Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Coveo Solutions Inc (CVOSF, Financial) exceeded its revenue guidance and outperformed profitability expectations for Q1 fiscal 2025.
- The company has signed over 30 generative AI deals with large enterprises, demonstrating significant ROI and double-digit gains.
- Coveo Solutions Inc (CVOSF) reported strong bookings performance in the EMEA region, marking its best quarter for bookings since fiscal 2023.
- The company achieved positive cash flow from operations of $3 million in Q1, up from $1 million a year ago.
- Coveo Solutions Inc (CVOSF) has a solid long-term business model with 95% of revenue coming from recurring SaaS subscriptions and high product gross margins.
Negative Points
- SaaS revenue for the platform acquired from Qubit declined by 34%, impacting total revenue growth.
- New bookings, while improved, are not yet at targeted levels, indicating potential challenges in achieving growth projections.
- The company continues to experience elongated sales cycles due to the market's ongoing discovery and validation phase for AI and GenAI technologies.
- Coveo Solutions Inc (CVOSF) expects ongoing attrition in Qubit SaaS subscription revenue, which will continue to impact overall revenue.
- Despite positive cash flow, the company reported an adjusted EBITDA loss of $1.7 million for the quarter.
Q & A Highlights
Highlights of Coveo Solutions Inc (CVOSF) Q1 2025 Earnings Call
Q: Louis, as far as the customers you're winning for GenAI, are there any common themes that you highlight? Are they weighted towards particular verticals, particular pain points, some other underlying elements of their data infrastructure? Or is it really across verticals, across geography? And also just to clarify, is it safe to assume that they're predominantly customer support yields? Thanks.
A: Hi, Thanos. Good question. They’re across verticals, but as you know, historically, a lot of the early adopters over the years of the Coveo technology were the tech and the large leading global tech companies. This has also transposed itself in GenAI. A lot of -- I would say a majority of the early adopters of our GenAI solution were the companies that tested our solution against either homegrown or other providers and ended up selecting us. So vast majority of them are some of the leading tech company names you would know. And so we're very proud of that, because these are some of the most educated companies, obviously, in the software industry and within AI and generative AI in particular. And after these extensive tests and comparisons and A/B test, they ended up selecting Coveo. As it relates to your other question, Thanos, it has been predominantly the vast majority in customer service -- in the customer service area, where the benefits don't have to be proven anymore. Clearly, generative AI on top of existing Coveo can increase self-service and reduce heart cases submission -- cases that require human assistance by double digits. And we routinely measure that. So this is a huge use case for these types of companies but also other verticals as well. We also see GenAI applications in the workplace area, in the commerce area, and in the websites area. So across all of our four businesses, pretty much every conversation right now includes our generative AI and positions us -- really, really differentiates us.
Q: Maybe just on these net new customers that you're winning, I think last quarter, you guys continued to call out the strength from this pipeline in net new. Can you give us a sense of how these deals are materializing? Is it largely outreach from your sales force or it's largely inbound that you're seeing just given the strong ROI that you guys have spoken to in your prepared remarks?
A: Love the question. I think it's both and increasingly our inbound as well as we publish the results. We had to -- I always say we have to close the loop. Whenever you come up with new innovation, be it in the software industry or in any other innovation industry, you have to put it to work, put it in production, and then it doesn't stop there; you have to actually measure. And ideally, you're allowed to use some of these measures and these results and publish that in the market. And we've been able -- being one of the first companies to deliver in full production with generative AI, if you recall, the Xero story last summer -- and now we've published stories around our work with SAP and other customers. This resonates really, really well in the market and as a result, is starting to create some inbound as well and some new customers as well, who also want to put generative AI to work in these areas. And so this is -- really obviously, we do employ a sales team and their job is to go out in the market and generate new leads and go knock on company's doors and talk about what we can do and the benefits we can bring. But we're also increasingly getting inbound as well. So it's really both.
Q: Wanted to touch on your partnership strategy. Could you talk a little bit about how important are these partnerships to your -- to Coveo's those broader growth strategy, and can you remind us what percentage mix of business is coming in through the partner today, and where would you like to be, call, it over the medium to long term?
A: So hi, Suthan. Two types of partnerships. Number one, partnerships with the systems integrators. We see an increased amount of interest from systems integrators. And obviously that's probably very motivated by the fact that their customers are asking them. The systems integrators are the family doctors -- I've used this term before -- the family doctors of large enterprises. They're also the whisper masters towards these large enterprises, telling enterprises which technology works best and who leads in tech in certain segments and et cetera. The adoption -- there's no question that AI and generative AI is top of mind for most enterprises right now. And so they turn to the systems integrators for that advice, but also the systems integrators want to jump on the digital transformation bandwagon and one of these areas of application is digital experiences. We talked about commerce; we talked about service, workplace, and website type of experiences -- anything that's a digital experience from someone online at the other end. So this is a massive digital transformation campground that will be established over the next couple of years. We think it will unfold pretty quickly. And so these partnerships are really, really important because Coveo wants to position itself, and I think is really viewed by these partners as the foundation technology that can scale across a large global enterprise and enable these transformations. So that's one. The second part is the alliances -- we call them alliances at Coveo -- that we have with software companies. So we've announced partnerships with SAP. We've obviously been a long-time partner of Salesforce. We worked with companies like Adobe. We've announced during the quarter the partnership with Genesys, which is the leading call center or contact center as a service company. And they too need best-of-breed technologies such as Coveo to improve their offerings and cater to the complex needs of enterprises. So this is the reason for these partnerships, and we just hired some new leaders in the alliances and partnerships channels area. And we expect that we'll continue to get a greater proportion of referrals, in fact, and in collaboration with these companies. And so we're -- so this is a key area of investment for us. As it relates to the percentage of our pipeline that comes from these channels, I would say it varies. If you look over the past couple of years, it varied, I would say, between a quarter to a third of our pipeline. Obviously, our market, as you know, was a bit in a holding pattern as companies were discovering AI and tried to distill AI and GenAI and et cetera. And as we know, it's reopening right now. So we expect the proportion of -- we expect the contribution of channels to grow very, very significantly. So in summary, these partnerships are really -- they are extremely important to us, and we think we can bring a lot of benefits to these integrators and these large software companies as well.
Q: You guys talked about that I think it's like 30 CRGA deals that you've signed. Can you talk about how many of those are in live production or revenue generating, and how many are from net new customers? And any color provide from that
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
