Coveo Solutions Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 7, 2024

There are 8 speakers on the call.

Operator

Good afternoon. My name is Ina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Coveo First Quarter Fiscal 2025 Financial Results Conference Call. All lines have been placed on mute to prevent any backhoe noise. After the speakers' remarks, there will be a question and answer session.

Operator

Thank you. I'll now turn the line over to Nick Good, Chief Business Officer at Coveo. Mr. Good, you may begin your conference.

Speaker 1

Good afternoon and thank you for joining us today for Coveo's Q1 fiscal 2025 financial results conference call and webcast. With me on the call are Louis Teteau, Kiveo's Chairman and Chief Executive Officer and Brandon Nutze, Chief Financial Officer. A reminder that remarks made during today's call may be forward looking statements within the meaning of applicable securities laws, including those regarding our plans, objectives, expected performance and our outlook for the Q2 fiscal year 2025. These forward looking statements are given as of today. And while we believe any statements we make are reasonable, they are based on current expectations, which are subject to risks and uncertainties, and actual results could differ materially from those expressed or implied.

Speaker 1

Coveo disclaims any intent or obligation to update our forward looking statements, whether as a result of new information, future events or otherwise. Further information on factors that could affect the the of the company's most recently filed annual information form as well as in the key factors affecting our performance in the company's most recently filed MD and A, both of which are available under our SEDAR Plus profile at www.sedarplus. Ca and on ir. Caveo.com. Additionally, some of the financial measures and ratios discussed on this call are either non IFRS measures or ratios or operating metrics used in our industry.

Speaker 1

A discussion on why we use these measures, ratios and metrics and where applicable, a reconciliation schedule showing IFRS versus non IFRS results are available in our press release and our MD and A issued today, which may be found on ir. Caveo.com and in our SEDAR Plus profile. Please note that unless otherwise stated, all references to financial figures made today are in U. S. Dollars.

Speaker 1

Finally, presentation slides accompanying this conference call can be accessed on our IR website under the News and section. I will turn the call over to Louis first to review the highlights of our Q1 before Brandon takes you through the financial details and our outlook for Q2 and fiscal 2025. We will then open up the line for Q and A and would ask you to limit your questions to 1 at a time to maximize participation. So with that, Louis?

Speaker 2

Thank you, Nick, and thank you all for joining us today. I'm pleased to share that Coveo's financial results have once again exceeded our revenue guidance and outperformed our profitability expectations. Building on the transformative year we saw in AI in fiscal 2024 and driven by our industry leading AI search and generative experience platform, in particular, our groundbreaking relevance augmented generative answering technology, we continue to experience positive business momentum. We see a market inflection moving from 18 months of discovery, education and experimentation of AI and GenAI to now validation, decisions and real adoption within enterprises. We believe that few companies like Coveo that passed the show me test and can demonstrate and deliver results will be highly rewarded.

Speaker 2

While many competing technologies are catching up to the reality of delivering AI for enterprises, we continue to roll out new innovation in full production with our clients. As a result of the above, we have delivered a quarter in line with what we said and we remain positive around this market inflection and the acceleration of Coveo adoption. Our mission is to bring AI to every point of experience across enterprises, powering remarkable individualized and generative experiences while optimizing their business outcomes at every interaction. Only AI combined with powerful search and relevance technology can achieve that. We continue to believe this will be one of significant digital transformation enterprises will need to engage in, particularly as they increasingly compete against AI and Gen AI powered experiences from their competitors and that this will happen across every industry.

Speaker 2

As we have previously reported, the initial adopters of Coveo's GenAI technology in fiscal existing customers. They immediately understood the power of our AI search indexing, semantics and relevance technology to power generative AI and our unique ability to ground large language models prompts into secure, current, traceable and relevant data, all needed to deliver the degree of precision needed by enterprises. We have now signed over 30 generative AI deals in total, all with large enterprises and are in full production with many of these customers already having realized significant ROI and double digit gains on top of the benefits they had previously gained using Coveo's AI search platform. I am pleased to report that we are now starting to see traction also winning net new clients as well with GenAI. In Q1, we achieved this new milestone by landing Trinity Life Sciences, a provider of evidence based solutions for the life sciences industry.

Speaker 2

More recently, we signed another net new Gen AI deal with a leading global manufacturer of GPUs, a company very familiar with AI technology, again after extensive comparative tests. Additionally, as mentioned during our last call, we secured new GenAI deployment work with F5 Networks, a global security technology leader, which was already a successful Coveo customer and this was following significant head to head testing over several months against the major platform vendor. We're excited to extend these benefits to our new customers and believe we are just getting started monetizing this Coveo technology advantage, particularly as our market has now gained maturity and a much better understanding of AI and GenAI, what works, what doesn't and why a complete Coveo software stack is needed and differentiated. As I've said from the beginning, since the November 2022 chat GPT and GenAI disruption, we believed Coveo would be the last to hype and the first to resolve. Well, I think we just did that.

Speaker 2

And I could not be more proud of the results we're achieving with our platform now with the addition of relevant augmented generative answering in full production at large scale. This is because we see every day the significant ROIs that we bring for enterprise customers that have also measured us against multiple other alternatives from homegrown to commercial software platform. We continue to get more and more of those customer use data points and how transformative this technology is, validating our view that what Coveo does in AI and GenAI is a game changer. I want to share with you a few real life examples. SAP Concur, the leading business travel and expense management software provider in the world, only after 4 weeks of AB testing achieved a 5% reduction in customer service cases and an 80% reduction in number of searches required for customer visit.

Speaker 2

Thanks to our relevance augmented generative answerings, immediate and accurate responses. This is in addition to a 64% decrease in content gaps. Chamberlain LiftMaster, a global 6000 employee leading manufacturer of intelligent access garage and commercial door openers and gate entry systems saw a 23% click through rate improvement in their online commerce experiences, thanks to Coveo AI. F5 Networks mentioned earlier, a leading application security company with $6,000,000,000 in revenue across 45 countries saw an 11% improvement in self-service success rate using relevant augmented generative answering through a 28 day AB test with Covell. Forcepoint, another global security software company saw a 14% improvement in self-service success rate on their customer community only after 3 months of using Coveo Relevance Augmented Generative answering.

Speaker 2

This is an important measure of the reduction of the number of customer sessions that ends up in a case submission for human assistance, hugely impacting service cost reductions and customer satisfaction. They're now live with our generative AI solutions across multiple other use cases as well. More of these great successes and recent hard metrics and gains using Coveo relevant augmented generative AI in particular can be found on the Coveo website. And furthermore, these customers are not experimenting. They are alive with our solutions and you can go and test them yourself.

Speaker 2

Our volume of queries from relevance generative answering has increased 10x since January 24, another telling sign of the adoption and value we believe our customers are seeing from this solution. At this point, I can unequivocally say after dozens of deployments and comparative tests at large enterprise customers against a variety of competing solutions that the differentiation and value of our platform has been validated and that our ability to deliver and particularly important as the market enters the show me phase, postgen AI hype, distilling what is needed and necessary, the risks, the precision, the security, the compliance, the traceability and explainability, the costs, use cases and benefits. This is why we believe that the few companies such as Coveo that can really deliver, prove the benefits and scale in full production globally will have an advantage in the market. While others continue to build, experiment and test, we are innovating on our competitive advantage and constantly delivering new cutting edge capabilities to further drive value with our customers, working in full production with large scale enterprise data. I'd like to remind everyone that customer is one single platform shared by all customers globally and in constant innovation.

Speaker 2

In Q1, we also closed a substantial expansion transaction with a top 5 U. S. Bank and initiated new work with Talia, the leading German bookstore brand with 20,000,000 products over 500 locations and a strong digital presence as well as with Carleton 1, a leading SaaS based employee management solutions provider. These are just a few examples of leading companies in their respective industries, which deploy Coveo, see the significant ROI and want to lead with AI across their digital experiences. I'd also like to highlight our bookings performance in the EMEA region, with Q1 marking our best quarter for bookings since fiscal 2023.

Speaker 2

We attribute this success in part to our recent appointment of a new executive, Nick Voll, as Managing Director in EMEA and who has a clear growth mandate in the region and also to our partnership with SAP and as an endorsed partner globally. Our relationship with SAP continues to show growing signs of demand and success, and we anticipate sustained momentum for the remainder of the year in EMEA and elsewhere. Our strong pipeline continues to give us confidence in our current growth projections for fiscal 2025 and beyond. And another validation of our previously reported thesis that the AI market adoption is inflecting. Notably, Q1 marked our 2nd best net new customer pipeline generation quarter ever.

Speaker 2

Additionally, in the quarter, we saw record GenAI pipeline generation with more than 2x increase quarter over quarter in new customer Gen AI pipeline. Those are additional encouraging metrics reflecting the strong demand for our innovative AI solutions as we continue to grow the number of customer proof points at various stages of testing and full production deployment. In summary, we believe Coveo's leadership position continues to strengthen through the ongoing innovation of our AI platform, informed by real world use cases with leading enterprises across the world and the solid results and benefits that this provides. In Q1, we've also announced an alliance with Genesys, a leading contact center as a service solutions provider, natively integrating our AI platform within the Genasys Cloud platform. Thanks to Coveo, agents will have access to personalized relevant knowledge exactly when needed, enhancing their workflow and empowering them with relevant insights and generated answers to customer questions.

Speaker 2

This enables them to onboard and upscale faster, reduce search time, improve first call resolution and lower average handling time. We're also investing to grow strong relationships with leading specialized systems integrators across the world. As they too seek to embark on this new wave of digital transformation, serving the needs for their enterprise clients to bring AI to every point of experience. We believe that Coveo is uniquely positioned as the core technology platform to enable these large systems integration undertaking. Such alliances and partnership investments strongly support our growth and investment thesis.

Speaker 2

Investments in our sales infrastructure continue and I am thrilled to have recently announced the appointment of John Grossons as our new Chief Revenue Officer globally. John brings over 30 years of global sales management experience in the SaaS industry and has a proven track record of driving significant revenue growth. His dedication to building value based relationship with customers aligns perfectly with our mission at Coveo. Given the significant opportunities ahead, we are confident that John's leadership will further accelerate our growth and strengthen our position in the enterprise applied AI market. At Coveo, we think we are at the forefront of a tidal wave of technological advancements as we navigate the growing importance of AI and generative AI in the digital experiences industry segment.

Speaker 2

Our recently published customer, employee and commerce industry reports available on our website reveal critical insights. 61% of consumers believe effective search significantly impacts brand perception in the customer experience space. Over 40% of employees see Gen AI as a way to enhance their work efficiency and 72% of shoppers expect generative AI to elevate their shopping experience online. By anticipating these growing trends, we're committed to innovating our AI based solutions to ensure seamless product discovery and improved digital interactions, positioning Coveo ahead of the competition in this rapidly evolving landscape. The ongoing investments in our platform also continue to be recognized by industry analysts such as Gartner, as I mentioned on the call last quarter.

Speaker 2

Most recently Coveo once again demonstrated AI leadership by winning the AI Search and Innovation Award at the 7th Annual AI Breakthrough Awards. This prestigious recognition was given due to our AI platform's breadth of functionalities providing advanced search, relevant recommendations, unrivaled personalization and now generative answering empowering our solution areas. In closing, our momentum from a transformative fiscal 2025 continues as we gain market recognition, secure new customers, deliver results and expand our partnerships. With our strategic investments and innovations in AI and GenAI, we are not only meeting the needs of our clients for this innovation, but doing so with an efficient business model. We're excited about the future as we navigate the growing importance of AI and continue to position Coveo as a leader in this dynamic landscape.

Speaker 2

With that, I will now hand the call over to Brandon

Speaker 3

Thanks, Louis. The Q1 of fiscal 2025 was a promising one. We delivered on our guidance for SaaS subscription and total revenue and continue to track well ahead of our plans on adjusted EBITDA and as well posted another quarter of solid positive cash from operations. As we look at the details, SaaS subscription revenue was $30,600,000 for the quarter, above the top end of our previously issued guidance. Again, this quarter, we have broken out the contribution of Coveo's core platform and the platform we acquired from Qubit.

Speaker 3

As a reminder, our focus is on the Coveo core platform, which drove SaaS subscription revenue of $28,700,000 up 12% from a year ago. Our ARR for the Coveo core platform grew roughly by the same amount. This was offset by a decline of 34% in SaaS revenue for the platform we acquired from Qubit. As previously Qubit platform will largely churn this year as we prioritize investments in our core. Total revenue was $32,200,000 up 6% from a year ago.

Speaker 3

Total revenue was impacted by the aforementioned Qubit churn and lower professional services revenue. Our Q1 new bookings were improved from a quarter ago and from the prior year. We saw continued momentum in our CRGA offering, which represented over 20% of new bookings once again this quarter and is tracking well against our plans for the year. We also saw a strong quarter of bookings in EMEA on the back of our go to market investments made in the past year and our ongoing SAP partnership. While new bookings did improve in the quarter, they are not yet at our targeted levels and our assumptions remain that we will see bookings momentum build as the year progresses and more customers finalize their AI purchasing decisions and we realize on more of our growth initiatives.

Speaker 3

Our NER excluding the Cubit platform for the quarter was 100 and 6%, down slightly from 107% in Q4. This is mainly due to a single loss customer I mentioned on last quarter's call whereby a financial services customer undertaking a significant cost reduction exercise chose an alternative path. Our gross retention rates continue to be very healthy through Q1 as compared to our peers in enterprise software. Gross margin for the quarter was 78% and product gross margin was 82%, both in line with a year ago. Combined, I remain encouraged by the strong unit economics inherent in our business model, with 95% of our revenue coming from recurring SaaS subscriptions carrying 80% plus product gross margins, gross retention rates in the 95% range and 105% to 110% net expansion rates for the Coveo core platform.

Speaker 3

We have a solid long term business model that provides good leverage for investment and growth opportunities and or greater profitability. This foundation is a strong positive as we continue our focus on driving improved new bookings. Adjusted EBITDA loss for the quarter was $1,700,000 compared to a loss of $1,800,000 a year ago and well ahead of our guidance $2,200,000 to $2,700,000 positioning us well to achieve a year of positive adjusted EBITDA. We've also increased our focus and emphasis on driving positive cash flow from operations and I'm quite pleased with our progress in this area. We drove positive cash flow from operations of $3,000,000 in the quarter, up from $1,000,000 a year ago.

Speaker 3

We have delivered positive cash flow from operations in 4 of the past 5 quarters, over $6,000,000 in the trailing 12 months and are tracking well to our original guidance of driving $10,000,000 in positive cash flow from operations for the current fiscal year, all while still investing for growth. We ended the quarter with cash on hand of $168,000,000 dollars and no debt. After the close of the quarter, we completed our substantial issuer bid whereby we repurchased approximately 6,500,000 shares for total repurchase consideration of $50,000,000 CAD. On a pro form a basis after considering the results of our SIB, we would have ended the quarter with US130 $1,000,000 in cash and a pro form a share count would have been US97.1 million dollars Finally, turning to guidance. For the 2nd quarter, we are expecting revenue of between $30,600,000 $31,000,000 and total revenue of between $32,000,000 $32,400,000 We also expect adjusted EBITDA of minus 0.5 $1,000,000 to $0,000 Our 2nd quarter guidance assumes the ongoing attrition in Cubit will continue as we continue to invest in the Coveo core.

Speaker 3

At this time, we'll leave our annual guidance unchanged at SaaS subscription revenue of between 120 $6,000,000 $130,000,000 with total revenue of between $133,000,000 $138,000,000 We expect annual adjusted EBITDA between $400,000 We continue to expect that our second half bookings performance will be stronger than first half and that SaaS subscription revenue growth for the Coveo core will improve thereafter. As mentioned last quarter, we expect Cubit SaaS subscription revenue will continue to churn through the year and continue to expect a revenue impact of approximately $4,000,000 as a result when comparing fiscal 2025 to fiscal 2024. And finally, as I just mentioned, we are tracking well towards our target of generating cash from operations of approximately $10,000,000 for the year, although we do expect some seasonality related to working capital to create some variability in our quarterly cash flow results. In closing, we continue to make positive progress towards reaccelerating our growth this quarter. And while we still have more work to do, I'm encouraged by what I've seen so far.

Speaker 3

And with that, operator, you may now open the line for questions.

Operator

Thank Your first question comes from the line of Thanos Moschopoulos from BMO Capital Markets. Please go ahead.

Speaker 4

Hi, good afternoon. Louis, as

Speaker 5

far as the customers you're winning for GenAI,

Speaker 2

are there any common themes that

Speaker 5

you'd highlight? Are they weighted towards a particular verticals, particular pain points, some other underlying elements like your data infrastructure? Or is it really cross vertical, cross geography? And also just to clarify, it would take to assume that the predominantly customer support deals? Thanks.

Speaker 2

Hi Thanos. Good question. There are cross 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.

Speaker 2

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 maybe tests ended up selecting Coveo. As it relates to your other question, Thanos, it has been predominantly the vast majority in customer service and 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 cases submission, cases that require human assistance by double digits and we routinely measure that.

Speaker 2

So this is a huge, huge case for these types of companies, but also other verticals as well. We also see, Gen AI applications in the workplace area, in the commerce area and in the websites area. So across all of our 4 businesses, pretty much every conversation right now includes generative AI and positions us really differentiates us.

Speaker 5

That's great. I'll pass the line. Thanks.

Operator

Yes. Thank you. And your next question comes from the line of Ed Heer Katve from 8 Capital. Please go ahead.

Speaker 5

Great. Thanks for taking my question guys. 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?

Speaker 5

Is it largely outreach from your sales force or is largely inbound that you're seeing just given the strong ROI that you guys have spoken to in your prepared remarks?

Speaker 2

Love the question. I think it's both and increasingly 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.

Speaker 2

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 to 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 companies' 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.

Speaker 5

Thanks a lot guys. I'll pass it on.

Operator

Thank you. Your next question comes from the line of Sreedhar Singh Kumar from Stifel. Please go ahead.

Speaker 6

Good evening, gents. Wanted to touch on your partnership strategy. Could you talk a little bit about how important are these partnerships to Coveo's broader growth strategy? And can you remind us what percentage mix of business is coming in through partners today? And where would you like to be, call it, over the medium to long term?

Speaker 2

So hi, Sudan. 2 types of partnerships. So number 1, 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.

Speaker 2

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 etcetera. 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 these systems integrators for that advice, but also these systems integrators want to jump on the digital transformation bandwagon. And one of the various of application is digital experiences. We talk about commerce, we talk about service, workplace and website type of experiences, anything that's a digital experience and has someone online at the other end.

Speaker 2

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.

Speaker 2

So we've announced partnerships with SAP. We've obviously been a long time partner of Salesforce. We work with companies like Adobe. We've announced during the quarter the partnership with Genesis, 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.

Speaker 2

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 collaboration with these companies. And 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. Our market, as you know, was a bit in a holding pattern as companies were discovering AI and try to distill AI and Gen AI and etcetera.

Speaker 2

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 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.

Speaker 6

Perfect. Thank you, Louis. I'll pass the line.

Operator

Thank you. And your next question comes from the line of David Kwan from TD Cowen. Please go ahead.

Speaker 2

Hey, guys. Hey.

Speaker 5

You guys talked about, I think it's like 30 CRGA deals that you've signed. Can you talk about how many of those are live production or revenue generating? And how many are from net new customers? And then any color you can buy from that standpoint on the net new customers in terms of how much they compose of the CRGA pipeline would be great. Thanks.

Speaker 2

Right. We don't report the detail of the breakdown, but I can certainly say that if we sign these deals, that is because they are contributing to our revenue. We have, in addition to that, dozens of other deployments right now at various stages of decision making and testing, experimentation or negotiation in procurement. These 30 that we refer to are signed and therefore for. We have some deals, a few when we sign deals, there are optionality on the part of customers for some of them to as it relates to the duration of the contract and the ability to opt in or opt out.

Speaker 2

But that's very, very few right now that have not fully opted in for the longer term, I would say with us.

Speaker 1

All right. Thanks.

Speaker 2

Yes.

Operator

Thank you. And your next question comes from the line of Paul Treiber from RBC Capital Markets. Please go ahead.

Speaker 4

Thanks very much and good afternoon. The your comment is the 30 deals signed is quite encouraging, but how do we align that or dovetail that with the ARR growth and it's up 12%. Can you give us a sense of how ARR growth has trended? And if those 30 deals is fully impacting that ARR growth?

Speaker 3

Hey, Paul. Yes, as Louie mentioned, if we mentioned a signed order, it is because there is a firm order that will be in ARR and in revenue. I think we've talked over the past several quarters about just what's been going on in the market more broadly, how many companies have paused decision making and so on. And that's impacted all aspects of our business. CRGA continues to be a very bright spot for us of primarily inside of our existing base, getting them to add on some of our generative answering capabilities.

Speaker 3

But the broader macro issue that we've been working through is just paused and delayed customer decision cycles as the market spent their time educating and getting up to speed on everything that's been affecting our market in general. Q1 did show some promising signs. And as we mentioned in the prepared comments, we expect that momentum to continue to build as the year goes on.

Speaker 4

Just a quick follow-up, if I may. Just the pipeline comments are quite encouraging. And you did mention elongated sales cycles are delaying the conversion. You comment on your win rates, what you sort of seen to date in terms of actual win rates?

Speaker 2

Paul, I think in the case of relevance augmented generative answering, I would say extremely high. Now when you peel the onion, it depends what you compare it to. From a competitive standpoint, I would say big picture, we don't lose. We haven't found any other solution for the use cases we cover yet, at least as of yet, that can deliver the level of precision on current on customers' current data, highly secured, etcetera. That meets the threshold where an enterprise would move forward to deploy.

Speaker 2

Some may decide not to move forward for various reasons or pause or pursue the testing from that perspective. But if you look at the numbers right now, I would say it's less than 10% that are what we call internally lost or dequalified. There's some on hold. There's some still actively testing. There are some where the tests are completed in our final decision phase.

Speaker 2

So it's I will tell you for us it's more than encouraging. It was really about this inflection and the proof points. The takeaway here that we're trying to say, communicate and in helping you understand what we're going through and what we're seeing is that this market is moving into the show me phase. And that's really, really important. After 18 months of education and testing and experiment, there will companies are willing to move forward and make decisions.

Speaker 2

Obviously, we're not immune to the general software industry and etcetera. And every software company says deals take longer and blah, blah, blah. We don't talk much about that because that's the overall dynamic. What's really, really exciting is the value that this technology creates. The numbers are stunning in terms of immediate benefits.

Speaker 2

And the fact that right now we've moved the demonstrations been made, companies, if they can see and if they can test with their own data and see the results, they'll find money for it and they'll move. And those signs are very encouraging. Obviously, this is a new technology. So and this has been a major disruption in the search market. But from a competitive perspective, just to wrap it up, we're definitely not seeing losses to competition in that particular area.

Speaker 4

Thanks for taking the follow-up.

Operator

Thank you. Your next question comes from the line of Koji Ikeda from Bank of America Securities. Please go ahead. Hi.

Speaker 7

This is George McGrien on for Koji. I appreciate you taking the question. Forgive me if I missed this earlier, but it I was kind of wondering if there's anything worth calling out in terms of how as relevance answering is increasingly in the mix, how that changes the sales cycle times

Speaker 3

for bookings?

Speaker 2

I think just building on the last answer, George, and this is a very good question because yes, it does in the sense that in general, if you look across the entire generative AI segment and etcetera, very few companies were buying, but most companies were experimenting and learning and discovering and learning one way or another. And from that perspective, that lengthened the sales cycle because they want to touch it on their own data and etcetera. So this was less of a repeatable sales process where you buy a solution that's been sold hundreds of times and you can relate to similar situations and ensure that this is going to work for you and etcetera like we see across the enterprise software industry. Customers and customers and deploying and talking to them and showing it with their data and etcetera. And so we and we see these results.

Speaker 2

And these customers, I can assure you, are extremely, extremely engaged. And it gets to a point where the ROI is so obvious that they need to move forward. And we think now the major issues that if you're a CIO of a global enterprise or a large enterprise, the major issues are for the most part behind you. You worried a year ago about security, about compliance, about the fact that this needed to run on your own data, about the fact that you couldn't load your customer data into a large language model about the traceability and the explainability and the lineage of content and all of that. And those things are now understood and behind you.

Speaker 2

So this is a long answer, pardon me, George, but just to say that from that perspective, it did elongate the sales cycles because the whole industry was in a holding pattern until the few companies like Coveo that can deliver now are standing with RIIO results and now companies have 2 choices. They will either adopt this technology or compete against it. And it's going to be pretty binary. It's going to be pretty brutal because the quantum leap and the benefits are just too high to ignore.

Operator

Thank you. And your next question comes from the line of David Weiss from Scotiabank. Please go ahead.

Speaker 5

Hi, good evening. Could we just maybe get an update on just the progress that you're seeing with the SAP endorsed partnership in terms of co selling? I mean, you had mentioned EMEA, but perhaps also globally, any commentary on that in terms of recent deals being signed or the contributions to the pipeline and the opportunity there globally? Thanks.

Speaker 2

Yes. Well, first of all, we were also pleased to report the progress we've made with SAP Concur as a key customer and the benefits and you can find that story on our website, which is quite impressive. And the fact that SAP is a customer of Coveo and is speaking publicly about their results is obviously fueling some awareness amongst their installed base. If you look and their customers in the market, if you look at SAP as a company, obviously, headquartered in Waldorf, Germany, I would say half of SAP's business is in EMEA and probably a higher proportion of their brand is in that region. So we're enjoying quite a lot of success in building the pipeline and signing joint deals.

Speaker 2

We announced during the quarter the signature of a large transact well, a significant transaction, I should say, to qualify it with Talia, which is the sort of the Barnes and Noble's of Germany and the dark region and very particular company, leading German bookstores. So that's a customer that's the kind of customer I would say that we win with SAP, 20,000,000 products, a very strong online presence, certainly one of the most important online brands in Germany. And we're seeing more and more of these types of transactions and customers when prospects come into the pipeline with SAP. We're also active with SAP and ANZ and North America as well. So that partner continues to grow.

Speaker 2

Now the dynamic, I just want to close by saying that the dynamic, whether it's SAP or Adobe or Salesforce or any of our alliances, they've experienced the exact same dynamic as it relates to Aon, which is their customers too. We're sort of a little bit in a holding pattern and trying to talk to them and discover what are the risks and costs and use cases and so on of Aon. So we're really at the same pace here. But there's no question that the SAP partnership and particularly in commerce, we've reported before that SAP is the most important e commerce vendor by gross merchandise value that they process. And so that's a really, really important partnership.

Speaker 2

And yes, we do see it at a very high level. We do see it growing very well, sorry, in the pipeline.

Speaker 5

Okay, great. Thanks. And I'll pass the line.

Operator

Thank you. And your next question comes from the line of Richard Chek from National Bank Financial. Please go ahead.

Speaker 3

Yes, thank you. Just on your full year guidance, it sort of implies a pretty sizable pickup here in the back half of this year when it comes to revenue. I'm just trying to understand the lag between bookings

Speaker 1

and when revenue is recognized and

Speaker 3

I guess sort of part of that question. We expect bookings to generally improve across the board. This quarter had some promising signs in Europe and CRGA continuing to go well. But we're seeing signs that bookings will continue to improve as the year goes, Richard. We still got a pretty wide range out there.

Speaker 3

So in terms of your comment on ramp, I think at the low end, there's not much of a ramp required at the high end. Yes, obviously, we need to see bookings pick up and not to turn into revenue. But as we've said, the order here is let's get bookings going in the right direction and the revenue will follow thereafter.

Speaker 6

Okay, thanks.

Operator

Thank you. There are no further questions at this time. I will now hand the call back to Mr. Louis Tattoo for any closing remarks.

Speaker 2

Very good. Well, thank you. I want to thank everyone on behalf of Coveo for attending this Q1 earnings call as you're all there every quarter. And with that, operator, you can now end the conference call. Thanks everyone.

Operator

This concludes today's call. Thank you for participating. You may all disconnect.

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Earnings Conference Call
Coveo Solutions Q1 2025
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