• GenAI is a significant catalyst. Coveo has rapidly moved to address the emerging GenAI opportunity, going from product announcement just ~6 months ago to its early access program in the summer and general availability expected in December. Coveo pointed to its underlying search platform as a competitive advantage, which uses advanced machine learning and cloud- native infrastructure to cost-efficiently build reliable, secure, and value-add GenAI functionality. Initial data points suggest Coveo’s GenAI offering delivers solid ROI (i.e. ~20% case deflection on top of the productivity benefits from Coveo’s enterprise search software). Coveo sees additional customer opportunities outside of the 45 early access customers, as many potential customers are still evaluating GenAI. Coveo has already secured 5 enterprise GenAI wins last quarter and expects the number to ramp with general availability in December.
• Coveo’s SAP partnership is also a material new growth driver. Coveo secured a partnership with SAP in March. Mr. Goode believes Coveo’s partnership with SAP may yield significant pipeline growth in the future, considering the search experience on most enterprise commerce websites is poor, being self-built and rules-based. Coveo expects its pipeline with SAP to continue to build, and new bookings may rise over the coming quarters. Additionally, Mr. Goode highlighted Commerce as a potential use case for GenAI. Coveo has already signed a GenAI win in Commerce.
• Macro is a headwind. Regarding macro, Mr. Goode commented that the environment feels largely status quo, as the backdrop has neither substantially deteriorated nor improved since earlier this year. While enterprise interest in GenAI may “give the illusion” that macro trends are improving, Coveo sees it as largely idiosyncratic given budgets for new enterprise software deployments remain tight and sales cycles continue to be extended.
• Finding the right balance between growth and profitability. Coveo has reduced operating losses much faster than expected over the last several quarters and expects to breakeven in FY25 (fiscal year ended March 31, 2025). The company is focused on driving the “most growth per dollar spent” and sees a large growth opportunity in GenAI. Coveo’s top investment priorities include GenAI, its SAP partnership, the Commerce vertical in general, new platform capabilities, and cross-sell/account coverage. For the first time since Coveo’s IPO, Mr. Goode noted that investors are beginning to shift from a profitability to a growth mindset and want to ensure that the company is investing sufficiently to capture the GenAI opportunity. Coveo also suggested that it would consider M&A to add adjacent capabilities (i.e. visual search), as valuations are more reasonable now.