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

Thank you.

Good afternoon ladies and gentlemen and welcome to the Coveo First Quarter Fiscal 2027 Financial Results Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, July 30, 2026. I would like to turn the conference over to Adia Cadve. Please go ahead.

Good afternoon, everyone, and thank you for joining us. With me to discuss Coveo's first quarter fiscal 2027 results are Laurent Simonot, Coveo's co-founder and chief executive officer, Louis Taitou, Coveo's executive chairman, and Kevin Amell, Coveo's chief financial advisor. A reminder that some remarks made today will be forward-looking statements within the meaning of applicable securities laws, including those regarding our planned objectives, expected performance, and our outlook for the second fiscal quarter and full year fiscal 2027. These are forward-looking statements given as of July 30th, 2026, and while we believe any statements we make are reasonable, they are based on current expectations and assumptions which are subject to risks and uncertainties. Actual results could differ materially from those expressed or implied. 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 company's financial results is included in the filings we make with Canadian Securities Regulators, including the Risk Factors section of the company's most recently filed Annual Information Form. as key factors affecting our performance section of the company's most recently filed MD&A, both of which are available on our CDARplus profile at cdarplus.ca or on ir.coveo.com. Additionally, some financial measures and ratios discussed on this call are either non-IFRS measures, ratios, or operating metrics used in our industry. a discussion on why we use these metrics, and where applicable, a reconciliation schedule showing IFRS versus non-IFRS results are available in our press release and our MD&A issue today. Finally, please note that unless otherwise stated, all references and financial figures made today are in U.S. dollars. Our presentation slides accompanying this conference call can be accessed on our IR website under the Financial Information section. I will now turn the call over to Louis to review our platform and strategy, followed by Laurent taking us through our operational and strategic highlights of our first quarter, and we will end off with Karim taking you through the financial details and provide our outlook for the second quarter and full year fiscal 2027. We will then open the line to your questions. With that, over to you, Louis.

Good afternoon everyone and thank you for joining us. We're pleased to report another successful quarter as we begin fiscal 27. Revenue came in within our guidance, adjusted EBITDA slightly above our expectations, and once again we generated strong positive cash flow. Those are encouraged encouraging results and they reflect the discipline with which our team continues to execute. Since quarter end, we've reached another important milestone for Coveo. For the first time, we now have a customer generating more than $10 million in annual subscription revenue. We've spoken before about our strategy of building larger, more strategic customer relationships as the value and importance of our technology continues to increase. This milestone is a meaningful validation of that strategy. It reflects not only the value customers place in our unique technology, but also their trust in Coveo as a long-term partner. So, this quarter says something even more important. It tells us that the enterprise AI market is maturing and that the characteristics that have always differentiated Coveo are becoming increasingly essential. Over the past three years, we've seen the AI market move through several phases. First came extraordinary advances in foundation models. Then came an intense period of experimentation as enterprises explored what generative AI could do for their businesses. Today, I believe we're entering a new phase. The conversation has shifted from possibility to deployment, from experimentation to production, to measurable business value. And perhaps most importantly, buyers have become much more educated and sophisticated. Our conversations with CIOs, digital leaders, and business executives are very different from those of 18 months ago. Enterprise leaders now understand what it takes to deliver AIO. at scale and that using an AI or large language model is only one piece of the puzzle. They understand the importance of trusted enterprise context, security, governance, relevance, orchestration, and continuous optimization. They also understand that AI must work in the real enterprise, not in a demonstration, but across thousands of employees, millions of customers, many systems, and enormous volumes of information and interactions. That growing enterprise AI literacy plays directly to Coveo's strength. We're also seeing a healthy impatience around return on investment. Organizations are no longer satisfied with demonstrations or isolated pilots. They want measurable improvements in customer experience, employee productivity, digital commerce, and operational efficiency, with the P&L and balance sheet keeping the score. They want AI that delivers business outcomes, and that is exactly where Coveo has always focused. At the same time, another important evolution is underway. Over the past two years, much of the market's attention has understandably focused on AI infrastructure, chips, cloud, and foundation models. Those technologies are incredibly important, but attention is increasingly shifting towards applied AI, the software that actually puts AI to work inside the enterprise. That's exactly where Kaleo belongs. Our vision is to lead the experience AI market. Our technology helps enterprises compete in the experience AI economy. Because if you think about how most people experience artificial intelligence today, the most pervasive of AI for all of us is through digital interactions. We're online to learn something, to buy something, to solve a problem, to find answers, to fix something, to discover new products and solutions, to move from intention to outcome quickly and effortlessly. Every one of those moments is an AI opportunity, and every experience needs to be trusted, contextual, personalized, prescriptive, conversational, and precise. Qualities that are not humanly possible at scale without AI. Those same expectations now exist inside every one of us. every enterprise. Businesses deliver millions of digital interactions every day to customers, partners, suppliers, and employees. Those interactions increasingly determine customer loyalty, employee productivity, revenue growth, and competitive advantage. That's the large and consequential market we're building for. Covail provides the intelligence layer that connects intricate enterprise context and data with AI models to control and optimize those experiences. Our confidence is growing because enterprises have learned important lessons over the past couple of years. They've learned that AI models do not intrinsically understand your business context. Context is distributed across the organization in many systems and sources of data. They've learned that moving everything into one system to capture context is neither practical nor economical. They've learned that AI models are also evolving quickly, becoming more specialized and increasing commoditized. With hundreds of models now available, including the rise of open source and sovereign AI, locking into a single model is not a sustainable strategy and the cost of tokens is now a key consideration. And now they're learning that AI agents are proliferating and also emerging as a major interface for enterprise software. Our platform was designed exactly for this environment. We're independent of content and data repositories. We're independent of AI models, which we A-B test. We deliver intelligence wherever the experience happens, on a website, in a commerce application, an employee workspace, a service experience, or increasingly through an AI agent also grounded in Coveo as the unified data and context pane. We ground those experiences in trusted, permission-aware enterprise context, continuously optimize relevance, and deliver precision at enterprise scale. So as organizations better understand the architecture required to operationalize AI, they increasingly recognize Coveo's critical role. We see that recognition translate directly into our business, customer service, Customer relationships are growing broader and more strategic. Customers continue to expand their investments with us. Seven-figure subscriptions continue to grow. And today, we are proud to have reached our first eight-figure annual subscription customer. Those are not simply larger contracts. They're evidence that customers increasingly see Coveo as foundational to their long-term AI strategy and to the experiences they deliver across their businesses. Our partner ecosystem is also encouraging. System integrators and technology partners are investing more in Coveo enablement and bringing us into larger enterprise transformation initiatives. As enterprise AI becomes mainstream, we believe those partnerships will become an increasingly important growth engine. So, our confidence in this growth opportunity shapes how we invest. Since becoming a public company, Coveo has roughly doubled in size while building a business with strong recurring revenue, with subscriptions representing 96% of total revenue, healthy product gross margins of more than 80% and disciplined financial management. We believe that's an important economic combination. As the applied AI market matures, we believe shareholders are best served by continued, thoughtful investment in innovation and in expanding our go-to-market capabilities each time we increase the value we create for customers, we create opportunities for larger, longer, and more strategic relationships, and strengthen our trusted brand. That's exactly the pattern we're seeing today. So looking ahead, we remain very optimistic. We believe experience AI will become one of the most important applications of artificial intelligence for enterprise competitiveness. Organizations will increasingly differentiate themselves through the performance of the digital experiences they deliver. And we believe Coveo is uniquely positioned to make those experiences trusted, intelligent, and economically measurable. Before I turn the call over to Laurent, I want to thank our employees for their commitment and execution, our customers for their trust, our partners for extending our reach, and our shareholders for their continued confidence as we built this business for the long term. With that, I'll hand things over to Laurent.

Thank you, Louis, and thank you everyone for joining us. We entered fiscal 2027 with three clear priorities. deepen our relationships with the world's largest enterprises, continue leading through innovation as enterprise rapidly evolves, and grow our business efficiently while investing for the long term. I am pleased to say we made meaningful progress against each of those priorities during the quarter. Let me start with our first priority, deepening strategic customers' relationships. Our customer momentum continues to validate both our strategy and the high-performance high economic value and uniqueness of our platform. We see this as a key to increase sales, deal size, and the strategic value of Coveo to our customers. During the quarter, we expanded relationships with customers including Nespresso, ADI Global, Enbridge, Linda Agee, and others, while also signing another seven-figure subscription with a Fortune 500 leader in healthcare distribution. These wins reinforce that as enterprises move from the experienced AI era, competitive advantage increasingly comes from the quality of the digital experiences they deliver. Our customers are no longer buying isolated AI capabilities. They are standardizing on our platform across their digital experiences. experiences capabilities. We enabled them to compete in the experience AI economy by securely connecting enterprise knowledge and product catalogs, grounding AI in trusted context, and continuously optimizing customer and employee experiences at scale. That is exactly where Coveo was differentiated. Turning now to our second priority, continuing to lead through innovation. Innovation continues to be one of our strongest competitive advantages, and a market adoption we're seeing across our newest AI capabilities reinforces our conviction that we're investing in the right areas, what our customers care about. Our conversational search solution is now live in production with customers while several dozen additional organizations are actively evaluating it. We're also seeing stronger early demand for conversational product discovery with customers onboarding and many others progressing through evaluations. During the quarter, we introduced merchandising co-pilot, and we're seeing strong early adoption. The majority of merchandisers using the product engage with it at least once each week, demonstrating that it is becoming a regular part of their merchandising workflow. Even more importantly, a growing number of merchandisers are leveraging our AI recommended actions to automate storefront optimizations. In some customer environments, AI-driven actions have now surpassed manual merchandising actions, offering an early glimpse of how AI can evolve from assisting teams to actively operating parts of the business. A broader product strategy remains centered on customer choice and interoperability. Rather than locking organizations into a single model or AI ecosystem, Covil provides the trusted intelligence layer that enables customers to adopt the AI technology of their choice, while ensuring those systems are grounded and secure, governed, and highly relevant enterprise knowledge. Let me bring that strategy to life with two customer examples. Netcash is one of Australia's leading distribution business across food, liquor and hardware, generating nearly $15 billion in annual revenue and facilitating more than $4 billion in B2B e-commerce sales. By bringing together information from Adobe Magento, SAP, and Salesforce, Clio created an intelligent experience that understands bulk products and customer context across the buying journey. The results at Medcash have been exceptional. Revenue per visit increased by more than 25%. Conversion improved by more than 30%. An average order value increased by more than 10%. Just as importantly, shortly after going live, Netcash expanded its relationship with Avail beyond commerce into supplier-facing workflows, extending both our AI search and our generative AI capabilities. That is exactly the expansion motion we strive to create. We deliver measurable business outcomes, and this leads to broader strategic adoption across the enterprise. Lynda is another excellent example. As one of the world's largest industrial companies operating across more than 80 countries with highly technical products and complex global operations, Lynda requires AI that performs reliably at enterprise scale. We initially selected Coveo to power their B2B commerce search experience in a single market. Since then, they have expanded our platform across additional markets and languages while partnering with us across a broader vision of unified, intent-driven experiences that seamlessly connect product technical guidance, and post-purchase support. We believe that vision represents the future of enterprise commerce, and Lynda is helping shape that future alongside us. Finally, I'd like to touch on the largest transaction in Coveo's history. As we mentioned earlier, shortly after quarter end, we closed the largest transaction in Coveo's history, expanding our relationship with a Fortune Global 500 technology leader to more than $10 million in annual subscription revenue. I could not be more excited about this and what this means. This customer now relies on Coveo across multiple strategic AI experiences spanning both customer facing and internal applications. Our platform also serves as the grounding and intelligence layer behind their authentic AI initiatives. What makes it truly meaningful is what it says about the market. This is one of the world's most sophisticated technology companies. They understand AI deeply, work directly with frontier model providers, and possess world-class engineering talent. yet they chose Coveo as the strategic platform for enterprise AI. Let me close with one broader observation. When I step back and look across these customer examples, I believe they all reinforce the same conclusion. These organizations have the technical capability to build many things themselves and the authority to engage any technology vendor relationship. Building enterprise AI at high scale and precision that consistently delivers measurable business outcomes requires much more than integrating a large language model. It requires trusted enterprise context, secure and permission aware retrieval, governance, continuous relevance optimization, interoperability across rapidly evolving AI ecosystem, and the ability to deliver those capabilities consistently at enterprise scale. Those capabilities are not commodities. They represent years of investment at Coveo, deep domain expertise, and proven execution working with hundreds of the world's largest brands. That's why sophisticated organizations continue to choose us. As enterprise AI moves from experimentation to production and real results, our customers increasingly question their ability to build these capabilities themselves. We give it to them out of the box, flexible, precise, secure, and cost-effective, and we keep them in tune with future AI innovation. The customer momentum we're seeing gives us real confidence that our strategy is aligned with where the market is heading, that our timing is right, and that we're a market taker. We solve some of the most important challenges in enterprise experience AI today, and that we're well positioned for the opportunities ahead. As a result, our third priority is growing our business efficiently. Everything I've discussed today reflects a deliberate strategy, invest behind innovation that creates measurable customer value, expand those relationships over time, and do so with discipline. We do this through a repeatable go-to-market motions and high value industries that generate viable economics. As you'll hear from Kerien, that approach continues to translate into healthy financial performance, strong cash generation, and disciplined investment as we execute against the significant opportunity ahead. With that, I'll turn it over to Karine to review our financial results.

Thank you, Laurent. Q1 reflected the themes and dynamics we outlined during the fourth quarter results. Q1 bookings were driven by our key growth drivers of commerce, including B2B, GenAI solutions, and multi-use case customers. We also closed another seven-figure transaction during the quarter, this time with an existing customer, reinforcing our ability to grow larger, more strategic customer relationships over time. Looking at profitability, we remain disciplined in our spend, allocating capital to the highest and most efficient areas. This resulted in a slight beat on our adjusted EBITDA guidance, and we generated strong cash flow from operations. Let me begin with a brief summary of our first quarter results. With the full deprecation of the legacy Qubit platform, all SAS subscription revenue came from the CoveoCore platform, which saw an increase of 13% compared to the prior period. Including QBITS, just subscription revenue was $37.4 million, an increase of 9% compared to the prior period. Total revenue was $38.5 million, an increase of 8%. of gross margin was 81% and gross margin was 78% comparable to the prior period. Adjusted EBITDA was 0.1 million compared to negative 1.9 million in the prior period. Cash flow from operating activities was $9.2 million and consistent with our seasonal trends aided by positive working capital fluctuations. Cash and cash equivalents were 107.1 billion as of June 30, 2026, and we remain debt-free. NER platform, which excludes the impact of Qubit, was 102%. Including Qubit, NER was 99%. Subsequent to quarter end, we renewed our NCIB, giving us optionality to repurchase approximately 5.1 million shares over a 12-month period. And finally, as you've heard from Louis and Laurent, in the first few weeks of July, we closed the largest transaction in the company's history, bringing the total annualized SaaS subscription of this customer to eight digits, an important milestone for us. Looking beyond the financial results, let me spend a few minutes on key booking trends we saw during the quarter. In Q1, we secured another seven figure transaction with an existing customer, a Fortune 500 leader in healthcare distribution. After successfully deploying Coveo to enhance its contact center and self-service experiences, the customer selected us to power its B2B commerce experience as well. This is exactly the type of expansion we aimed to drive, growing across additional use cases within our core ICP of large complex enterprises. The relationship with this customer began with a low six figure subscription and has now grown to more than 1 million in annual recurring revenue, illustrating both both the breadth of our platform and the strength of our land and expand model. Generative AI continues to be a meaningful driver of our bookings this quarter, representing approximately 30% of total bookings in Q1. More importantly, we're seeing a clear shift in customers' buying behavior. As organizations move beyond AI experimentation towards production deployment, they are increasingly designing AI into their digital experiences from the outset. Our generative AI capabilities are increasingly at the center of initial customers' conversations. As I noted last quarter, this creates a compelling land and expand motion, enabling us to establish strategic relationships earlier and expand adoption across the enterprise over time. On the innovation front, as Laurent discussed, we're encouraged by the early adoption of agentic AI capabilities, including search agents, conversational product discovery, and merchandising co-pilot. From a financial perspective, these innovations create new ways for customers to engage with the Coveo platform, expanding the number of use cases and user interactions we support. As a reminder, our customers subscribe to the Coveo platform by committing to a defined level of annual platform consumption which provides us with a predictable base of recurring revenue. As customers adopt additional use cases and platform engagement growth, consumption can exceed committed level, creating opportunities for incremental revenue over time. We believe our continued pace of innovation supports customer expansion and increased platform consumption over time. Moving now on to customer expansion and retention. Our reported net expansion rate, excluding legacy Qubit customers, was 102%, and 99% including legacy Qubit customers. As we've discussed previously, we continue to view this metric in the context of the broader evolution of our customer base. Our strategy cohorts, including customer using B2B and B2C commerce solutions, customers with multiple use cases and those adopting our GenAI solutions continue to expand at a higher rate than our reported NERs, while legacy cohorts continue to wait on the consolidated metric. Again, shortly after border ends, we closed the largest extension in our history. While the timing of large expansions can create quarter-to-quarter variability in our NER, we believe this transaction reinforces the strength of our expansion motion and our ability to grow alongside our customer over time. Turning to guidance, our outlook remains aligned with the plan we outlined at the beginning of the year. We continue to see ongoing customer adoption, expansion across our strategic customer base, and an active pipeline of strategic opportunities. At the same time, as we've noted previously, the precise timing of large transactions remains difficult to forecast. As a result, we are reaffirming our full-year fiscal 2027 guidance, which we believe appropriately reflects both the underlying fundamentals of the business and the normal timing variances. associated with large and complex opportunities. As such, we expect Q2 self-subscription revenue to be between $38.5 and $39 million, representing approximately 10% to 12% growth on the CoveoCorp platform. due to total revenue to be between 39.7 and 40.2 million. For the full year, we expect SaaS subscription revenue to be between $154 and $158 million, representing approximately 10 to 13% growth for the CorreoCore platform. And we expect total revenue to come in between $160 and $164 million. On profitability, we remain focused on making the investment that we believe will drive medium to long-term growth. At the same time, we continue to allocate capital with a disciplined focus on the highest return opportunities and operating efficiency. As such, we expect Q2 adjusted EBITDA to be between 0.5 and 1.5 million. For the fiscal year, we expect adjusted EBITDA between two and seven million. And finally, we expect to generate operating cash flows of more than 10 million for the full fiscal year. Note that we will have some quarter variability here due to timing of working capital. In summary, the underlying trends in our business remain healthy. We're seeing continued demand for large enterprises, customer expansion, and early adoption of our AI innovation. Her strategy remains unchanged, and this gives us conviction in the long-term opportunity ahead. With that, Operator, please open the line for questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you have question, please press the star followed by the number 1 on your touchtone phone and you will hear a prompt that your hand has been raised. If you wish to decline from the polling process, please press the star followed by the number two. moment for your first question. And your first question comes from the line of Athanasios Mouskopoulos of BMO Capital Markets. Please go ahead.

Hi, good afternoon. Maybe just starting off with the eight-figure customer, can you provide some color in terms of what drove that? upsell. So was that a function of the customer adding a use case? Was it just adding regions or product lines or.

you know, their increased usage of the platform? What was the catalyst there? Python, it's slow here. So, So it was an existing customer that where with Coveo created a lot of value over the past 18 months and Coveo became an integral part of their AI infrastructure strategy. So they expanded in both new use cases, more experiences, And more consumptions, more languages, for instance. So it's all of the above, Donis.

David Chambers- Good to hear. And you recently appointed a new head of sales. its early days, but just any initial thoughts in terms of, you know, changes or tweaks to the go-to-market strategy, or is it more just about maintaining the strategy but improving execution?.

Yes, absolutely. And Thanos, as you know, we're investing in both our new and existing customer motion. We continue to strengthen our leadership bench. Last quarter, we announced the arrival of our new CSO that is focused on new customer motion. So it's been... It's been arrived in 30 something days ago. So far, so good with progress, but the general picture here is we're strengthening our bench. We're investing in this team that is greatly positioned to go after the opportunities in front of us.

Okay. And just on that note, I guess the problem question is, you alluded to how the conversations are becoming more strategic. larger in nature. And so as you think about the motion needed there, Is there some upskilling of the Salesforce required? Do you have the right team in place for that? How has that changed your thinking in terms of as you execute on those larger deal sizes?.

Yes, Thanos, Louis, I'll answer the first part of that question. We're seeing a meaningful difference, as in the prepared remarks, in terms of the strategic nature scope, value of the conversations with the customers who, as we said, realize the importance of the Coveo infrastructure to essentially make AI work in a trusted way. That leads to some pretty interesting... dynamics in terms of how we deploy our sales motion. In particular, Laurent commented last quarter and this quarter on the forward deployment engineering function, which is essentially designed to help customers understand the art of the possible, discover value, opportunities, and essentially, in our case, we have a very agile model to prototype abilities within a matter of days and weeks you know which leads to in Increasing account executives and we have account managers for the install base, complemented with the technical and business expertise, as well as the financial analysis and ROI analysis and et cetera. So it's continuously evolving and we're Perfecting that model and, you know, as we nail the model, we certainly are ready to invest and scale it.

If I may, just as a compliment, basically what we're seeing is the more we're doing up front to reduce the risk and eliminate the risk and the crystallized value up front, of course, we increase the probability of a larger deal and faster. We adjust with the timelines of customers. and prospects, but we see great value in investing in front with those motions of FDEs and the business value experts.

Alright, thanks for the call. I'll pass the line. And your next question comes from the line of . Please go ahead.

Good afternoon, guys. My first question, I wanted to touch on net new deals. Can you speak a little bit about how average deal sizes here have been trending and and um and what's been changing and how net new customers are procuring your your offering and just wondering if there's you know there's more um assessment pre-sales activity that you're seeing? Is there multiple use cases out of the gate now and our partners being more involved? I'm just curious kind of what's changed in the overall end-to-end sales process,.

in the past year. Thank you, Sutan, for your question. I would say that we didn't see a major shift into what we had seen and we've talked about and what you've heard from us in the last couple of quarters. Our unit economics are trending in a better direction. We're happy with the opportunities and the logo we're engaging with. Over time, yes, we're seeing the average deal-by-value growing. So I would say that this quarter aligns with what we've seen in the last couple of quarters. Okay, great.

know shifting the lens to your existing customer base and more specifically the legacy cohort what's the strategy in navigating that base you know it feels like it's more of a it's more a question of when not if GenAI becomes a more important strategy for this cohort. guys um you know positioning for that opportunity and and what's the strategy there.

Yes, hi, Cévennes, Louis. Maybe I'll start by saying that what we call the sort of legacy cohort is, again, the minority of our AIR, which has not yet transitioned to GenAI, to your point, and agent tech. We can't predict exactly how every one of them will, but to your point, I think I'm repeating what you said. I agree with your statement that the future is generative and agentic, and we're obviously designed for that. There are two things that happen here. We're obviously working to, you know, for those of them who don't feel the burning desire to move quickly on that, we're working hard to keep them. and renew their subscription. As we said before, you know, smaller customers that have bought a search engine on limited content and et cetera for let's say 50K a year or whatever, you will understand that this is not where we put our major investment in. And then the second thing is, We're working to obviously transition particularly all the enterprise, the larger enterprise of this cohort, we're looking to, we're working to grow them. Again, in line with our prepared remarks, We're seeing more opportunity as the understanding and the literacy of these customers increases on And they appreciate you know you know, the part of the stack that Coveo brings. So that's sort of the color of that cohort. On the flip side, the vast majority of our, well, the majority of our area is the strategic cohorts. That's commerce, B2B, industrials, distribution, large enterprise, knowledge verticals, multi-use case customers, etc. So those in this case are expanding. We said on the last call we qualified it as high double digits. you know it's it's a very very healthy segment so so that's that's sort of the dynamic we're in right now Obviously the legacy brings down our overall metric, But from an NER perspective and a growth perspective, the company is clearly designed to serve the majority of our ARR and where we're focused. Maybe Kevin wants some numbers and colors.

Well, I think there is not much. I think your answer was pretty consistent. And I would say, you know, The Q1 went pretty much in line with what we were expecting. So, yes. Yes.

Okay, great. And just the last one for me, you guys have been seeing sustained strength here in commerce. Genting Commerce as a theme, it sounds like it's gaining a lot of momentum here. How are you guys positioned to play into that theme? Yes.

Thank you for that question. So, first of all, you have to remember that Coveo is built expertise in both dealing with complex catalogs and commerce and also a design. advance knowledge over the years. So what we're now doing is support classic e-commerce with someone that will navigate through category pages and do search and semantic search, but then also deal with more advanced conversations where you provide a more generic, general query that may have an outcome of buying something or getting more information on something or getting support on a product and this applies in retail and b2c but even more into industrials and distribution So, we're quite excited about this one. As we said in the prepared remarks, we have customers that are running production right now and a lot in pilots. So that's an area that is highly strategic for us in the future. And maybe I should add, so then an area where we're highly differentiated because to Laurent's point, we understand semantic, we understand content. You know, Coveo grew in that world of very advanced long tail intricate customer support in particular, where, you know, deep engineering and knowledge conversations. and so on is the norm. And so new shopping experiences require not only the SKU itself, but everything around the SKU, not only the metadata, but all that. If you think about a chainsaw at a DIY supplier, you will index all that. all the engineering manuals, the user manuals, maybe the customer comments and all the service records of that particular system. And so you end up in the industrial world where they may have 2 million parts. for after market and complex diagnostic and engineering documents and etc. And you combine all of that to create a unified experience And that's pretty unique to Coveo because of our ability to merge and blend both the commerce and the knowledge experiences, which is now becoming the norm in enterprise commerce, both in B2C complex commerce and particularly in B2C.

be. Great. Thank you for taking my question. I'll pass the line.

And your next question comes from the line of Paul Traber of RBC Capital Markets. Please go ahead, Paul.

Thanks for taking the question. Good afternoon. You mentioned in the prepared remarks that you're seeing increased engagement with systems integrators. Can you speak to the magnitude of that impact and the change? And also just generally speaking, with larger deals in your pipeline, how has the.