Coveo Solutions Inc.

Good afternoon, my name is Michelle, and I will be your conference operator today. At this time, I would like to welcome everyone to the CAVEO third 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 the number one on your telephone keypad. If you would like to withdraw your question, please press the star followed by the two. Thank you. Mr. Moon, you may 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 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 fourth quarter in 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 regulators, including under the section titled Risk Factors in the company's most recently filed annual information form, which is available under our CDAR profile at www.cdar.com. Additionally, some of the financial measures and ratios discussed on this call are either non-IFRS measures and ratios or operating metrics used in our industry. A discussion on why we use these financial measures and ratios and operating metrics and, where applicable, the reconciliation schedule showing IFRS versus non-IFRS results are currently available in our press release and our MDMA issue today, which may both be found on our Investor Relations website at ir.cobeo.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 will 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 that Coveo once again delivered solid results that exceeded the top end of our quarterly guidance for both SAS subscription revenue and total revenue. We also continued to demonstrate an accelerated path to profitability by beating our guidance for adjusted operating loss. For the third quarter ended December 31st, we delivered year-over-year SAS subscription revenue growth of 25%, and total revenue growth of 23%. Our net expansion rate for the quarter was 107% and within our target range of between 105 to 115%. The decline compared to the prior quarter was principally related to anticipated customer churn following the Qubit acquisition. Customer retention rates remained very high and together with the good visibility we have on cross-sell and up-sell opportunities within our existing customer base, we expect NER to gradually improve in subsequent quarters while remaining within our target range. Our revenue growth, continued focus on operational efficiency, and favorable FX movements resulted in an adjusted operating loss of $3.9 million for the third quarter, significantly ahead of our guidance. As such, we once again have improved our adjusted operating laws guidance for the fiscal year 2023. The trend of large enterprises investing in AI-powered customer experience platforms to drive business optimization, which we believe is an imperative, has continued. A recent survey of 500 IT professionals by Bank of America concluded that businesses intend to increase their IT spending by 8% this year. compared to 7% in 2022. Moreover, the data shows a positive correlation between company size and expected spending growth. Coveo's target customers, large enterprises, are investing the most on software, growing 10% over last year compared to smaller businesses, and they also showed the largest IT hiring budget increase at 12%. As we continue to make strategic investments in our Coveo Relevance Cloud platform, we are seeing consistent interest from enterprises who are also investing in high ROI solutions, particularly in the commerce sector and in industries that are currently experiencing strong relative demand. While we, like others, are seeing demand soften in certain sectors and persistent delegation of sales cycles, We are also seeing relative strength in sectors such as manufacturing, which we believe represent a compelling opportunity for Coveo. Business-to-business commerce is by nature more complex than business-to-consumer. There is a need to manage a greater number of SKUs, far more product attributes, longer-term customer relationships, customer-specific pricing, volume pricing, and so on. These complexities play to Coveo's strength relative to our competitors. In business-to-consumer commerce, we believe our ability to create true one-to-one personalized experiences for customers and treat individuals as people and not personas can drive compelling improvements in business outcomes in a market where a suboptimal digital experience can have a huge impact on revenue and margins. And in service, Our ability to help enterprises lower costs and increase NPS to preserve existing customers and revenue also applies across any macroeconomic cycle, especially the current one. We are excited about our progress with new customer wins in the quarter, which continues to strengthen the foundation of our business. We landed new logos across all of our lines of business and once again, had the strongest commerce bookings quarter in the history of the company. These land transactions included the largest commerce land to date. In fact, our largest land transaction for any line of business, with a global direct seller of nutritional products operating in 100 countries, and the major manufacturer of mechanical power transmission solutions used in several industries. We also landed large six-figure deals in our service and platform lines of business, including those with a multinational semiconductor and telecommunications company and a multinational pharmaceutical services company. We also completed significant expand transactions across all our lines of business, including with an American healthcare services company, a multinational oil and gas corporation, a large home improvement and outdoor living retail chain, as well as with Synopsys, Finastra, Bombardier Recreational Products, Pet Supply Plus, and others with whom we continue to strengthen our relationship. I would now like to highlight some recent examples of customers using Coveo's platform to optimize business outcomes and provide personalized, relevant digital experiences. In November 2021, we signed an initial deal with a top three global consumer electronics manufacturer. They were looking to not only improve their commerce operations for both B2B and B2C, but also wanted to optimize their customer support sites. The company's U.S. brand began a digital transformation journey with the goal of becoming the best in their geography and industry. They partnered with Coveo with specific goals in mind to increase conversions, improve search accuracy, improve merchandising, and automate with AI wherever possible. The U.S. region went live with commerce and support in mid-2022 and saw significant results. Impressed with how well Coveo powered their commerce and support sites simultaneously, The client introduced Coveo to their international team, who subsequently decided to deploy our technology and platform globally. In 2023 and beyond, Coveo will be expanding its services and will start to power their commerce and support sites across 81 different countries. This is an exciting opportunity for our commerce and service lines of business to work seamlessly together with a single global customer. Coveo partners with one of the largest DIY and home hardware store chains in the Oceania region. The company has been utilizing Coveo's relevant platform and machine learning capabilities in three key areas. Website search to ensure customers receive relevant results and improve user experience. Category and product listing pages to prioritize products that have a higher likelihood of being selected. end up selling at multiple stages of the customer's personalized journey. We are extremely pleased with the results of our collaboration, which has led to millions of dollars in upsells in a recent quarter, attributed to products recommended by Coveo. Lastly, Coveo works with a global leader in network security who has deployed nearly a million of its integrated multifunction threat management appliances worldwide to businesses of all sizes, from SMEs to large distributed enterprises. With more than 250,000 customers, 17,000 security resellers, and close to 100 service agents, they've been leveraging our platform to power their partner and customer portal, case deflection page, agent insight panel, and full search page. Thanks to Coveo's solution, they have been able to significantly increase customer and partner self-service, allowing for growth without hiring new agents and maximizing the value of their content by distributing that knowledge more effectively. The impact of Coveo was instant and significant as the case deflection rate increased meaningfully within a very short period of time. We believe that customers that select the Coveo Relevance Cloud platform receive a subscription to ongoing innovation, including AI research and investment, expertise, and customer success, as well as a compelling ROI driven by continuously optimizing business outcomes. You saw us recently announce the release of the new Coveo Merchandising Hub, which we believe to be a game changer. This groundbreaking platform is the result of our successful integration with Qubits and has allowed us to significantly expand the capabilities of the Coveo Relevance platform by offering the first ever comprehensive suite of tools tailored specifically to merchandisers. We are excited to continue showcasing these new capabilities to our customers that help to create more value by optimizing both the alignment to shopper intent, as well as enabling merchandisers to optimize their business outcomes using AI. Next, I'll review some product features of the Coveo Relevance Cloud platform we announced during the quarter that further differentiate our offerings and help optimize business outcomes for our customers. We launched our intelligent out-of-the-box facet generator which simplifies the implementation and configuration of website navigation for large enterprises. Coveo is one of the only search platforms that can automatically leverage hundreds of filtering options and select the best ones to use to help improve the end user experience without any traffic or behavioral data. Combined with the intelligence of our machine learning models, Coveo has the ability to go even deeper when data is available. As a result, our platform can help to drive unmatched relevance and personalization in website navigation. We also released analytics and developer tools for use within data cloud company Snowflake. The new features provide real-time access to Coveo Analytics through Snowflake's reader account where data can be leveraged in any business intelligence tool and even combined with other external data sources for a more complete visualization of search engagement and business performance. Lastly, I would be remiss if I didn't mention that for the fifth consecutive time, Coveo has been named the leader in the 2022 Gartner Magic Quadrant for Insight Engines. This acknowledges the Coveo Relevance Cloud platform in terms of its maturity, market presence, capabilities, and overall vision compared to other established technology vendors, which we are very proud of. Coveo was also recently named a champion in the 2023 Enterprise Search Data Quadrant from Software Reviews, a division of Infotech Research Group. We are humbled by this particular award as it is based on objective feedback from real customers and is a testament to our dedication to customer success and delivering business value to our customers. History has shown that companies that have succeeded regardless of economic cycle are those that have continued to make strategic investments, remain focused on the fundamentals of their business, and been disciplined in their approach to efficiency. We believe that Coveo's strategic investments in our Coveo Relevance Cloud platform are strength in commerce and service, and our ability to address the complexities of the industries we serve while delivering strong ROI for our customers position us very well to weather the current macroeconomic environment, and we remain excited about the significant market opportunity in front of us. With that, I will now hand the call over to Jean to discuss our quarterly results in more detail. Jean?