Coveo Reports Third Quarter Fiscal 2022 Financial Results


SaaS Subscription Revenue grew 50% year-over-year to $21.2 million
Total revenue increased 39% percent year-over-year to $23.2 million
Current SaaS Subscription Remaining Performance Obligations grew 49% to $72.2 million

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

MONTREAL and SAN FRANCISCO, Feb. 07, 2022 (GLOBE NEWSWIRE) — Coveo Solutions Inc. (“Coveo” or the “Company”) (TSX: CVO), a leader in AI-powered relevance platforms that helps to transform search, recommendations, and personalization within digital experiences, today announced financial results for its third quarter of fiscal 2022, ended December 31, 2021.

“We delivered record results in the third quarter demonstrating the demand for AI-powered relevance within modern digital businesses,” said Louis Têtu, Chairman and CEO of Coveo. “People expect personalized and relevant digital experiences when interacting with businesses across commerce, websites, customer service, and in the workplace, and this can only be achieved by leveraging sophisticated AI. For more than a decade, Coveo and now the Coveo Relevance Cloud™ platform have been at the forefront of a sizeable opportunity for AI to transform business at scale. We are well positioned to capture this demand across industries and pursue our mission of democratizing AI-powered digital experiences for every business.”

Third Quarter Fiscal 2022 Financial Highlights

  • SaaS Subscription Revenue grew 50% year-over-year to $21.2 million.
  • Total revenue was $23.2 million, an increase of 39% year-over-year compared to $16.8 million in the third quarter of fiscal 2021.
  • Current SaaS Subscription Remaining Performance Obligations of $72.2 million as of December 31, 2021, up 49% year-over-year compared to $48.5 million in the third quarter of fiscal 2021.
  • Gross profit percentage was 74%, an increase of 55 basis points compared to the third quarter of fiscal 2021.
  • Operating loss was $23.4 million and Adjusted Operating Loss (1) was $8.1 million.
  • Net income was $426.3 million, compared to a net loss of $101.7 million in the third quarter of fiscal 2021. Net income in the third quarter of fiscal 2022 was impacted by a non-cash gain of $269.2 million and an associated income tax recovery of $184.4 million, each related to our preferred shares, which were converted into multiple voting shares immediately prior to our IPO.
  • Net income per share was $7.65, compared to a net loss per share of $5.55 in the third quarter of fiscal 2021.
  • Net cash used in operations was $7.9 million, and cash was $233.7 million as of December 31, 2021.

Third Quarter Fiscal 2022 Operational Highlights

  • Net Expansion Rate of 112% as of December 31, 2021.
  • Completed the acquisition of Qubit Digital Ltd, a UK-based leader in AI-powered personalization for merchandising teams, on October 14, 2021.
  • Raised $195.9 million in gross proceeds ($179.9 million in net proceeds) from our initial public offering of 14,340,000 subordinate voting shares and concurrent private placement of 129,996 additional subordinate voting shares, which closed on November 24, 2021, and the exercise of the over-allotment option for an additional 2,151,000 subordinate voting shares, which closed on December 1, 2021.
  • Released Deep Learning Case Classification model, which greatly improves the quality of support cases submitted by users through automatic prompting of relevant classification tags.
  • Introduced our Smart Snippets feature, which automatically extracts answer snippets from content to enable users to get direct answers to their queries without having to navigate away from the results page.
  • Announced a deeper integration with Adobe Experience Manager, including the release of Coveo for Adobe Experience Manager on the Adobe Exchange marketplace, to make it easier for digital leaders and developers to bring robust, relevant search experiences to Adobe-powered websites, intranets, online stores, and technical documentation.
  • Launched Coveo Search and Recommendations for SAP Commerce on the SAP® Store to allow retailers and manufacturers to leverage Coveo’s complementary enterprise-class AI to get even more out of SAP Commerce Cloud and deliver the buying experience today’s consumers expect.

Financial Outlook

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

  Q4 FY’22 Full Year FY’22
SaaS Subscription Revenue $21.5 – $22.0 million $76.3 – $76.8 million
Total Revenue $23.5 – $24.0 million $84.5 – $85.0 million
Adjusted Operating Loss (1) $9.5 – $10.5 million $29.0 – $30.0 million
Weighted Average Shares Outstanding 103.4 – 103.9 million 50.8 – 51.3 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 Operating Loss is a non-IFRS measure. Please see the “Non-IFRS Measures and Key Performance Indicators” section below.

Conference Call Information

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

Date: Monday, February 7, 2022
Time: 5:00 p.m. Eastern time
Dial in number: Canada/US: 888-394-8218
  Confirmation Code: 6876328
Live webcast: ir.coveo.com under the “News & Events” section
  Webcast will be available for one year at ir.coveo.com

Non-IFRS Measures and Key Performance Indicators

Coveo’s unaudited 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 a non-IFRS financial measure, namely Adjusted Operating Loss. This measure is not a recognized measure under IFRS and does not have standardized meanings prescribed by IFRS and is therefore unlikely to be comparable to similar measures presented by other companies. Rather, this measure is provided as additional information to complement IFRS measures by providing further understanding of the Company’s results of operations from management’s perspective.

Accordingly, this measure should not be considered in isolation nor as a substitute for analysis of the Company’s financial information reported under IFRS. Adjusted Operating Loss is used to provide investors with a supplemental measure 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 February 7, 2022 (the “MD&A”), which is available under our profile on SEDAR at www.sedar.com, for a description of this measure. See the financial tables below for a reconciliation of Adjusted Operating Loss to operating loss.

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 and the year ending on March 31, 2022. 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, and is subject to known and unknown risks, uncertainties, assumptions, and other factors 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 final supplemented PREP prospectus dated November 17, 2021, which is 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.

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. All forward-looking statements in this press release are based on information available to us as of the date hereof, and we do not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.

About Coveo Solutions Inc.

We believe that relevance and personalization are 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 self‐service, 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.

Contact Information

Nick Goode
Investor Relations
investors@coveo.com

Kiyomi Harrington
PR Lead
kharrington@coveo.com

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

    Three months ended
December 31,
  Nine months ended
December 31,
 
    2021
$
  2020
$
  2021
$
  2020  
Revenue          
SaaS subscription   21,153   14,120   54,782   40,057  
Self-managed licenses and maintenance   487   1,405   2,042   4,002  
Product revenue   21,640   15,525   56,824   44,059  
Professional services   1,603   1,237   4,155   3,364  
Total revenue   23,243   16,762   60,979   47,423  
           
Cost of revenue          
Product   4,476   3,585   11,215   9,555  
Professional services   1,566   865   3,406   2,615  
Total cost of revenue   6,042   4,450   14,621   12,170  
           
Gross profit   17,201   12,312   46,358   35,253  
           
Operating expenses          
Sales and marketing   12,182   8,514   33,650   22,375  
Research and product development   9,076   3,766   19,446   10,454  
General and administrative   17,277   3,560   26,939   9,079  
Depreciation of property and equipment   684   491   1,985   1,403  
Amortization of intangible assets   1,042   62   1,098   182  
Depreciation of right-of-use assets   377   402   1,138   1,161  
           
Total operating expenses   40,638   16,795   84,256   44,654  
           
Operating loss   (23,437 ) (4,483 ) (37,898 ) (9,401 )
           
Change in redeemable preferred shares – conversion rights
  component fair value
  (269,200 ) 72,749   (299,428 ) 151,557  
Net financial expenses   2,930   4,262   12,560   11,888  
Foreign exchange loss   628   997   281   1,532  
           
Income (loss) before income taxes   242,205   (82,491 ) 248,689   (174,378 )
           
Income tax expense (recovery)   (184,108 ) 19,163   (188,972 ) 40,716  
           
Net income (loss)   426,313   (101,654 ) 437,661   (215,094 )
           
Other comprehensive income (loss)          
Items that may be reclassified to the consolidated statements of income (loss)      
Foreign currency differences on translation to presentation currency   (6,989 ) (25,113 ) (2,637 ) (47,299 )
Total comprehensive income (loss)   419,324   (126,767 ) 435,024   (262,393 )
Net income (loss) per share          
Basic   7.65   (5.55 ) 13.05   (11.74 )
Diluted   (0.24 ) (5.55 ) (0.41 ) (11.74 )
           
Weighted average number of shares outstanding          
Basic   55,701,559   18,326,538   33,537,536   18,314,865  
Diluted   101,636,633   18,326,538   96,272,762   18,314,865  

Condensed Interim Consolidated Statements of Income or Loss and Comprehensive Income or Loss
(expressed in thousands of US dollars, unaudited)

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

  Three months ended
December 31,
  Nine months ended
December 31,
 
  2021
$
  2020
$
  2021
$
  2020
$
 
         
Cost of revenue – Product 140   24   230   51  
Cost of revenue – Professional services 132   16   206   33  
Sales and marketing 695   131   1,153   312  
Research and product development 1,100   130   1,537   287  
General and administrative 786   202   1,201   545  
         
  2,853   503   4,327   1,228  

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

  Three months ended
December 31,
  Nine months ended
December 31,
 
  2021
$
  2020
$
  2021
$
  2020
$
 
         
Operating loss (23,437 ) (4,483 ) (37,898 ) (9,401 )
Share-based compensation and related expenses (1) 2,853   503   4,327   1,228  
Amortization of acquired intangible assets (2) 1,003   41   1,003   83  
Acquisition-related compensation (3) 502   121   744   363  
Transaction-related expenses (4) 509     1,839    
Charitable contributions (5) 10,420   28   10,479   60  
         
Adjusted Operating Loss (8,150 ) (3,790 ) (19,506 ) (7,667 )

(1)   These expenses represent non-cash expenditures recognized in connection with issued stock options and other awards under share-based plans to our employees and directors as well as related payroll taxes given that they are directly attributable to share-based compensation.

(2)   This expense represents the amortization of intangible assets acquired through the Tooso, Inc. and Qubit acquisitions.

(3)   These expenses relate to non-recurring compensation that is associated with the ongoing employment obligations for certain employees in connection with the Tooso, Inc. and Qubit acquisitions.

(4)   These expenses represent expenses related to professional, legal, consulting, and accounting fees relating to the IPO and the acquisition of Qubit.

(5)   These expenses represent charitable contributions of the Company, including the one-time 1% pledge of our equity.

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

      Dec 31,
2021
$
    March 31,
2021
$
 
Assets          
           
Current assets          
Cash     233,683     55,399  
Short-term investments         76,472  
Trade and other receivables     19,676     18,056  
Government assistance and refundable tax credits     9,284     4,189  
Prepaid expenses     4,495     3,953  
      267,138     158,069  
           
Non-current assets          
Contract acquisition costs     10,538     8,624  
Property and equipment     8,745     9,577  
Intangible assets     23,437     584  
Right-of-use assets     9,142     10,268  
Deferred tax assets     5,011     5,672  
Goodwill     22,232     1,247  
           
Total assets     346,243     194,041  
           
Liabilities          
           
Current liabilities          
Trade payable and accrued liabilities     21,057     16,550  
Current portion of deferred revenue     45,242     37,144  
Current portion of lease obligations     1,807     1,555  
      68,106     55,249  
           
Non-current liabilities          
Deferred revenue     569     680  
Lease obligations     11,188     12,588  
Redeemable preferred shares          
Debt component         195,701  
Conversion rights component         742,653  
Deferred tax liabilities         186,249  
Total liabilities     79,863     1,193,120  
           
Shareholders’ Equity (Deficiency)          
           
Share capital     859,065     16,957  
Conversion rights – Series A         1,105  
Contributed surplus     9,984     5,794  
Deficit     (572,871 )   (995,774 )
Accumulated other comprehensive loss     (29,798 )   (27,161 )
Total shareholders’ equity (deficiency)     266,380     (999,079 )
           
Total liabilities and shareholders’ equity (deficiency)     346,243     194,041  
           

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

      Three months ended
December 31,
  Nine months ended
December 31,
 
      2021
$
  2020
$
  2021
$
  2020
$
 
             
Cash flows from (used in) operating activities            
Net income (loss)     426,313   (101,654 ) 437,661   (215,094 )
Items not affecting cash            
             
Bad debt expense     8     31    
Amortization of contract acquisition costs     987   832   2,797   2,468  
Depreciation of property and equipment     684   491   1,985   1,403  
Amortization of intangible assets     1,042   62   1,098   182  
Depreciation of right-of-use assets     377   402   1,138   1,161  
Interest accretion     2,753   4,040   11,906   11,574  
Change in redeemable preferred shares – conversion rights
  component fair value
    (269,200 ) 72,749   (299,428 ) 151,557  
Donation of shares     10,379     10,379    
Share-based compensation     2,853   503   4,327   1,228  
Change in fair value of short-term investments     12   46   103   (201 )
Interest on lease obligations     176   184   550   538  
Variation of deferred tax assets and liabilities     (184,118 ) 19,154   (189,062 ) 40,661  
Unrealized foreign exchange loss     679   988   232   1,533  
             
Changes in non-cash working capital items     (868 ) 2,519   (7,285 ) 8,361  
             
      (7,923 ) 316   (23,568 ) 5,371  
             
Cash flows from (used in) investing activities            
Business combination, net of cash acquired     (38,667 )   (38,667 )  
Proceeds from disposal of short-term investments     46,479   7,611   76,351   26,066  
Additions to property and equipment     (451 ) (821 ) (1,118 ) (2,240 )
Additions to intangible assets     (155 ) (115 ) (756 ) (115 )
             
      7,206   6,675   35,810   23,711  
             
Cash flows from (used in) financing activities            
Share capital issued     195,920     195,920    
Share capital issuance costs     (14,477 )   (14,477 )  
Consideration to a shareholder     (14,758 )   (14,758 )  
Proceeds from exercise of stock options     215   22   337   72  
Payments on lease obligations net of lease incentives received     (551 ) (125 ) (1,683 ) (386 )
             
      166,349   (103 ) 165,339   (314 )
             
Effect of foreign exchange rate changes on cash     874   344   703   677  
             
Increase in cash during the period     166,506   7,232   178,284   29,445  
             
Cash – beginning of period     67,177   38,304   55,399   16,091  
             
Cash – end of period     233,683   45,536   233,683   45,536  

Coveo Solutions Inc



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