Coveo Solutions Inc.

Good afternoon. My name is Sylvie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Caveo second quarter 2023 financial results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then number one on your telephone keypad. If you would like to withdraw your question, please press star two. Thank you. Mr. Moon, you may now begin your conference.

Good afternoon, and thank you for joining us today. With me on the call are Louis Taitou, Chairman and Chief Executive Officer of Coveo, and Jean Laviguerre, Chief Financial Officer. Before we get started, I would like to note that certain statements made during this conference call are forward-looking statements within the meaning of applicable securities laws including those regarding our future plans, objectives, growth, and expected performance, including our outlook for the third quarter and fiscal year 2023. These forward-looking statements are given only as of the date of this call. While we believe any forward-looking statements we make are reasonable, actual results could differ materially because the statements are based on current expectations and are subject to risks and uncertainties. We do not undertake or expressly disclaim any obligation to update or alter our forward-looking statements whether as a result of new information, future events, or otherwise. Further information on these and other factors that could affect the company's financial results is included in filings we make with Canadian Securities Regulatory Authority, including under the section titled Risk Factors in the company's most recently filed annual information form, which is available on our CEEDAR profile at www.ceedar.com. Additionally, some of the financial measures discussed on this call are either non-IFRS measures or operating metrics used in our industry. A discussion on why we use non-IFRS financial measures and operating metrics and where applicable, a reconciliation schedule showing IFRS versus non-IFRS results are currently available in our press release and our MD&A dated as of today, which may both be found on our investor relations website at ir.coveo.com and our CDAR profile. Please note that unless otherwise stated, all references to any financial figures are in U.S. dollars. Lastly, slides accompanying this conference call are available for viewing and accessible on our IR website under the News and Events section. I'll now turn the call over to Louis to begin. Louis?

Thank you, Paul, and thank you all for joining us today. I am pleased to report second quarter results that reflect our strong relationships with customers, who view Coveo as a mission-critical partner that helps them optimize business outcomes and our commitment to improve our operational efficiency. We believe the current macroeconomic environment is driving enterprises in all industries towards solutions that provide tangible ROI and that our differentiated, scalable, AI-powered platform can deliver rapid time-to-value through relevant search, personalization, recommendations, and merchandising. It is our firm belief that digital transformation is an imperative, no matter the economic cycle, and that businesses must invest in true personalization to effectively compete in the new digital experience economy. With the Coveo Relevance Cloud Platform, each interaction is a true one-to-one personalized experience powered by AI and machine learning, regardless of whether a user is authenticated or anonymous. By treating individuals as people and not personas, our platform can drive significant improvements in revenue, profitability, and customer and employee satisfaction. For the second quarter ended September 30th, we delivered year-over-year SaaS subscription revenue growth of 47% and total revenue growth of 43%. Please note that FX represented an approximately 3% headwind against our year-over-year growth rates for both SaaS subscription and total revenue. Our net expansion rate for the quarter remains strong at 111%, demonstrating our continued traction with customer retention and strong cross-sells and upsells with our existing customer base. Our revenue growth, seasonally lower expenses related to vacations taken during the summer months, favorable FX movements, and continued focus on operational efficiency resulted in an adjusted operating loss of $4.7 million for the second quarter, significantly ahead of our guidance. And based on these continuous improvements in efficiency, We will also be meaningfully improving our adjusted operating laws guidance for the fiscal 2023. All lines of business continue to grow double digits organically on a trailing 12-month basis. The trend of an elongation of sales cycles due to the current macroeconomic environment persisted in fiscal Q3, in particular for larger deal sizes and those within our workplace line of business. These deals are oftentimes requiring additional layers of approval and taking longer to close than before. In the second quarter, we continued to land a number of new logos and had the strongest commerce bookings quarter in the history of the company. Examples of new commerce customers in the quarter include a global online manufacturer and retailer of licensed sportwear and merchandise, a large European-based electrical retailer specializing in household appliances and electrical, and the Lottery and Gaming Crown Corporation located in Canada. In our service line of business, which included a solid year-over-year increase in Salesforce integration bookings, notable new customers include a leading provider of critical decision support tools and services for the global investment community, a global provider of industrial software solutions, and CrowdStrike Holdings, a NASDAQ-listed provider of cybersecurity software and solutions. We also completed expand transactions across all of our lines of business, including a multinational semiconductor manufacturer, United Healthcare Services, Motorola, Honeywell, Salesforce, and many others with whom we continue to grow our relationships. I would now like to take a moment to highlight some recent examples of customers using Coveo's platform to optimize business outcomes and provide personalized, relevant digital experiences. Back in the third quarter of fiscal 2022, we first highlighted a significant expand transaction with Informatica, a leading provider of cloud data management solutions, and I'm pleased to report the partnership continues to thrive. They have continued their growth as a global leader in the space, and along the way have expanded their use of Coveo as a key part of their digital transformation strategy. Today, Coveo helps to power their internal and external digital experiences, including in marketing, documentation, knowledge, service, marketplace, and professional services, leveraging Coveo in their service organization, They have reported annual cost savings of more than $3.5 million related to improved case deflection. We are also working with Coupa, a global technology platform that provides business-spent management solutions. They have implemented Coveo in self-service and contact center use cases, helping them save significant support costs by increasing case deflection and self-service success rates. Coveo is now supporting Coupa in onboarding a new all-in-one support platform experience for their customers, which is expected to further improve their support metrics and costs. Lastly, Coveo has partnered with a global e-commerce technology group and brand owner based in Europe that controls dozens of brands and has more than 200 clients on their platforms. Following a successful pilot that delivered a multimillion-dollar uplift in revenue alongside added merchandising capabilities for their in-house teams, they're working to deploy Coveo's personalization solutions across additional brands within the group. The next phase of the partnership involves a combined go-to-market strategy leveraging Coveo's commerce and merchandising solutions as a value-added service for other retailers. to mention some new product features for our commerce and service customers that further differentiate our offerings and help improve revenue, profitability, and customer satisfaction and loyalty by providing personalized relevant content. We have made new enhancements to the Coveo merchandising hub to allow social proofing or badging to be easily and scalably deployed on product listing pages of those of our commerce customers. Deploying badging on these pages, which are often amongst the most visited on commerce sites, has the potential to generate significant increases in conversion and revenues for our customers. In service, we launched the Quantic Insights Panel component to enable administrators to easily deploy a next-generation Coveo Hosted Insights Panel in Salesforce. This new capability can help to drive rapid time to value and innovation, as managers can easily update the inside panel configuration and functionality in real time via the Coveo admin console. These new product enhancements were initially made available to a select group of customers via an early access program, and based on the success, they will now be generally available to all customers in this and the subsequent quarter. We continue to prioritize research and development as a strategic investment focus and will provide more exciting product updates as they become available. To conclude, as we approach our first anniversary as a public company, I'm incredibly proud of what we've accomplished so far, and I'm excited for the future of Coveo as we continue to help enterprises succeed with our Relevance Cloud platform. With the investments we have made in our people and technology today, we believe we've built a strong foundation that will allow us to continue to execute on our growth plans while also continuing to accelerate our path to profitability. With that, I will now hand the call over to Jean to discuss our quarterly results in more detail.