before were not as open, and so we're reaping benefits on both sides of the equation.

Great. Thank you for that color. The second question I had was I guess more on sort of the cross-sell traction you guys have been seeing. Could you provide an update on some of the recent adoption trends you've been seeing across your learning suite and especially with some of the more recent product innovations that you launched recently like the [indiscernible] which I believe was launched during the quarter. Just kind of curious to see how that might be trending?

Sure. So, in terms of adoption of technology that we've launched, I want to underscore that we really are very satisfied with the trend that we have seen with regard to Docebo Shape. Docebo Shape is priming to be a strategic technology and platform for us moving forward. We emphasized on the Shape side, the AI and GenAI capabilities. We're pushing very much into that. Customers are liking it more and more as we improve it. I would say an example of that since you were just asking about government, we mentioned a customer win in Texas on the government side. And one of the key differentiators in that deal was Shape in order to repurpose existing material that the agency had and being able to recreate content using Shape. But Shape in our view has even further opportunity, Suthan. We want to push further the content creation offering side of it. And the GenAI side, we're working very much on it. So, on Shape, I would say already great results. However, the amazing stuff is yet to come. So, we're incredibly bullish on that technology. We're seeing an uptick in the sale and the pipeline creation of the module Microsoft Teams, which we launched a few months ago and is starting to do really well for us. And in general, look, I would say the best answer that I can think of to your question is we continue to think about providing value to our customers and focusing on how our products meet the customers' needs. There is a concerted focus on the customer experience and understanding really where we need to do better, how we're doing better swiftly makes it into our product roadmap to stay on top of the market trends. That's a big focus we have. Yeah, we're becoming bigger, but we don't want to lose that agility and nimbleness of being able to continue to improve our product for our amazing customers. That is a priority that we have now and we're going to continue to have in the future.

And one quick point, Suthan, just I want to add to that is that if we look into 2024, and we'll provide some more color as we implement some of the changes, but as we go to market and position Docebo, you can expect that as we package the offering to our customers, it would be more around features and capabilities of the problem we solve for them rather than the modules -- an individual products and modules that historically we place with the customer. So, as we look at opening different packaging and pricing optionality for our customers, we also think that that would help not only ease our ability to sell increased deal velocity, but also make sure we sell from -- most importantly make sure we sell from a perspective of driving value and driving -- solving the problem for the customer. And so that's going to be certainly one other area as we think about modules going forward.

That's great. Thank you, gents. Appreciate the color, and congrats again on the quarter. I'll pass the line.

Thank you, Suthan.

Your next question comes from Josh Bear with Morgan Stanley. Please go ahead.

Great, thanks for the question. I was hoping you could talk a little bit about the competitive landscape. Just thinking about the legacy LMS vendors, is the competitive environment getting easier, tougher, staying the same? And then, I have a follow-up. Thank you.

Good morning, Josh. A couple of comments from my side on competitive landscape. No notable changes or something very new that changes our views on our strategy, in general. Notably, on the customer wins that we have executed this time in this quarter, I would say, the bank that we refer to, I think, in the script, we indicated that they had -- they felt like their system was outdated. We continue to see a trend that we have described before where especially large organizations that have providers with overlapping assets constitute an opportunity for us to be crisp and clear in our value proposition and offering. And as a result, to stand out and clear that confusion and come in with a very well-defined value prop, and in that case, that was a big strength that we've leveraged. We believe we have much more opportunities to do the same thing across some of the best companies that have that same issue. The other trend that is the opposite of competition, the lack of competition we're seeing in the external use case side, it's a very big greenfield opportunity. Pirelli, that we've mentioned in our script, for example, was an expansion that allowed us to win the business of partner training. Now, this technology was built in-house, it was not competitive before. Why? Because as we mentioned before, the business of external training, oftentimes is still greenfield. And so, we love that because it makes our job a little bit easier in a way, but yeah, definitely less competitive. And then look...

Okay. Really -- go ahead.

The markets, the non-enterprise markets remain noisy. There are a lot of small vendors, and in general, the SMB space tends to be a race to the bottom space in terms of pricing. And that is also one of the reasons why we remain focused on higher-value ACV and more complexity given the capabilities of our product.

Got it. Really helpful. And that was kind of my follow-up was around the different market segments. I think you answered it for SMB. So, maybe just like thinking about your evolution as a company and maybe thinking about enterprise versus mid-market or upper mid-market, like where are you prioritizing your resources? And when you think about sales reps going after opportunities, like how are they balancing the potential to land bigger with like a broader LMS deployment versus potentially landing for a specific use case or a single department, like balancing that versus a bigger displacement opportunity?

Sure. So, Sukaran, please chime in with any additional considerations, but I have a couple of points to this question. Historically, Josh, as you know, we have been quite balanced in our approach to small, mid-market and enterprise segments. Over the past few years, we have taken a position such as that our product capabilities and our differentiation in our platform lead itself to being more appreciated by organizations that are not necessarily small or big per se, but have more complexity of use cases, meaning they have more jobs to be done. This can happen in a very large bank, but it can also happen in a relatively small, relative to size, association. But that doesn't mean that association doesn't have the complexity of need that we are able to satisfy that yields eventually in a high ACV. So, the first thing I'd like to note is not always the employee size is the driver of the complexity, and therefore, the value that we can both offer and extract. Secondly, you asked where we are diverting more our efforts and resources. We're certainly focused on building a platform that scales, that is secure, that is stable, and high performing in highly complex environments. I'm speaking about concurrency. I'm speaking about high volume of users. And look, we recognize that the LMS market per se is, in theory, competitive. But when you really look at the players that can do complexity, multiple use cases, and manage multiple millions of users and enable learning as a business at scale, allowing and unlocking millions and billions of revenue, there are not many who can do that. And so, we're diverting -- we're focusing our resources in exactly becoming that one player platform company that solves everything for learning technologies, for learning in general, and become a partner of the company as opposed to the LMS tool. We want to be seen as a strategic partner and not just as a commoditized technology.

And, Josh, the only thing I want to add quickly to Alessio's point is that it's obvious, I'm sure you're seeing this across the board, ultimately in the decision-making process, that's been also an effort and change as we -- not change, it's the wrong word, but have improved our motion in the last couple of years, as more C-suite and the scrutiny. What that effectively really means is that you do get an opportunity more than you used to even in the past where you can potentially consolidate the tech stack at the onset. But we are more than happy, depending on scenarios of each customer, to start with a certain use case or multiple use cases and build over time. One of the strategies that we do where we can consolidate the tech stack at the onset is that we will continuously track and I don't want to give all of our strategies but just some perspective is that we will track at all of our mid-to-large -- mid-market enterprise customers our opportunity based on use cases and we will work hard to win the hearts of those departments beyond the ones that we serve today. So, I think the reality is in this market, consolidating the tech stack in multiple use cases and leading from the ones that drive revenue and drive -- protect revenue for an organization gives us a prime seat to do so. And that's a theme that's playing out there. As well as I'll say that the big win in the major bank is also a theme that is worth considering in the competitive landscape, that the legacy technologies are now becoming a burden for certain organizations that are focused on driving productivity but also employee experience.

Perfect. Thank you.

Josh, Claudio speaking. I don't know if you remember me, I'm the former CEO, I'm kidding. I want to add one point to what Alessio and Sukaran were saying. I want to understand one important element, which is the barrier -- the competition barrier we have in very sophisticated and complex use cases, but why we have this advantage? Because to build an horizontal LMS that plays in multi-department, certified FedRAMP that can scale on millions of users, it's like a five-, seven-year job. And if I was an entrepreneur and wanted to make money quickly, I would build a vertical LMS that cover all one use case. I will not change Docebo, because it's too complex and it's too risky. And remember that this company is 19, sorry -- 18 months -- 18 years and 11 months old. So, we get there because of the luxury of time we had to stay in the market and prosper on the market. And also because we have worked with transformational customers like Thomson Reuters, Banca Intesa, Amazon AWS, that over time added the requirements that were very complex. So, if I have to imagine what is our strongest role to protect Docebo fortress is our complexity that makes an appealing for competitors to change very sophisticated environment. On top of that, competitors that are there are not innovating fast enough. So, we are also -- we have also the innovation that plays on our advantage. If you sum those two, you will see competition pressure is [indiscernible] side, but we have these big stocks of very large and complex cases, which is very hard to change.

Your next question will come from Kevin Kumar with Goldman Sachs. Please go ahead.

Hi, thanks for taking my question. I wanted to start with just maybe asking about overall macro trends that you're seeing. How are enterprise sales cycles trending? And when you talk to your customers, how are they talking about this overall kind of learning development budgets for '24? Thanks.

Good morning, Kevin. So, I'd say from a enterprise trends, we continue to see some form of elongation in the processes and the trends that we've mentioned in the past haven't changed too much. Although, we're seeing in some sectors more than others some positive signals, but we remain cautious in our position around the sales cycles specifically. In terms of trends that we're seeing, of course, very naturally everybody knows that GenAI is a very critical trend that everybody talks about. What I'm seeing in this area, if I have to say something that stands out more than others, is a big desire to be educated. I think we are in a phase in which 2024 will be the big year of education and realization relative to L&D, education and realization of the art of the real possible and how to get to real value. Perhaps the past few years many have either used GenAI as a core capability to strengthen certain capabilities of a platform. In other instances, it has been used more as a marketing leverage. From our perspective, GenAI has always been an investment. And the way we respond to that, right, from our perspective, GenAI has been a huge investment in the core of our system with different features that make adoption easier and faster. And now that we're focused even more on shape, it's creating incremental value, which we spoke to with our roadmap on the creation side in particular. I think the additional element that I can speak to is L&D leaders are very concerned, remain very concerned with the topic of skills transformation. We see it all the time going into projects in which there is a desire to upskill and train the workforces, whether it's exiting workforces or entering newer generational workforces. The attention to managing skills, which for us translates in a business -- the business problem is this one, how we resolve it and how we approach it is by helping customers translate very complex ontologies of skill sets in the platform actually using AI. We have a very sophisticated technology to do that and our customers are finding a ton of value in it. I think GenAI and skills management are the macro trends. There is also a palpable sentiment of how GenAI in itself will change the content world and whether the business of content will be disrupted by adoption of GenAI. We know the capabilities of those technologies, and learning leaders really debate this a lot. And our role in all of this is to be part of that education system that guides customers and leads them and helps them with the technology that we have or that our partners can offer.

Appreciate the color there. Really helpful. And then maybe just one on net dollar retention. I think that dropped a bit in '23. So, maybe if you could help dissect that number a bit? Did [churn] (ph) impact that or did the rate of expansion slow a bit? And I guess how are you thinking about kind of the sustainable -- like a range of sustainable retention rates for the business going forward? Thank you.

Sure. Sukaran, you want to...

Hey, Kevin, good morning. Yeah, will do. Good morning, Kevin. Yeah. So, net retention, I think, the way I would kind of speak to this here is generally it's a bit of a consistent trend you probably seen across macro. What's baked into our next retention at a high level just to kind of give you some macro points here, specific to Docebo is that, the cautious spending, and we talked about some of the deliberate move that we've made in the past two years around mid-market enterprise. So, if you combine cautious spending and the SMB space impact in 2023, as well as just general macro trends from a [seat] (ph) compression or flat seat compression, especially on the internal use case side, I think those two factors combined is where net retention kind of was. I would say that as we always are frank, this is an area where we will call out ourselves as a management team will be one of our important focus areas as we move forward. We'll certainly look to improve this as we move into 2024-2025 cycle. But I think what's important to also remember is that from a gross retention perspective, our gross retention was relatively flat year-over-year, slightly below. But where you continue to participate in mid to large enterprise customers, expand multiple use cases, and as we look to pricing and packaging these more effectively into the latter part of this year, you should expect us to not only be focused on driving healthy expansion opportunities, not just from a cross-sell perspective, but more from an upsell perspective. And then we, of course, have a number of new products that we spoke about at Docebo Inspire in Q3 of last year, that will kick in, whether it's in late H1 and H2 of this year, that will show some more meaningful impact, I would say, as we look into 2025, but some impact in 2024 as well. But combining the use case expansion, new products and modules and the new packaging that we're doing, I think in a nutshell, what we'll say is that while the macro was what it was, and it certainly had some pressure on seat expansion and cautious spending in the lower end of the market, I think we're going to be highly focused in driving this avenue of growth as we look into '24-'25.

That's helpful. Thank you, guys.

Thank you.

Your next question comes from Richard Tse with National Bank Financial. Please go ahead.

Yes, thanks for taking my question. I'm kind of curious to see -- the business has changed a bit in terms of -- I think you're moving up market to higher-value customers. What is the mix of new wins from direct versus partners? And how would have that changed over year-over-year?

Sure. I will pass it to you, Sukaran.

Go ahead. Yeah, thanks, Alessio. So, Richard, I think in terms of overall what's changed as we look through the -- over the years, generally I think we've talked about on the growth side, the bigger shift that Alessio spoke at the start of the call was that, if you can remember, I know you've been following the company since the start of time when we went public, at that time, the company from an even source attribution perspective was heavily inbound. There's a certain element of outbound from a partner side perspective. That was a very different motion compared to if you look at 2023, you would say that to be able to be successful in the mid-market and enterprise segments, we've successfully transitioned or we've done as best as we can and continue to work hard on transitioning more robust outbound motion, significant investments, as you know, from our partners, the ones that we called out, whether it's in the OEM channels, whether it's the [E&Y] (ph) or partner channels, actually [E&Y] (ph) that we signed, as well as other SIs that we work with in the government space. Carahsoft is the one we named that is a significant partner to us in winning some of the business and driving some of the pipeline in the government space. We have significant SIs that have helped us win deals such as the large big tech opportunity that we disclosed in Q3. I think that shift combined with heavy investments that we've made over the last two-and-a-half, three years that drive our ability to sell in a mature, organized fashion into large enterprise customers, combined with, of course, and the most important point is the technology that is not just innovative, but a technology that is -- that has to remain robust and perform at the level that is expected by the Fortune 500s of this world. I think that is overall the winning formula here. And for us, the game is pretty straightforward. We understand what our product does, where we can support our customers, and the use cases that can drive ROI for them. Our job is to just keep our heads down and continue to focus on channels and source attributions that will drive not only new business, but expansion of the current business by keeping our -- by making sure that we do that in an efficient fashion from a CAC perspective.

Okay. And just to relate a question to that, it seems like you've certainly become a lot more efficient. So, in that context with everything you're doing here, what's the order of magnitude in terms of the change that you've picked up on the LTV to CAC side? My guess is that it's improved, but can you give us a sense of the degree of that improvement?

Yeah, it's certainly significantly improved. I would say that it's -- I want to just underscore some things around the margin profile and I'll come back to CAC in a second. I think one thing that I want to highlight though, Richard, that's important to notice that our investments, whether it's R&D, sales and marketing, on a relative basis, remain the same. The biggest impact that you're seeing firstly from our operating leverage, which is pretty obvious, is that as the business is scaling where 81% gross margin business, you're going to see the one area that we've always set all along, G&A continue to give operating leverage to the business. On the sales and marketing side, as you think about the fact that 2023 was a year where you had higher quota capacity, less -- more investments -- major investments in technology where we upgraded our CRM, order to cash process, as well as the fact that the attrition levels are nowhere near the madness that was going on in 2020-'21 era, you're going to see just natural efficiencies come through the system because of those inefficiencies that have gone away that were there in the 2020-'21 era. And so, what I'm trying to articulate here is that growth is our primary focus and our investments in sales and marketing and R&D will remain to drive growth as the primary objective. What you're seeing in the results come through as a positive on the EBITDA side is just a natural inflection point of the business and certain nuances on how we continue to optimize in certain areas. But majority of that, I will -- we would attribute to a model where we are now showing operating leverage through scale. In terms of the sales and marketing side on the LCV to CAC, you can expect that we're comfortably north of 7x to 8x in that area. But I wouldn't disclose it on a segment basis, but it's much more superior when you think about certain segments versus others.

Okay. Great. Thank you.

This will conclude the question-and-answer session on today's call. I will now turn it back over to Claudio Erba for any closing remarks.

Hello. As you all know, this is my last earning call. And I would like to take a minute to thank you all. I want to thank all the analysts that provide top coverage, [Stefan] (ph), Martin, Robert, Gavin, Christian, Josh, Richard, Ryan, Kevin, Suthan, Daniel, the two Kevins, I have learned a lot, a lot from you. I want to also thank small and big shareholders, asset managers, pension funds, hedge funds, family offices, and the individuals that invested in Docebo, giving us your trust. I want to thank the Board, the executive team, and those of Docebo employees, partner and their families. You are now in the good hands of the best of the best, Ale, supported by a rock star like Sukaran, and don't get tact. Thank you all.

This concludes today's conference. Thank you for your participation. You may now disconnect.