Coveo Reports First Quarter Fiscal 2023 Financial Results

First Quarter SaaS Subscription Revenue grew 47% year-over-year to $24.0 million
First Quarter total revenue increased 45% year-over-year to $26.5 million
Current SaaS Subscription Remaining Performance Obligations grew 49% year-over-year to $84.4 million as of June 30, 2022
Coveo to host inaugural Capital Markets Day on November 17, 2022

Coveo reports in U.S. dollars and in accordance with International Financial Reporting Standards (“IFRS”)

MONTREAL and SAN FRANCISCO, Aug. 08, 2022 (GLOBE NEWSWIRE) -- Coveo Solutions Inc. (“Coveo” or the “Company”) (TSX: CVO), a leader in AI-powered relevance platforms that transform search, recommendations, personalization, and merchandizing within digital experiences, today announced financial results for its first quarter of fiscal 2023, ended June 30, 2022.

“Our first quarter results reflect the strong demand we are seeing for our AI-powered platform and the momentum we continue to build upon following a record fiscal 2022,” said Louis Têtu, Chairman and CEO of Coveo. “Despite a challenging macro environment, we believe digital transformation remains a priority for businesses worldwide, and Coveo’s solutions help to enable these businesses to deliver relevant experiences that optimize business outcomes. We look for this demand from our customers to drive revenue growth while continuing to increase our operational efficiency through our strong unit economics.”

First Quarter Fiscal 2023 Financial Highlights
(All comparisons are relative to the three-month period ended June 30, 2021, unless otherwise stated)

  • SaaS Subscription Revenue grew 47% to $24.0 million compared to $16.3 million.
  • Total revenue was $26.5 million, an increase of 45% compared to $18.2 million.
  • Current SaaS Subscription Remaining Performance Obligations of $84.4 million, up 49% compared to $56.7 million.
  • Gross profit (%) was 75%, a decrease of 1%, and product gross profit (%) was 80%, in-line with the prior period. Adjusted Gross Profit (%) (1) was 76%, a decrease of 1%, and Adjusted Product Gross Profit (%) (1) was 81%, an increase of 1%.
  • Operating loss was $13.3 million and Adjusted Operating Loss (2) was $7.4 million.
  • Net loss was $12.5 million, compared to net income of $73.2 million. Net income in the comparable period was principally impacted by a non-cash gain of $69.5 million and an associated income tax recovery of $16.3 million, both related to the Company’s preferred shares converted immediately prior to the IPO in November 2021.
  • Cash flow generated from operations was $1.4 million, and cash and cash equivalents were $217.7 million as of June 30, 2022.

First Quarter Fiscal 2023 Operational Highlights

  • Net Expansion Rate of 112% as of June 30, 2022.
  • Recognized as Salesforce Commerce Cloud Partner of the Year for Best Early Salesforce Commerce Win 2022 and Best Personalization 2022. Coveo received the award for its performance as a digital transformation commerce partner within the Salesforce ecosystem, considering the number of new customers and overall growth.
  • Released new recommendations decisioning capabilities to allow deployment of explicit, finer-grained strategies for specific audiences and streamline deployment of global, multi-region configurations. These enhancements will help generate more engagement from merchandisers as well as increase revenue driven through the Coveo Merchandising Hub.
  • Introduced native SAP Commerce sources to simplify the ingestion of complex catalogs. This new data source makes the deployment of Coveo alongside SAP Commerce Cloud significantly easier, and enables the processing of all catalog data by our machine learning algorithms.
  • Launched Simpler Builder experience for Hosted Search Pages. This new, no-code builder enables any user to easily create and share next-gen Coveo Atomic (Coveo’s web component library) search page experiences with simple menus and configuration options.
  • Announced a range of new capabilities to help customer service employees deliver personalized customer experiences, including a new library for Coveo Quantic (Coveo’s Lightning Web Component library), guided templates for Case Submission flows, enhanced User Actions, and visibility into Coveo machine learning models in the admin console.

Financial Outlook

Coveo anticipates SaaS Subscription Revenue, Total Revenue, Adjusted Operating Loss, and Weighted Average Shares Outstanding to be in the following ranges:

  Q2 FY’23 Full Year FY’23
SaaS Subscription Revenue $24.4 – $24.9 million $101.5 – $103.0 million
Total Revenue $26.6 – $27.1 million $110.0 – $111.5 million
Adjusted Operating Loss (2) $6.5 – $7.5 million $31.5 – $33.5 million
Weighted Average Shares Outstanding 104.0 – 104.5 million 104.0 – 105.0 million

        
These statements are forward-looking and actual results may differ materially. Please refer to the “Forward-Looking Information” section below for information on the factors that could cause our actual results to differ materially from these forward-looking statements.

Coveo’s outlook also constitutes a "financial outlook" within the meaning of applicable securities laws and is provided for the purposes of assisting the reader in understanding the Company's financial performance and measuring progress toward management's objectives and the reader is cautioned that it may not be appropriate for other purposes.

(1)   Adjusted Gross Profit (%) and Adjusted Product Gross Profit (%) are non-IFRS ratios. Please see the “Non-IFRS Measures and Key Performance Indicators” section below.
(2)   Adjusted Operating Loss is a non-IFRS measure. Please see the “Non-IFRS Measures and Key Performance Indicators” section below.

Q1 Conference Call and Webcast Information

Coveo will host a conference call today at 5:00 p.m. Eastern Time today to discuss its financial results for its fiscal first quarter 2022. The call will be hosted by Louis Têtu, Chairman and CEO, and Jean Lavigueur, CFO.

Date: Monday, August 8, 2022
Time: 5:00 p.m. Eastern Time
Dial in number: Canada/US: 1-888-664-6392
  Confirmation #: 92794107
Live webcast: ir.coveo.com under the “News & Events” section

Capital Markets Day – November 17, 2022

Coveo will host its inaugural Capital Markets Day on Thursday, November 17, 2022, at the TMX Market Centre in Toronto. During this half-day, hybrid event, beginning at 8:30 am ET, members of the senior management team will present on the Company’s differentiated AI-powered relevance platform, growth strategy, and customer success, among other topics.

The event is limited to the financial analyst and institutional investor community. Capacity is limited and attendees will be registered on a first come, first served basis. To register in advance and receive updates up to the date of the event, please visit the following page at: www.coveo.com/en/resources/events/capital-markets-day.

The event will be recorded live with replay and presentation materials available at ir.coveo.com.

Non-IFRS Measures and Key Performance Indicators

Coveo’s unaudited condensed interim financial statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board. The information presented in this press release includes non-IFRS financial measures and ratios, namely (i) Adjusted Operating Loss; (ii) Adjusted Gross Profit, Adjusted Product Gross Profit, and Adjusted Professional Services Gross Profit (collectively referred to as our “Adjusted Gross Profit Measures”); (iii) Adjusted Gross Profit (%), Adjusted Product Gross Profit (%), and Adjusted Professional Services Gross Profit (%) (collectively referred to as our “Adjusted Gross Profit (%) Measures”); (iv) Adjusted Sales and Marketing Expenses, Adjusted Research and Product Development Expenses, and Adjusted General and Administrative Expenses (collectively referred to as our “Adjusted Operating Expense Measures”); and (v) Adjusted Sales and Marketing Expenses (%), Adjusted Research and Product Development Expenses (%), and Adjusted General and Administrative Expenses (%) (collectively referred to as our “Adjusted Operating Expense (%) Measures”). These measures and ratios are not recognized measures under IFRS and do not have standardized meanings prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures and ratios are provided as additional information to complement IFRS measures by providing further understanding of the Company’s results of operations from management’s perspective.

Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of the Company’s financial information reported under IFRS. Adjusted Operating Loss, the Adjusted Gross Profit Measures, the Adjusted Gross Profit (%) Measures, the Adjusted Operating Expense Measures, and the Adjusted Operating Expense (%) Measures are used to provide investors with supplemental measures of the Company’s operating performance and thus highlight trends in Coveo’s core business that may not otherwise be apparent when relying solely on IFRS measures. The Company’s management also believes that securities analysts, investors, and other interested parties frequently use non-IFRS measures in the evaluation of issuers. Coveo’s management uses and intends to continue to use non-IFRS measures in order to facilitate operating performance comparisons from period to period, and to prepare annual operating budgets and forecasts.

See the “Non-IFRS Measures” section of our interim management’s discussion and analysis dated August 8, 2022 (the “MD&A”), which is available under our profile on SEDAR at www.sedar.com, for a description of these measures. See the financial tables below for a reconciliation of (i) Adjusted Operating Loss to operating loss; (ii) Adjusted Gross Profit to gross profit; (iii) Adjusted Product Gross Profit to product gross profit; (iv) Adjusted Professional Services Gross Profit to professional services gross profit; (v) Adjusted Sales and Marketing Expenses to sales and marketing expenses; (vi) Adjusted Research and Product Development Expenses to research and product development expenses; and (vii) Adjusted General and Administrative Expenses to general and administrative expenses.

This press release also refers to SaaS Subscription Revenue, Current SaaS Subscription Remaining Performance Obligations, and Net Expansion Rate, which are operating metrics used in Coveo’s industry. Please refer to the “Key Performance Indicators” section of our MD&A for a description of these metrics.

Forward-Looking Information

This press release contains “forward-looking information” within the meaning of applicable securities laws, including Coveo’s financial outlook on SaaS Subscription Revenue, Total Revenue, Adjusted Operating Loss, and Weighted Average Shares Outstanding for the three months ending on September 30, 2022, and for the year ending March 31, 2023. This forward-looking information is identified by the use of terms and phrases such as “may”, “would”, “should”, ”could”, “might”, “will”, “achieve”, “occur”, “expect”, “intend”, “estimate“, “anticipate“, “plan“, “foresee“, “believe“, “continue“, “target“, “opportunity“, “strategy“, “scheduled“, “outlook“, “forecast“, “projection“, or “prospect“, the negative of these terms and similar terminology, including references to assumptions, although not all forward-looking information contains these terms and phrases. In addition, any statements that refer to expectations, intentions, projections, or other characterizations of future events or circumstances contain forward-looking information. Statements containing forward-looking information are not historical facts but instead represent management’s expectations, estimates, and projections regarding future events or circumstances.

Coveo’s financial outlook on SaaS Subscription Revenue, Total Revenue, Adjusted Operating Loss, and Weighted Average Shares Outstanding also constitutes “financial outlook” within the meaning of applicable securities laws and is provided for the purposes of assisting the reader in understanding the Company’s financial performance and measuring progress toward management’s objectives and the reader is cautioned that it may not be appropriate for other purposes.

Forward-looking information is necessarily based on a number of opinions, estimates, and assumptions that we considered appropriate and reasonable as of the date such statements are made. Although the forward-looking information contained herein is based upon what we believe are reasonable assumptions, actual results may vary from the forward-looking information contained herein. Certain assumptions made in preparing the forward-looking information contained in herein include: our ability to capitalize on growth opportunities and implement our growth strategy; our ability to attract new customers, both domestically and internationally; the success of our efforts to expand our product portfolio and market reach; our ability to maintain successful strategic relationships with partners and other third parties; assumptions regarding our future capital requirements; assumptions regarding available liquidity under our revolving credit facility; the accuracy of our estimates of market opportunity and growth forecasts; our success in identifying and evaluating, as well as financing and integrating, any acquisitions, partnerships, or joint ventures, and our ability to execute on our expansion plans. Moreover, forward-looking information is subject to known and unknown risks, uncertainties, and other factors, many of which are beyond our control, that may cause the actual results, level of activity, performance, or achievements to be materially different from those expressed or implied by such forward-looking information, including but not limited to the risk factors described under “Risk Factors“ in the Company’s most recently filed Annual Information Form and available under our profile on SEDAR at www.sedar.com. There can be no assurance that such forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, prospective investors should not place undue reliance on forward-looking information, which speaks only as of the date made.

Moreover, we operate in a very competitive and rapidly changing environment. Although we have attempted to identify important risk factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other risk factors not presently known to us or that we presently believe are not material that could also cause actual results or future events to differ materially from those expressed in such forward-looking information.

You should not rely on these forward-looking statements, as actual outcomes and results may differ materially from those contemplated by these forward-looking statements as a result of such risks and uncertainties. Additional information will also be set forth in other filings that we make with the CSA from time to time. The forward-looking statements made in this press release relate only to events or information as of the date hereof, and are expressly qualified in their entirety by this cautionary statement. Except as required by law, we do not assume any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.

About Coveo Solutions Inc.

We believe that relevance is critical for businesses to win in the new digital experience economy, to serve people the way they expect, and that applied AI is an imperative. Coveo is a market-leading AI-powered relevance platform. Our SaaS-native, multi-tenant platform injects search, recommendations, and personalization solutions into digital experiences. We provide solutions for commerce, service, website, and workplace applications. Our solutions are designed to provide tangible value to our customers by helping drive conversion and revenue growth, reduce customer support costs, increase customer satisfaction and website engagement, and improve employee proficiency and satisfaction. Our AI powers relevant interactions for hundreds of the world’s most innovative brands and is supported by a large network of global system integrators and implementation partners.

Coveo is a trademark of Coveo Solutions, Inc.

Stay up to date on the latest Coveo news and content by subscribing to the Coveo blog, and following Coveo on LinkedInTwitter, and YouTube.

Contact Information

Nick Goode
Investor Relations
investors@coveo.com

Kiyomi Harrington
PR Lead
kharrington@coveo.com

Condensed Interim Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
(expressed in thousands of US dollars, except share and per share data, unaudited)

     
    Three months ended June 30,
 
    2022   2021  
    $   $  
Revenue      
SaaS subscription   24,003   16,316  
Self-managed licenses and maintenance   324   714  
Product revenue   24,327   17,030  
Professional services   2,135   1,194  
Total revenue   26,462   18,224  
       
Cost of revenue      
Product   4,758   3,398  
Professional services   1,977   958  
Total cost of revenue   6,735   4,356  
Gross profit   19,727   13,868  
       
Operating expenses      
Sales and marketing   14,561   10,873  
Research and product development   9,132   4,842  
General and administrative   7,093   4,146  
Depreciation of property and equipment   692   649  
Amortization of intangible assets   1,161   26  
Depreciation of right-of-use assets   397   383  
Total operating expenses   33,036   20,919  
Operating loss   (13,309 ) (7,051 )
       
Change in redeemable preferred shares – conversion rights component fair value   -   (69,476 )
Net financial expenses (income)   (399 ) 4,804  
Foreign exchange loss (gain)   (500 ) 433  
Income (loss) before income tax expense (recovery)   (12,410 ) 57,188  
Income tax expense (recovery)   109   (16,048 )
Net income (loss)   (12,519 ) 73,236  
       
Other comprehensive income (loss)      
Items that may be reclassified to the consolidated statements of income (loss):      
Foreign currency differences on translation to presentation currency   (8,602 ) (16,074 )
Total comprehensive income (loss)   (21,121 ) 57,162  


Net income (loss) per share
     
Basic   (0.12 ) 3.27  
Diluted   (0.12 ) (0.08 )
       
Weighted average number of shares outstanding      
Basic   103,829,091   22,365,663  
Diluted   103,829,091   93,765,676  

Condensed Interim Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
(expressed in thousands of US dollars, except share and per share data, unaudited)

The following table presents share-based payment and related expenses recognized by the Company:

     
    Three months ended June 30,
    2022 2021
    $ $
Product cost of revenue   182 46
Professional services cost of revenue   144 31
Sales and marketing    1,531 218
Research and product development    1,433 199
General and administrative    1,185 210
    4,475 704

Reconciliation of Adjusted Operating Loss to Operating Loss
(expressed in thousands of US dollars, unaudited)

     
    Three months ended June 30,
 
    2022   2021  
    $   $  
Operating loss   (13,309 ) (7,051 )
Share-based payment and related expenses (1)   4,475   704  
Amortization of acquired intangible assets (2)   1,160   -  
Acquisition-related compensation (3)   211   121  
Charitable contributions   46   31  
Adjusted Operating Loss   (7,417 ) (6,195 )

(1)   These expenses represent non-cash expenditures recognized in connection with issued stock options, restricted shares units, and other awards under share-based plans to our employees and directors as well as related payroll taxes that are directly attributable to the share-based payments. These costs are included in product and professional services cost of revenue, and sales and marketing, research and product development, and general and administrative expenses.

(2)   These expenses represent the amortization of intangible assets acquired through the Qubit acquisition. These costs are included in amortization of intangible assets.

(3)   These expenses relate to non-recurring acquisition-related compensation in connection with the Tooso, Inc. and Qubit acquisitions. These costs are included in product and professional services cost of revenue, and sales and marketing, research and product development, and general and administrative expenses.

Reconciliation of Adjusted Gross Profit Measures and Adjusted Gross Profit (%) Measures
(expressed in thousands of US dollars, unaudited)

       
    Three months ended June 30,
 
    2022   2021  
    $   $  
Total revenue   26,462   18,224  
Gross profit   19,727   13,868  
Gross profit (%)   75 % 76 %
Add: Share-based payment and related expenses   326   77  
Add: Acquisition-related compensation   81   -  
Adjusted Gross Profit   20,134   13,945  
Adjusted Gross Profit (%)   76 % 77 %
       
Product revenue   24,327   17,030  
Product cost of revenue   4,758   3,398  
Product gross profit   19,569   13,632  
Product gross profit (%)   80 % 80 %
Add: Share-based payment and related expenses   182   46  
Add: Acquisition-related compensation   60   -  
Adjusted Product Gross Profit   19,811   13,678  
Adjusted Product Gross Profit (%)   81 % 80 %
       
Professional services revenue   2,135   1,194  
Professional services cost of revenue   1,977   958  
Professional services gross profit   158   236  
Professional services gross profit (%)   7 % 20 %
Add: Share-based payment and related expenses   144   31  
Add: Acquisition-related compensation   21   -  
Adjusted Professional Services Gross Profit   323   267  
Adjusted Professional Services Gross Profit (%)   15 % 22 %

Reconciliation of Adjusted Operating Expense Measures and Adjusted Operating Expense (%) Measures
(expressed in thousands of US dollars, unaudited)

       
    Three months ended June 30,
 
    2022   2021  
    $   $  
Sales and marketing expenses   14,561   10,873  
Sales and marketing expenses (%)   55 % 60 %
Less: Share-based payment and related expenses   1,531   218  
Less: Acquisition-related compensation   34   -  
Adjusted Sales and Marketing Expenses   12,996   10,655  
Adjusted Sales and Marketing Expenses (%)   49 % 58 %
       
Research and product development expenses   9,132   4,842  
Research and product development expenses (%)   35 % 27 %
Less: Share-based payment and related expenses   1,433   199  
Less: Acquisition-related compensation   88   121  
Adjusted Research and Product Development Expenses   7,611   4,522  
Adjusted Research and Product Development Expenses (%)   29 % 25 %
       
General and administrative expenses   7,093   4,146  
General and administrative expenses (%)   27 % 23 %
Less: Share-based payment and related expenses   1,185   210  
Less: Acquisition-related compensation   8   -  
Less: Charitable contributions   46   31  
Adjusted General and Administrative Expenses   5,854   3,905  
Adjusted General and Administrative Expenses (%)   22 % 21 %

Condensed Interim Consolidated Statements of Financial Position
(expressed in thousands of US dollars, unaudited)

       
    June 30,
2022
March 31,
2022
    $ $
Assets      
Current assets      
Cash and cash equivalents   217,668   223,072  
Trade and other receivables   19,896   25,476  
Refundable tax credits   6,020   10,443  
Prepaid expenses   5,560   5,861  
    249,144   264,852  
Non-current assets      
Contract acquisition costs   10,760   10,858  
Property and equipment   7,989   8,704  
Intangible assets   18,262   20,605  
Right-of-use assets   8,777   9,255  
Deferred tax assets   4,357   4,616  
Goodwill   25,386   26,610  
Total assets   324,675   345,500  
       
Liabilities      
Current liabilities      
Trade payable and accrued liabilities   20,585   22,910  
Current portion of deferred revenue   47,710   49,879  
Current portion of lease obligations   1,868   1,916  
    70,163   74,705  
Non-current liabilities      
Deferred revenue   319   513  
Lease obligations   10,559   11,169  
Deferred tax liabilities   3,232   3,677  
Total liabilities   84,273   90,064  
Shareholders' equity      
Share capital   860,774   859,944  
Contributed surplus   20,552   15,295  
Deficit   (604,775 ) (592,256 )
Accumulated other comprehensive loss   (36,149 ) (27,547 )
Total shareholders' equity   240,402   255,436  
Total liabilities and shareholders' equity   324,675   345,500  

Condensed Interim Consolidated Statements of Cash Flows
(expressed in thousands of US dollars, unaudited)

     
    Three months ended June 30,
    2022  2021 
    $ $
Cash flows from (used in) operating activities      
Net income (loss)   (12,519 ) 73,236  
Items not affecting cash      
Amortization of contract acquisition costs   1,077   887  
Depreciation of property and equipment   692   649  
Amortization of intangible assets   1,161   26  
Depreciation of right-of-use assets   397   383  
Interest accretion   -   4,556  
Change in redeemable preferred shares – conversion rights component fair value   -   (69,476 )
Share-based payments   5,796   704  
Interest on lease obligations   170   191  
Change in fair value of short-term investments   -   52  
Variation of deferred tax assets and liabilities   83   (16,075 )
Unrealized foreign exchange loss (gain)   (500 ) 337  
       
Changes in non-cash working capital items   5,048   (1,989 )
    1,405   (6,519 )
       
Cash flows from (used in) investing activities      
Proceeds from disposal of short-term investments   -   13,845  
Additions to property and equipment   (527 ) (368 )
Additions to intangible assets   (5 ) (226 )
    (532 ) 13,251  
       
Cash flows from (used in) financing activities      
Proceeds from exercise of stock options   291   63  
Payments on lease obligations net of lease incentives received   (633 ) (527 )
    (342 ) (464 )
       
Effect of foreign exchange rate changes on cash and cash equivalents   (5,935 ) 97  
       
Increase (decrease) in cash and cash equivalents during the period   (5,404 ) 6,365  
       
Cash and cash equivalents – beginning of period   223,072   55,399  
       
Cash and cash equivalents – end of period   217,668   61,764  


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Source: Coveo Solutions Inc.