Coveo Solutions Inc. (CVO.TO) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to Coveo's 2025 Annual General Meeting of Shareholders. [Foreign Language] My name is Laurent Simoneau, and I am the CEO of the company. With me here on this virtual AGM are Brandon Nussey, Chief Financial Officer of Coveo; and Jeremie Ste-Marie, the Vice President of Legal Affairs and Corporate Secretary of Coveo, as well as a number of other executives and Board members in listen-in mode. As you know, the company has decided this year again to conduct the meeting virtually by way of a live webcast to maximize shareholder attendance for those who would be unable to attend the meeting. All shareholders, regardless of their geographic location, have an equal opportunity to participate in real time and vote at the meeting. Dear shareholders, this is an exciting time for Coveo. We're seeing clear momentum in the market because our innovation is relevant. Customers are now better educated on the benefits and challenges of applied AI, are moving past experimentation toward adoption, and are recognizing the uniqueness and necessity of our AI relevance platform to support their AI and generative experience transformation efforts. That shift makes our path clear. We will aggressively pursue our opportunity while delivering exceptional customer experience. This year, I believe we have cemented our place in the AI ecosystem and believe that the groundwork we have laid over more than a decade ago is paying off. Our Relevance Augmented Generative Answering product is recognized as market-leading, and we're contributing to agentic AI ecosystems to ensure consistent, trusted outcomes where it matters most, search, retrieval and reasoning over data. We deliver AI relevance across both knowledge and commerce use cases for both customers and employees. Our Coveo AI-Relevance platform brings it all together with business optimization AI models that work in unison across all data to achieve specific business outcomes, delivering unmatched relevance for each individual user. Needless to say, we believe we are positioned to lead. This year, we've continued to invest in fast and leading innovation while maintaining operational discipline, improving profitability and generating a solid positive cash flow business model, setting the foundation for long-term efficient growth and we're now accelerating our investment to scale. In terms of financial results, this has translated in fiscal 2025 being another great year for Coveo. During fiscal 2025, we grew our SaaS subscription revenue for our core platform 11%, delivering USD 11.1 million of cash flows from operating activities, a 164% increase compared to the prior year, delivered growth of 50% in new business bookings for the second half of fiscal 2025 versus the comparable prior period, continued to drive meaningful land and expand transactions with our generative AI solutions, and continued to sign and expand flagship customers on our platforms such as Docusign, ABB, SAP, Vanguard, Edward Jones and a number of others. All of the four going despite a challenging economic and trade environment. But we are even more excited for the future of Coveo. We believe our product is built to lead and that we have the team and leadership to scale it. We are entering the next phase of the Coveo story with clarity, conviction and confidence. We're grateful to have you as shareholders to stand by our side as we continue to scale it. Now for the formal part of the meeting, I would like to make a motion to have Brandon Nussey, our CFO, act as Chairperson of this AGM in accordance with Section 11.8 of our general bylaws. This motion is already been seconded by John Grosshans, our Chief Operating Officer, who is also a shareholder of the company. Any questions or opposition? Great. I can now confirm that Brandon Nussey will act as Chairperson of this meeting. Brandon, over to you.

Thank you, Laurent. Good morning, everyone. This is Brandon Nussey, Chief Financial Officer of the company. [Foreign Language] Before we start the formal portion of the meeting, I would like to make a motion to have Jeremie Ste-Marie, our Vice President of Legal and Corporate Secretary act as Secretary of this AGM also in accordance with Section 11.8 of our general bylaws. This motion has already been seconded by John Grosshans, our Chief Operating Officer, who is also a shareholder of the company. Any questions or opposition? Great. I can now confirm that Jeremie Ste-Marie will act as Secretary of this meeting. Before we begin with the formal portion of the meeting, I will hand it over to Jeremie, who will quickly go through the meeting's rules.

Thanks, Brandon. Good morning, everyone. [Foreign Language] To ensure that the meeting proceeds in an orderly fashion, we wanted to communicate with you some information regarding the conduct of the meeting. First, today's meeting will be conducted in English, and the management presentation at the end of the meeting will also be given in English as our shareholder base is diverse and shareholders and proxy holders who are attending the meeting from all around the world. As you can see for convenience, a live French translation is being provided. Copies of all the documents related to today's meeting in both English and French are available on SEDAR+ under Coveo's profile at www.sedarplus.ca and on our Investor Relations website. Questions may be asked in English or French throughout the meeting. Second, as this meeting is being held online, here are a few rules governing the meeting. All registered shareholders and duly appointed proxy holders that have completed all prerequisite steps to enter this meeting as such will be able to ask questions and communicate with each other during the meeting via the chat function of the meeting platform. Questions submitted during the formal portion of the meeting may be addressed by the appropriate person during the relevant order of the business or more appropriate at the formal Q&A session of the meeting, which will occur after the management presentation. Following adjournment of the formal business of the meeting, management will give a presentation about the company's business and activities. At the conclusion of the presentation, the company will hold a live Q&A session to address general questions submitted during the meeting. We have allocated a certain amount of time for today's AGM as a whole, and we'll answer as many questions as we can in that period of time. In order to allow the company to answer as many questions as possible from shareholders, please ensure your questions are succinct and cover only one topic per question. Questions from multiple shareholders on the same topic or that are otherwise related may be grouped, summarized or answered together for efficiency. Follow-up questions will only be addressed via e-mail to [email protected]. The Chair of the meeting, Brandon Nussey, reserves the right to edit or reject questions he deems inappropriate or to limit the number of questions per shareholder or duly appointed proxy holder in order to ensure that as many persons as possible have the opportunity to ask questions. The Chair of the meeting, Mr. Nussey has brought authority to conduct the meeting in an orderly manner. To ensure the meeting is conducted in a manner that is fair to all shareholders, the Chair may exercise broad discretion in the order in which questions are asked and the amount of time devoted to any one question. The company does not intend to address during this meeting questions that are either irrelevant to the business of the company or the business of the meeting related to material nonpublic information of Coveo of a personal nature, including any question related to personal grievances, derogatory references to individuals that are otherwise in bad taste, hostile or otherwise disruptive to the orderly conduct of the meeting out of order or not otherwise suitable for the conduct of the meeting, the whole as determined by the Chair and its reasonable judgment. Coveo rep will contact you after the meeting if your question is of a personal nature and best addressed privately. Today's vote on the items of business will be conducted via electronic ballots, and you will be required to vote on each item of business in real time. Voting will open upon commencement of the formal portion of the meeting and remain open for your vote at any time until the poll is closed. You may choose to vote on each resolution immediately or wait until the conclusion of discussion on all resolutions prior to casting your vote. When you are asked to vote, you will receive a message within the online interface requiring you to register your votes. If you've already submitted your voting instructions or have already voted prior to today's meeting, not required to vote again today. If you decide to do so, you will be revoking your previous voting instructions. Finally, we want to remind shareholders and duly appointed proxy holders that in the event of a technical malfunction or other significant problem that disrupts the orderly conduct of the meeting, the Chair may adjourn the meeting, recess the meeting or expedite the meeting and/or take such other action as he determines appropriate considering the circumstances. Okay. Thank you all for listening to these rules. With that, let's call the meeting to order. Brandon, over to you.

Thank you very much, Jeremie. The meeting will now come to order and per the powers vested in me by our bylaws, I appoint Francine Beauséjour and [ Jenny Koncam ] of TSX Trust Company here with us today in listen-in mode to act as scrutineers for the meeting. I wish to note that in addition to folks at TSX Trust Company, we have a few other people here with us in listen-in-only mode today, including certain executives of the company, our director nominees and our external auditors, PricewaterhouseCoopers. The Secretary has confirmed that the meeting notice, the notice of availability of materials, our management proxy circular, our annual report, including our annual financial statements and the corresponding MD&A and all other required meeting materials were made available to all shareholders. All such materials can be found under the company's profile on SEDAR+ at www.sedarplus.ca and on our Investor Relations website. The Secretary has further confirmed that the notice of meeting, the notice of availability of materials in a form of proxy and/or of VIF as applicable were mailed on August 11, 2025 to all shareholders of record as of July 28, 2025, as evidenced by an affidavit of mailing provided to us by the company's transfer agent, TSX Trust Company. The affidavit of mailing is available for inspection by any shareholder. I ask that the Secretary of the meeting file a copy of such affidavit with the minutes of today's meeting. We've also been advised by the transfer agent and the meeting scrutineers that the holders of at least 25% of the aggregate number of votes attached to all of the company's shares entitled to vote at this meeting are virtually present or represented by proxy, and at least two persons entitled to vote at this meeting are virtually present or represented by proxy, such that we now have quorum for the meeting per the company's bylaws. I ask the Secretary of this meeting to file a copy of the scrutineer's report with the minutes of today's meeting. Therefore, I declare this Annual General Meeting to be regularly called and properly constituted for the transaction of business. The voting polls will now be opened for all resolutions. They will close approximately 1 minute after the last item of business. Each item of business to be considered today requires that a majority of the votes cast be voted in favor of the item of business in order for the corresponding resolution to be passed. I wish to inform each and every one of you that we have been informed by the transfer agent and scrutineers that given the number of votes received prior to the proxy cutoff, each motion presented before you today is currently expected to be carried. Finally, I note that today's meeting format -- I note that given today's meeting format, our Chief Operating Officer, John Grosshans; and our Chief Technology Officer, Marc Sanfaçon, both of whom are shareholders of the company, have agreed as shareholders and in advance of the meeting to move and second all motions presented to you today in an effort to be as efficient as possible and to allow as much time as possible for questions at the end of the meeting. As such, all motions presented before you today are considered and deemed to have been moved and seconded. If you have any questions on motions presented before you today, please let us know by writing in the chat function of the meeting platform, and we will address such questions at the appropriate time. Today's first order of business is to receive the company's consolidated financial statements for the fiscal year ended March 31, 2025, and the auditor's report thereon. First, I submit the company's consolidated financial statements for the fiscal year ended March 31, 2025, and the auditor's report thereon to this meeting. These statements have been reviewed and approved by the company's Audit Committee and Board of Directors. The company's annual report comprising the company's financial statements for the fiscal year 2025, the applicable laws and exemptions therefrom. Having considered the length of time needed to read all pages of our financial statements, I have moved that the requirement to present and read the financial statements for the fiscal year ended March 31, 2025, and the auditor's report thereon be waived. And I now place the company's consolidated financial statements for fiscal '25 and the auditor's report thereon before shareholders. Are there any questions? As there are no relevant questions on this item of business, I declare that the company's financial statements for fiscal 2025 and the auditor's report thereon have been duly presented and received. The next item of business is the election of the directors of Coveo for the ensuing year or until their successors are duly elected or appointed as applicable. As required by applicable securities laws, we will be nominating and approving directors individually and not by slate. The number of directors to be elected at today's meeting has been fixed by the Board of Directors at seven. All directors currently sitting on the Board of Directors of the company are standing for reelection at the meeting except for Shanti Ariker and Isaac Kim. I would like to thank Ms. Ariker and Mr. Kim personally and on behalf of Coveo for their work on the Board over the past few years. Further information on the seven directors standing for election today is set forth in the company's management proxy circular, a copy of which is available on our IR website and on our SEDAR+ profile. I confirm that all nominees are eligible for election and have accepted to serve as directors of the company, should they be elected. As previously mentioned, all motions have been pre-moved and pre-seconded. So I hereby confirm that each of the seven persons nominated to be elected as directors as set forth in our management proxy circular are up for election to hold office until the next Annual Meeting of Shareholders or until a successor is duly elected or appointed as applicable. Are there any questions? As there are no relevant questions on this item of business, I now call for a vote on the election of each individual standing for election on Coveo's Board of Directors. Would all shareholders and duly appointed proxy holders please enter their votes? We will give you 1 minute to do so and then continue to the next item of business. The carrying of all motions presented before you today will be formally confirmed at the end of the formal portion of the meeting. [Voting]

Thank you all for your votes. The last item of business today is the appointment of our current auditors, PricewaterhouseCoopers LLP, chartered professional accountants as auditors of the company for the ensuing year and authorizing the Board of Directors to fix their remuneration. PwC have been auditors of the company since its incorporation in 2004. As previously mentioned, all motions have been pre-moved and pre-seconded. So I hereby confirm that a vote can be taken on the appointment of our current auditors, PricewaterhouseCoopers LLP as auditors of the company for the ensuing year and the authorization of the Board of Directors to fix the remuneration. Are there any questions? As there are no relevant questions on this item of business, I now call for a vote as regards the appointment of our auditors and the authorization of the Board of Directors to fix the remuneration. Would all shareholders and duly appointed proxy holders please enter their votes? We will give you 60 seconds to do so and to complete any other missing votes and then officially close the votes for this year's meeting. The carrying of all motions presented before you today will be subsequently formally confirmed. [Voting]

Thank you all for your votes. The polls are now closed. We will now take a brief recess for our scrutineers to compile the votes, and we will be back with the preliminary results and announcements regarding the carrying of the motions presented before you today. Thank you all for your patience. It's my pleasure to confirm that all resolutions presented before you today have been formally carried and adopted with a substantial majority of the votes cast in favor of each resolution. As such, the Secretary and I confirm that the seven directors standing for election as set forth in our management proxy circular have been duly elected, and that PricewaterhouseCoopers have been appointed as auditors of the company and the Board is authorized to fix their remuneration. Final voting results will be published today in a press release and a report of voting results, which will both be filed under our SEDAR+ profile. As there is no further business to be brought before this meeting, I hereby declare the formal portion of this meeting to be concluded. Now that the formal portion of the meeting is over, I will present on the business and activities of the company and talk about the year ahead. I wish to remind shareholders that questions submitted during the meeting that did not specifically pertain to an item of business will be addressed at the end of the presentation. First of all, we, of course, want to thank all of our customers, our employees, our investors, all for your continued support in Coveo. It's interesting times for the business, of course, with lots going on in our market and lots going on with the company. As Laurent introduced, at Coveo here, we help our customers leverage the benefits of AI search and generative experiences to deliver on key business challenges around two primary areas: how do they access their enterprise knowledge to drive better business outcomes around things like customer service, how your website performs, how your employees access knowledge and how your commerce site performs, how your customers find products, get recommendations and better convert commerce site. We do this for some of the world's biggest companies across several verticals, customers like you see on this slide here. That's where we're focused, and that's where our value prop really shines. These customers have millions of end customers, lots of complexity in their business and are eager to see the benefits of AI to transform some of their own business outcomes. We work with customers like SAP. SAP Concur was an early adopter of our Generative Answering product and saw significant results from it, 31% reduction in support case volumes, leveraging Coveo's Generative Answering for their customer service portal, resulting in EUR 8 million -- over EUR 8 million in savings to the business. We're now extending that relationship into SAP's global customer portal, SAP for Me, and SAP continues to be a wonderful customer and partner of the business. Companies like LCBO, we power the commerce site behind it. And we've been able to significantly improve conversion of that site, working with LCBO, greatly improving conversion rates and helping the performance of the site overall from a commerce standpoint. Companies like Zoom leverage our generative answering for their own customer support portal, and companies like Zoom have seen 20% case deflection by turning on this functionality, resulting in significant benefits to them. And of course, Xero, one of our first adopters of generative answering solution leverages Coveo, has seen 21% case deflection and is a huge customer advocate for Coveo. So these are some of the companies we work with in terms of customers. We also are recognized as a leader by all the leading industry analysts. And we work with some of the biggest platforms on the planet, helping them with their most complex customer use cases as well. SAP is a wonderful partner who help us bring the benefits of AI search and recommendations as an endorsed partner to their customer base. We're an early partner of Shopify as they go into the enterprise space and commerce. We are an AWS partner, increasingly leveraging Bedrock in our own solutions. And of course, Salesforce is a long-standing partner of the business, primarily around the customer service use case for us. Our platform is valued by our customers because at the end of the day, these large enterprises are all trying to achieve similar things. They've got millions of customers that they want to drive personalized outcomes for, whether that's customers who come to the commerce site, their basic website. There's customer service portals or their internal workplace employees as well. The challenge, of course, is their data is everywhere. And they have structured and unstructured data that might be most responsive to those queries and those customer experiences. And they're trying to leverage the power of AI to bridge the gap, and that's where Coveo comes in. We've got proprietary purpose-built connectors to all the major source systems inside a large enterprise. We bring that together. We protect the security and permissioning inherent in those source systems. We do things like semantic and vectorization of that data. We then run it through our own purpose-built AI models to power the end use cases that our customers are after. We, of course, also leverage the benefit of LLMs to power things like generative answering to allow that to be more conversational in nature and increasingly now are active in the agentic space as companies look to leverage the benefit of virtual agents, Coveo underpins a lot of potential use cases there. What companies are recognizing is that solutions like what Coveo offers around RAG, retrieval augmented generation, in our case, relevance augmented generation are critical to how they power generative and agentic AI use cases. Because data is everywhere and because various data sources can be responsive to a given customer query, our ability to bring that together is valued tremendously by our customers. And that allows us also because we're good at relevance and retrieval to improve accuracy and precision and reduce hallucinations for our customers. Of course, our customers greatly value our agnosticity in this market. We're agnostic to content source. We're agnostic to end experience, and we're agnostic to the LLM you choose to use. And that agnosticity goes a long way in this market here today. We're able to do this with speed, high security and in a cost-effective manner as well, of course, all very relevant to large enterprises. The agentic space is currently very -- it's a key trend happening in our market right now. And we see the demand for Coveo to underpin some of these agentic experiences continuing to be strong. We think the same approach that we brought to generative AI will be relevant in the agentic experiences, and we're working with some of the largest agentic players in the space right now to help their customers leverage the benefit. That's showing up in momentum. This is a subset of customers who have undergone a selection process, who have generative AI plans, who have selected Coveo as part of the technology stack to pull those off. What you'll recognize here is these are some of the biggest companies in the world. These are brand name companies who have every vendor in the planet calling on them to help them with AI needs, and they've all selected Coveo to help drive a portion of their generative AI projects. Not only have they selected us, they're going live, full global production rollouts, and standing up and talking about the benefits they're achieving. And in a world that's filled with hype right now around AI, where you'll read published studies recently from likes of MIT saying that 95% of enterprise generative AI projects have failed, our customers are seeing great success leveraging Coveo for their specific needs. We're proud of the results we're achieving here, we're proud of the customers that we have, and proud to see some of the use cases and proof points we have here today. But much more to do. As we transition into the financial aspects of the business, just a quick refresher on our business model. We are a subscription-based business. We are not consumption-based. We do not have variable revenue streams. Our customers sign up to typically multiyear agreements with fixed subscriptions, which gives us a lot of forward visibility into our revenue. As I mentioned, we do serve the enterprise segment. On average, we get about $200,000 in average ARR per customer, and that has been growing nicely over the past couple of years. We have a land-and-expand model where we try to land a customer with a specific use case and see great opportunity to expand that over time. Our net expansion rate was 107% for our most recent fiscal year. It was 108% in our most recent fiscal quarter, Q1 of fiscal '26. And we see a lot of opportunity to see that continue to grow. Fiscal '25 was an important year for the business. We saw, after a period of disruption, momentum return into the business as customers moved from experiments and pilots into full production rollouts, some -- a little like what I showed you on a couple of slides ago. We saw our bookings momentum return in the back half of the year as we forecasted it might. And that has led to reaccelerating revenue growth rates and improved net expansion rate. And importantly, we're now a profitable business. We generated $1 million of adjusted EBITDA last year and over $11 million of free cash flow or of operating cash flow for the period. We've been driving a very efficient model over the past 4 years. You can see in the top chart. We've basically been operating with the same expense envelope for the past 4 years, making difficult trade-off choices within, making different prioritization decisions within, but really showing the leverage of the business model. We went from 4 years ago, losing more than $30 million in cash to generating over $11 million in our most recent year. That puts us in a great position today. We're seeing momentum return. We've had a number of consecutive quarters of bookings momentum. That's leading to reaccelerating revenue growth rates. And our profitability position here has now afforded us the ability to reinvest into the business for further future growth. We've been making select investments as we enter our fiscal '26 around expanding go-to-market, doubling down on some innovation projects and really looking to capitalize on some of the recent momentum we've been seeing in our pipeline with our customer base and are optimistic about our ability to see our revenue continue to reaccelerate. So with that, that will formally conclude the management presentation. And we will now open the session up for questions -- sorry, I will now turn it back to Jeremie Ste-Marie for next steps for the meeting.

All right, folks. This is Jeremie, VP of Legal and Secretary of this meeting. Before we conclude this meeting, we would be pleased to answer questions received from shareholders during the meeting and the presentations that were not yet addressed. For each question we answer, I will read out the question as well as the name of the person who asked the question, and one of the people here with us today will answer it. We will now give shareholders an additional 30 seconds to ask questions through the chat function of this meeting. Thank you all. It seems like there are no questions at this time. As such, this concludes this year's annual meeting, and I am hereby formally declaring the meeting closed. Thank you all very much for joining us today. We are looking forward to seeing you next year.