TAILWINDS FROM SALESFORCE RE- ENGAGEMENT AND $15.2MM GOVERNMENT GRANT
THE TD COWEN INSIGHT
We believe the now strengthened partnership with Salesforce, one of CVO's largest partners and customers, should help drive a rebound in Salesforce-driven bookings, particularly in the Service LoB, which is CVO's largest. We think Salesforce's re-engagement highlights the competitive strength of CVO's platform, particularly when addressing enterprise customers' complex data environments.
Impact: SLIGHTLY POSITIVE
On better terms with Salesforce. CVO has issued several press releases this week that we think could help drive stronger growth in C2025 and beyond.
The most significant announcement outlined a strengthened partnership with Salesforce, one of CVO's biggest partners and customers. Specifically, a new integration will allow Coveo's Relevance Cloud Platform to securely feed a broader array of its enterprise customers' data sources into Salesforce's Data Cloud. This will allow large enterprises with distributed, complex data sources to benefit from higher degrees of relevance and greater precision with generative answering, without having to migrate their data to Salesforce's Data Cloud.
Management indicated that because of their distributed, complex data sources, enterprise customers (e.g., Dell, F5 Networks, Xero) have chosen CVO to deliver AI-driven relevant experiences for their customers and employees, and not Salesforce's Einstein, which only leverages data in their Data Cloud.
CVO stated that it expects to see improved engagement with Salesforce's sales reps, particularly when targeting enterprise customers with complex uses cases that CVO can better address.
We understand that Salesforce was a key contributor to CVO's Service bookings (~40% of total bookings), so Salesforce's push to drive Einstein adoption (over CVO) helped lead to the slowdown in bookings/revenue growth.
We believe the re-engagement should provide a tailwind but think it will take at least a quarter or two before we could see a material improvement in Salesforce-driven bookings.
Receives a C$15.2mm government grant. Yesterday, the Canadian government announced a C$15.2mm grant to CVO through the Strategic Investment Fund that is to be used to enhance CVO's platform with new, cutting-edge AI technology (details here). This follows the ~C$9.3mm federal grant through SCALE AI that ended in Q4/F24.
Management indicated that it expects to receive the funds over the next three years (~ $5mm/year) and that it will help fund existing projects. The first funds are expected to be received this quarter and the grants are already baked into F2025 guidance.