Coveo Solutions Inc T.CVO

Alternate Symbol(s): CVOSF

Technology Software - Application

Coveo Solutions Inc. is an enterprise software-as-a-service (SaaS) company. The Company is engaged in applied artificial intelligence (AI), enabling businesses to personalize and profitize every experience at scale. The Company’s Coveo Relevance Cloud platform is an AI platform that combines AI search, AI recommendations, GenAI answering, AI models and analytics. Its platform drives personalization and merchandising intelligence in digital experiences across commerce, service, Website, and workplace applications. The Coveo Relevance Cloud is a cloud-native, multi-tenant, application programming interface (API)-first, SaaS platform that offers various out-of-the-box user interface (UI) integrations, as well as Coveo Headless for custom integrations, and support for over 100+ source types via native, generic, and custom-built connectors. The Company serves customers in the technology, financial services, manufacturing, healthcare, telecommunications, and retail industries.

TSX:CVO - Post by User

Coveo Solutions Inc

<< Previous

Bullboard Posts

Next >>

Post by retiredcfon Aug 11, 2024 1:48pm

238 Views

Post# 36173547

RBC Report

Their upside scenario target is $14.00. GLTA

August 7, 2024

Outperform

TSX: CVO; CAD 5.85

Price Target CAD 11.00 ↓ 13.00

Coveo Solutions Inc Waiting for the re-acceleration

Our view: Coveo's Q1 was in line with RBC/consensus expectations and the company reaffirmed FY25 guidance. New pipeline growth is healthy and bookings improved sequentially, though ARR growth remains modest as elongated sales cycles persist. The high-end of reaffirmed FY25 guidance implies growth inflects in the second half of the year, which we believe will be a catalyst for the stock. Maintain Outperform, target moves from C $13.00 to C$11.00.

Key points:

• Q1 revenue in line with RBC/consensus. Q1 revenue was $32.2MM (6% Y/Y, 10% excluding Qubit), effectively in line with RBC/consensus of $32.1MM/$32.1MM. SaaS revenue was $30.6MM (12% Y/Y excluding Qubit), in line with RBC at $30.4MM (consensus at $31.1MM includes an outlier). On lower opex ($31MM vs. RBC at $33MM), adj. EPS was $0.00, exceeding RBC/consensus of -$0.02.

Reaffirmed FY25 guidance implies a back-end loaded year. Coveo reiterated FY25 revenue guidance of $133-138MM and $126-130MM, along with FY25 adj. EBITDA guidance of $0-4MM. However, Q2 guidance for $32.0-32.4MM revenue and $30.6-31.0MM SaaS was below consensus ($33MM revenue) and RBC ($33.5MM revenue, $31.6MM SaaS). The implied re-acceleration in bookings and SaaS growth occurs later in the year than our expectations.
GenAI pipeline grows, bookings increase sequentially. Coveo disclosed that Q1 bookings increased sequentially from Q4. GenAI accounted for 20% of Q1 bookings (vs. 20% Q4). Coveo has now signed over 30 GenAI deals and its GenAI pipeline increased by 2x Q/Q. Q1 was also the second best quarter for net new customer pipeline generation in Coveo's history. GenAI win rates are "extremely high" and it is seeing <10% of pipeline that is lost/de-qualified. Disclosed new wins include a "leading global manufacturer of GPUs", Trinity Life Sciences, a top 5 U.S. bank, and Thalia.
Elongated sales cycles continue to restrain growth. Despite new customer wins, Q1 ARR rose only 12% Y/Y (similar to ex-Qubit SaaS revenue growth) and RPO was up only 3% Y/Y. Extensive testing and evaluation of GenAI is delaying the rate of conversion of Coveo's GenAI pipeline to wins. Management continues to expect an inflection in bookings 2H/FY25, given increasing customer references, successful trials, and sales execution (new CRO from Palo Alto, AWS). Following Q1, our financial estimates are largely unchanged.
A GenAI beneficiary trading at 1.8x sales. Coveo is trading at 1.8x NTM EV/S, below peers at 7.5x. We believe catalysts for valuation multiple expansion are: 1) re-accelerating RPO and SaaS growth; 2) visibility regarding new high-profile GenAI customer wins; and 3) improving cashflow. Our revised C$11.00 price target (C$13.00 prior) equates to 4.2x CY25e EV/S, down from 5.4x previously, given incrementally lower visibility to growth following Q2 guidance below our expectations.