Coveo Solutions Inc.

Good afternoon. My name is Jenny, and I will be your conference operator today. At this time, I would like to welcome everyone to the Coveo Second Quarter Fiscal 2024 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, then the number 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, Coveo's Chairman and Chief Executive Officer, and Brandon Nessie, Coveo's 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 plans, objectives, expected performance, and our outlook for the third quarter and fiscal year 2024. These forward-looking statements are given as of the date of this call, 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. We do not undertake or expressly disclaim any obligation to update our forward-looking statements, whether because of new information, future events, or otherwise. Further information on 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 AIF, and the section Key Factors Affecting Our Performance in the company's most recently filed MD&A, which are available under our CDAR Plus profile. at www.cedarplus.ca. Additionally, some of the financial measures and ratios discussed on this call are either non-IFRS measures or operating metrics used in our industry. A discussion on why we use these results and where applicable, a reconciliation schedule showing IFRS versus non-IFRS results are available in our press release and our MD&A issue today, which may be found on our investor relations website at ir.coveo.com and our CEDAR Plus profile. Please note that unless otherwise stated, all references to 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. Starting off with the financial results, I am pleased to report that second quarter SAS subscription revenue, excluding the impact of qubit churn, grew 19% year over year. Additionally, our adjusted operating loss for the quarter was $1 million, a significant year over year improvement from $4.7 million for the same quarter last year, and was ahead of our guidance for the quarter. We are incredibly excited by the promising early results and customer interest from our generative AI rollout program. And we're thrilled to announce Xero as our first customer to go live with Coveo relevant generative answering on their Xero central customer service portals globally. We believe this combined with the building momentum of our partnership with SAP and overall interest in our AI platform creates a substantial opportunity for us in the mid to long term and expect a positive impact on bookings in the coming quarters. Generative AI has been for Coveo a natural extension of the capabilities we have built over the last decade in our platform. Having said that, following the release of Chad GPT, We have observed so far this year a landscape where enterprises have been grappling with the hype surrounding generative AI and have been carefully assessing and evaluating its practical applications along with its many risks, including security, factuality, accuracy, and cost. With that hype came an onslaught of marketing messages and pitches that enterprises have been forced to sift through to a certain what is reality, and what is actually worth buying that will drive real business outcomes. As a result, many customers have been in evaluation mode as they further refined their strategies around generative AI and have been cautious about entering into new deals, especially in light of the ongoing macroeconomic headwinds that have more broadly impacted customer spending on software. While this has, of course, been disruptive to sales cycles, I believe this ultimately plays to our advantage as Coveo is one of the few companies on the planet with a decade of experience in AI, helping large enterprises realize superior outcomes at scale in a secure, reliable, and trusted way. We believe we're starting to see the hype cycle around generative AI subsiding and believe the market has started to coalesce around four main areas where tangible ROI, even in the current macroeconomic environment, can be achieved. These areas are customer service, knowledge management, commerce, content creation, and co-piloting. In the first three, we believe we are extremely well positioned to be successful through our unique ability to solve the many challenges of leveraging generative AI in enterprise use cases. Our approach to creating an enterprise-grade generative AI solution has always been guided by our last-to-hype, first-to-results principle. And as I'll talk about shortly, we now have the results to justify the hype. So in summary, we are very bullish on the underlying long-term growth drivers of Coveo in spite of what we believe are near-term macroeconomic headwinds. As I mentioned, we're extremely excited about the early progress and rollout of our Generative AI program, and I'm pleased to announce that we're on track for general availability of Coveo Relevance Generative answering for service, website, and workplace use cases in December 2023, a major accomplishment by all measures. We also recently announced early access availability of Coveo Relevance Generative Answering for B2B and B2C commerce, offering customers an enterprise-scale generative answering solution for commerce. This innovation empowers customer experiences with AI-driven question answering and advisory capabilities, fostering customer engagement and product knowledge discovery in e-commerce. Cale's generative answering solution is designed to enhance the digital storefront experience by providing a conversational way to share product information with customers. We signed our first five generative AI transaction in our fiscal Q2, including one in commerce that I'll talk about later, with a substantial number of additional deals expected to close in our fiscal Q3 and Q4. This significant customer interest in generative AI and our platform more broadly resulted in another good quarter for pipeline generation, with commerce and our partnership with SAP in particular continuing to represent a significant portion of our growing pipeline. Most excitingly, while we have been articulating the value that we believe Relevance Generative Answering can bring to our customers, we finally were able to see the benefits via A-B testing. And I am excited to share that the early results were far better than our expectations, with customers seeing case deflection improvement in excess of 20%. This would equate to significant cost savings, especially when considering the scale of most of our enterprise customers. Importantly, These savings are in addition to the cost savings already realized by our customers through the use of our AI platform. Being able to show concrete and tangible improvements in business outcomes, like case deflection in customer service, at the end of the day is what our customers care about. It was the one question we still had as we began providing product access to our design partners and advisory group customers. Now with this data, we have the answer. This is the most significant and massive advancement in self-service we have seen that can significantly improve self-service, case deflection, resulting in lower costs and higher customer satisfaction and loyalty. We believe this will result in a tectonic shift of value from the contact center into intelligent self-service, an area where Coveo is also uniquely positioned. As I mentioned, we had our first customer Xero go live with Coveo Relevance Answering to enhance its customer service for its 3.7 million business subscribers. We believe this is one of the first examples in the market of a company deploying generative answering for self-service use cases at scale globally. This enhanced solution aligns with Xero's vision of delivering real-time conversational answers, leveraging Coveo's unified index for secure and controlled access to information, combined with our AI-relevant stack that understands a user's context, complete with citations for traceability to sources of truth. By offering personalized and generative self-service journeys, Xero helps their subscribers to independently manage complex tasks, freeing up their contact center's capacity while delighting more customers. In the coming weeks, Xero intends to implement generative AI for internal employee support and knowledge management. Xero's vision is to streamline and enhance the overall digital experience across their organizations. which encompasses approximately 4,000 employees worldwide. This comprehensive approach underscores Xero's ongoing commitment to improving interactions with both customers and employees, and we at Coveo are thrilled to play a central part in this journey. Another compelling example of the potential of generative AI for Coveo within our commerce line of business is our collaboration with a major U.S. home improvement retail chain. We successfully created a proof of concept that can connect their extensive internal product documentation to their product catalog, resulting in a rich guided discovery and advisory experience for their customers. This groundbreaking capability showcases how shoppers can engage with in-depth product exploration much earlier in their buying journey while maintaining their focus on the retailer's website, removing the need to navigate to external sites. This achievement not only exceeds our initial expectations within commerce, but also shows our ability to rapidly implement new capabilities and applications of generative AI, thanks to our single AI platform. We are thrilled to continue innovating with this customer to further optimize results. Additional generative AI wins with our customers included a leader in high-performance silicon chip design, verification, IP integration, and software security, a leader in spatial data solutions, and a global enterprise software company focused on project management for customer self-service and agent proficiency use cases, respectively. We believe these early wins are a great start as we continue to penetrate what we believe is a very significant opportunity, both within our installed base and with net new customers. In addition to our generative AI successes thus far, we also want a new commerce customer that is a leading global B2B distributor of connector and sensor products. This customer shortlisted Coveo and one other competitor to replace their existing homegrown search solution, ultimately decided to partner with Coveo because of stronger product capabilities and our ability to handle large and complex catalogs. Their goal is to make significant improvements in the digital experiences they provide to their customers to maintain their leading market position. We also secured a significant new customer win with a major Australian retailer for their next generation employee portal, marking another important milestone in the ANZ region. The customer was looking to address critical gaps in their usage of Salesforce to improve employee satisfaction and loyalty as part of a key C-level initiative. Our belief is this is the first of many other opportunities we will have to expand our relationship with this large customer. As shown on the slide, We made several announcements during the quarter that highlight the strength of our AI platform developed over more than a decade, demonstrating our commitment to ongoing and high-velocity innovation. Subsequent to the end of the quarter, we announced more than 15 additional innovations to our AI search and generative experience platform to further enhance digital experience across our four lines of business, websites, commerce, service, and workplace. These advancements solidify Coveo's leadership position, empowering billions of individualized, trusted, and connected digital experience interactions on a global scale, enabling enterprises to excel in an ever-evolving digital landscape. I'm especially pleased with the remarkable speed at which In collaboration with our design and advisory partners and the strength of our R&D team, we have successfully established a truly enterprise-ready generative AI solution. It has been approximately seven months since our announcement of relevance generative answering to now having our first customer live with the solution. And Coveo is one of very select few vendors to have any customer live with a generative AI solution. that we believe generates a substantial and tangible ROI. This achievement, built on our robust AI platform, enriched and refined over a dozen years, offers customers a powerful technology to drive the new business to person imperative through semantic search, AI recommendations, and now generative experiences that are fully secure and accurate. We know what it takes. for enterprises to gain a trusted AI experience advantage. And this places us at the forefront of this journey where search, recommendations, generative answering, chat, conversations, and personalization all converge. This completely redefines a new, much more powerful digital experience paradigm. And we are proud to see Coveo at the forefront of that innovation. already delivering results at scale with some of the leading brands in the world. With that, I will now hand the call over to Brandon to discuss our quarterly results in more detail. Brandon?