Coveo Solutions Q2 2027 Earnings Call Transcript

Coveo Solutions (TSX:CVO) reported second-quarter financial results on Thursday. The transcript from the company’s second-quarter earnings call has been provided below.

This transcript is brought to you by Benzinga APIs. For real-time access to our entire catalog, please visit https://www.benzinga.com/apis/ for a consultation.

View the webcast at https://app.webinar.net/mwlkMPDMJ0Y

Summary

Coveo Solutions reported its strongest booking quarter in history with revenue and adjusted EBITDA exceeding guidance, driven by marquee customer transactions including two seven-figure subscriptions.

The acquisition of Anglera is set to enhance the company’s platform, particularly in data enrichment for industrial distribution and complex retail, aligning with strategic target segments.

AI continues to be a major growth driver, with generative AI solutions now representing 16% of ARR, contributing significantly to new business and customer expansion.

The company maintains a strong focus on innovation, highlighted by the introduction of Conversational Product Discovery and Merchandising Agent, aimed at enhancing commerce experiences.

Financial results show SaaS subscription revenue growth of 12% year-over-year, with a net expansion rate of 105%, and a strong cash position of $82.7 million.

Future guidance reflects continued growth with Q3 SaaS subscription revenue expected between $39.7 million and $40.2 million and full-year expectations raised slightly.

The strategic focus remains on deepening customer relationships, expanding in target verticals like industrial distribution and complex retail, and leveraging the Anglera acquisition.

Full Transcript

OPERATOR

Ladies and gentlemen, welcome to the Coveo Solutions Second Quarter Fiscal 2027 Financial Results conference call. At this time all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press 0 for the operator. This call is being recorded on Thursday, October 29, 2026. I would now like to turn the conference over to Adhere Kanavay, Head of Investor Relations.

Adhere Kanavay (Head of Investor Relations)

Please go ahead. Good afternoon everyone and thank you for joining us. With me to discuss Coveo Solutions’ second quarter fiscal 2027 results are Laurent Simoneau, Coveo Solutions’ co‑founder and chief executive officer, Louis Taitou, Coveo Solutions’ executive chairman, and Katherine Amel, Coveo Solutions’ chief financial officer. A reminder that some remarks made today will be forward‑looking statements within the meaning of applicable securities laws, including those regarding our plans, objectives, expected performance, and our outlook for the fiscal third quarter and full year fiscal 2027. These are forward‑looking statements given as of October 29, 2026 and, while we believe any statements we make are reasonable as they are based on current expectations and assumptions which are subject to risks and uncertainties, actual results could differ materially from those expressed or implied.

Coveo Solutions disclaims any intent or obligation to update our forward‑looking statements, whether as a result of new information, future events or otherwise. Further information on factors that could affect the company’s financial results is included in filings we make with Canadian securities regulators, including in the Risk Factors section of the company’s most recently filed Annual Information Form, as well as the Key Factors Affecting Our Performance section of the company’s most recently filed MD&A, both of which are available on our SEDARPlus profile and on ir.coveo.com.

Additionally, some of the financial measures and ratios discussed on this call are either non‑IFRS measures, ratios, or operating metrics used in our industry. A discussion on why we use these metrics and, where applicable, reconciliation schedules showing IFRS versus non‑IFRS results are available in our press release and our MD&A issued today. Finally, please note that unless otherwise stated, all references and financial figures made today are in U.S. dollars.

Our presentation slides accompanying this conference call can be accessed on our IR website under the Financial Information section. I will now turn the call over to Louis to review our platform and strategy, followed by Laurent taking us through our operational and strategic highlights of our second quarter, and we will end off with Kevin taking us through the financial details and provide our outlook for the third quarter and full year fiscal 2027. We will then open the line to your questions. With that, over to you, Louis.

Louis Taitou (Executive Chairman)

Good afternoon everyone and thanks for joining us. We delivered the strongest booking quarter in our history in what is usually our seasonally slowest quarter. Both revenue and adjusted EBITDA came in above our guidance range. We continue to see marquee customer transactions with two seven‑figure subscriptions in the quarter. The acquisition of Anglera is a key event we’re excited about. First, it’s an important technology that helps us further advance our platform in the data layer, but also Anglera brings substantial incremental value to our customers and enhances our solutions portfolio in industrial distribution and complex retail, our strategic target segments. We remain focused on deepening our strategic relationships with the largest organizations in the world and ensuring that our technology remains a key ingredient in our customers’ ambitious AI strategies.

Laurent and Karine will go into the details, but in my view, this quarter once again reflects strong progress on all these fronts as our market matures. The addressable market for Coveo Solutions is very large and reaching an important inflection point. Our category is Experience AI: how AI is brought into every digital experience to produce better business outcomes for enterprises. Experience AI is about bringing AI to every moment of intent, connecting what someone wants to accomplish with the information, products, and guidance that they need. Fast, modern, conversational, and with personalized relevance.

The opportunity goes far beyond chatbots. It spans commerce, service, and work. It is much bigger than an isolated application or one department’s AI tool. Enterprises interact with customers, partners, technicians, buyers, and employees online, sometimes a million times a week or even a day. These people need to find products, solve problems, learn, fix equipment, or choose replacement parts. Every interaction is an opportunity to resolve issues faster, grow revenue, improve productivity, or reduce costs.

AI makes these improvements possible at scale. Think about your own experience with ChatGPT, Perplexity, or Claude. These tools change how you find information and so they also change what you expect from all your digital interactions. When one company helps customers buy confidently or technicians solve problems faster, slower alternatives become harder to accept. Rising expectations from people online, proven possibilities, and competitive pressure are creating this market and its urgency. We focus primarily on industrial B2B distribution, complex retail, and large‑scale service.

This is where Coveo Solutions has strong differentiation and delivers high economics. These are markets where product catalogs, technical knowledge, and business rules must work together and where ROI can be substantial. We already serve some of the largest manufacturers, distributors, and retailers in the world. Consider a buyer on an industrial distributor’s website. Instead of searching thousands of parts, the buyer describes the problem context. Coveo Solutions AI brings together specifications, compatible products, and insights from other customers’ experiences. It also incorporates inventory and negotiated pricing to guide the purchase. The result is more completed orders, fewer mistakes, and greater revenue from the same traffic.

Now consider a field technician repairing a complex machine. The fixed solution may be spread across equipment maintenance records, service manuals, and parts catalogs. The technician also needs to know what fits and what’s available. Coveo Solutions connects that knowledge. AI helps identify the problem, recommend a compatible replacement, and guide its purchase. From availability to the installation, commerce and service become one experience focused on getting the machine working again.

The technician gets a better experience and a faster resolution. The technician’s customer reduces downtime. The manufacturer gains a competitive advantage by increasing dependability. The economics are powerful. Enterprises already have the traffic, the data and knowledge, and the demand. It’s all there. Coveo Solutions helps them get higher value from those assets and quickly. For illustration, consider a business with $500 million in annual digital sales for aftermarket parts. Each 1% increase in revenue per visit would add $5 million in revenue at unchanged traffic. But that is before any service savings and the benefits from a greater dependability promise. We often see double‑digit gains with our customers—tens of millions of dollars. We believe enterprises face an increasingly binary choice: use AI to deliver better experiences or compete against companies that do.

That pressure, combined with evident and measurable financial returns, creates a catalyst for the rapid adoption of Coveo Solutions within enterprise experience. But here’s the critical point. An AI model does not inherently know your products, projects, customer contracts, or business rules. It cannot guess which part fits in a particular machine serial number, its maintenance history, or what a customer can buy on what terms. That knowledge sits across disconnected enterprise systems. The role of models in this type of use case—to generate—means enterprises must supply the context. Otherwise, AI models can’t deliver reliable results.

Coveo Solutions is that harness that makes AI relevant, trustworthy, and useful. It securely supplies the current business context digital agents need. With that harness in place, and as models become commoditized, Coveo Solutions’ model flexibility lets enterprises keep pace with innovation, improve performance, and optimize token cost without model lock‑in. Experience AI therefore goes beyond individual interactions and spans across the full spectrum of intents—from discovery to purchase to ownership and aftermarket support. Coveo Solutions connects intelligence across the entire journey. Enterprises can start with one commerce or service experience that can demonstrate value, then expand and extend the same intelligence across all channels. In Experience AI, each interaction, intent, and outcome provide signals that help improve the next experience.

The value compounds as Coveo Solutions AI learns, without the need for a separate AI project for every touch point, and there is no need to replace the existing technology stack. Coveo Solutions’ moat is the complete solution. We combine unique technology, enterprise integrations, industry expertise, and repeated customer results. It’s not an isolated feature or a single AI model. This is why we believe the so‑called “saaspocalypse” narrative is overdone. Frontier AI technology is not the same as complete solutions delivering trusted enterprise outcomes. Our customers need that complete solution backed by technology know‑how and a results promise.

We see AI innovation expanding the need for what Coveo Solutions does, not making it obsolete. And these customers gain more than software. They gain faster time to value and confidence in a partner that delivers results repeatedly and keeps innovating. For Coveo Solutions, this expands the opportunity beyond technology budgets. It opens the door to strategic partnerships with our customers and the C‑suite to improve revenue, service, and competitiveness. This is why we’re seeing seven‑figure subscriptions. We grow by winning larger customers, serving more interactions within existing accounts, and earning larger partnerships through measurable value and strategic business impact. We turn the interactions enterprises already have into the financial outcomes they’re after with AI, and we’re aiming to translate that value into accelerating growth for our company.

We believe Coveo Solutions will become the defining company in the Experience AI space. With that, I’ll turn it over to Laurent to discuss the quarter.

Laurent Simoneau (President and Chief Technology Officer)

Thank you, Louis. We delivered a very strong quarter with the best bookings performance in our history. Growth was driven by B2B and B2C, commerce, generative AI, and multi use case customers. Today I want to focus on three themes that continue to drive our business: deepening customer relationships, leading through innovation, and continuing our focus on maintaining strong economics for the business. Let me begin with customers. We have now delivered four consecutive quarters with seven figure transactions, including two this quarter. These significant enterprise commitments reflect the strategic role Coveo Solutions is playing as organizations put AI into production. New customer wins and expansions included Coles, US Foods, LG, Intel, a global commercial equipment parts distributor, a North American industrial gases and equipment supplier, and several others.

The first major transaction was the previously announced expansion with a global Fortune 500 technology leader. This represents the largest transaction in Coveo Solutions’ history. It is also our first customer relationship exceeding 10 million in annual recurring revenue. This is an important milestone. It demonstrates that one of the world’s most sophisticated technology companies considers Coveo Solutions a strategic part of its enterprise AI strategy.

That company is also expanding the use of our platform across multiple experiences. The second was a seven figure win with Coles, one of Australia’s leading retailers. Coles operates more than 840 supermarkets and generates nearly 42 billion Australian dollars in revenue. E-commerce is a strategic growth priority for Coles and its supermarket business. Supermarket commerce presents unique challenges. Product availability changes rapidly, perishable products have limited shelf life, and competition is intense. At the same time, customers expect to find the right product easily, whether searching for something specific or exploring options.

Coles selected Coveo Solutions to power search across its online properties. Our platform will improve the shopping experience through personalization, intelligent ranking, and search optimization, while preserving the merchandising controls its teams require. The objective is to improve conversion, average order value, and revenue per visit. Ultimately, this should support stronger margins for Coles. This win also establishes a foundation for agentic commerce where AI agents will increasingly help shoppers discover and purchase products.

Importantly, this was a competitive win against established vendors. It demonstrates the strength of our platform in a demanding, high scale commerce environment. Turning to innovation, we continue investing in capabilities that address real customer needs and extend Coveo Solutions’ value across the commerce journey. We are doubling down on our strategic commerce business with a particular focus on retailers, distributors, and manufacturers. At the same time, we continue investing in our business serving sophisticated, knowledge intensive industries where AI is creating new opportunities to deliver value to our customers.

Conversational Product Discovery brings natural language interactions directly into commerce experiences. Shoppers can ask questions and refine their needs through conversation. The experience adapts to their intent, presenting product cards, comparisons, detailed analysis, or personalized suggestions. All responses are grounded in the product catalog and respect established merchandising rules. Through interoperability protocols such as MCP and APIs, our underlying agents can also enrich experiences with external AI assistance including ChatGPT, Gemini, Claude, and others.

Conversational Product Discovery is already live at Linde, a global leader in industrial gases and engineering. Linde supplies specialized gas and equipment to industries ranging from manufacturing and healthcare to food processing and electronics. For Linde’s customers, choosing the right products requires understanding complex technical specifications, compatibility, and application requirements. Conversational Product Discovery helps them navigate these complexities and make more informed purchasing decisions.

We’re seeing strong market interest and a healthy pipeline of expansion opportunities. Several additional customers are currently onboarding, and the capability is also attracting new prospects. Another important innovation is Merchandising Agent, formerly Merchandising Copilot. This represents a strategic evolution of our commerce platform, bringing AI directly into how our customers manage and optimize their digital businesses. Embedded in the Coveo Solutions Merchandising Hub, the agent allows business teams to analyze performance, identify opportunities, and optimize campaigns through natural language. It can recommend and execute changes to business rules, facets, and product recommendations without requiring specialized operational expertise.

Crucially, customers retain control over relevance and merchandising decisions. Actions are governed by guardrails, approval workflows, and a full audit trail. This combines the speed and intelligence of AI agents with the control enterprises require. Early engagement metrics are promising. More than 70% of users engage with the product repeatedly. Approximately half of those users apply actions recommended by the assistant. More than 20% of storefront optimizations are now completed through automated AI agent actions.

We expect these metrics to improve as adoption matures. These early results demonstrate how generative AI can help teams move more quickly from insight to action while preserving human oversight. Our Forward Deployed Engineering initiative is also progressing well. As of today, the team is approaching full scale and completed more than 40 customer engagements. This model brings our technical teams closer to customers and their real world deployments. It helps us better understand their needs and solve problems faster. We are already seeing positive contributions to customer retention and expansion. The initiative also creates a tighter feedback loop between customer needs and our product roadmap.

Finally, I want to discuss our acquisition of Anglera, which strengthens our commerce offering for retailers, distributors, and manufacturers. Product data is critical to helping customers find the right product. This is true for both traditional search and AI assistants. Yet essential attributes such as dimensions, materials, and compatibility are often missing from catalogs. This limits product discoverability and relevance across all discovery channels.

Anglera addresses this challenge by using AI to enrich existing catalogs at enterprise scale, extracting information from unstructured product content. Anglera’s technology is highly complementary to Coveo Solutions. Anglera improves the underlying product data while Coveo Solutions makes that information accessible through intelligent search, recommendations, and conversational experiences. Strategically, this acquisition strengthens our differentiation across B2B and B2C commerce.

It improves the foundation for relevance, personalization, and merchandising. It also supports answer engine optimization and generative engine optimization, helping customers make their products more discoverable through search engines and AI assistants. This further positions Coveo Solutions for the shift toward agentic commerce. We are excited about the opportunities ahead, and I want to personally welcome the Anglera team to Coveo Solutions. We look forward to what we will accomplish together.

Our third theme is to continue our focus on maintaining strong economics for the business. Our subscription-based model provides high recurring revenue and strong gross margins, creating significant operating leverage. We remain deliberate about where we invest. We prioritize product innovation, customer initiatives that reinforce our differentiation and support expansion, while maintaining financial discipline across the business. This approach is reflected in our adjusted EBITDA performance, which exceeded our guidance this quarter.

To conclude, the progress we’re making reinforces our confidence in Coveo Solutions’ long term opportunity. We’re building larger and more strategic customer relationships, adoption of our latest innovations is growing, and we’re bringing product development even closer to our customers’ needs. We remain focused on solving complex problems at enterprise scale, delivering measurable customer value, while building a more differentiated and efficient business.

I’m proud of our team’s execution this quarter and the momentum we are building. With that, I’ll turn it over to Karin to work through our financial results.

OPERATOR

Thank you, ladies and gentlemen. We will now begin the question-and-answer session. Should you have a question, please press star followed by 1 on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number 2. If you are using a speakerphone, please lift the handset before pressing any keys. As a reminder, please limit your questions to one and one follow-up.

One moment, please, for your first question. And your first question comes from the line of Thanos Mushopoulos with BMO Capital Markets. Your line is now open.

Thanos Mushopoulos (Analyst)

Hi, good afternoon. Starting off on Anglera, can you provide some context on how they came onto your radar and how the acquisition came about? And then as far as monetization, will that be a separate product like an add-on, or is that going to be folded into the broader platform, and describe overall value in terms of the rental capability for platform.

Laurent Simoneau (President and Chief Technology Officer)

Thank you, Thanos, thank you for your question. So first of all, we closed that today, so we expect to discuss more integration in the coming weeks and months. But as of today, this product works already with customers in production, and we can sell that today. It solves a real important problem — the product data problems. It automates the enrichment that a lot of customers are struggling today to do manually. So it fixes incorrect product data, inconsistent product data.

And ultimately it creates a lot of value in the form of additional conversion, revenue per visit, margin, etc. And I would also add that ultimately it’s a great way also to manage GEO and EO that are components of agentic commerce. So the ability to surface content to those external AI assistants in the context of commerce is a growing priority for customers in retail especially. And we believe that this acquisition will provide a lot of value here.

Thanos Mushopoulos (Analyst)

Great. And then just on the FTE strategy you talked about in the prepared remarks, maybe some more color in terms of the types of opportunities where that’s driving success and what your plans are in terms of continuing to scale and build the team — kind of maybe just the magnitude of investment you’re planning to make in that regard. Thanks.

Laurent Simoneau (President and Chief Technology Officer)

Yes, absolutely. Thank you for that question too. So we’re quite happy about the early results of this FD initiative. It has an impact on retention of customers, it has an impact on expansion, and basically this new world of AI, we see a lot more of architecture and interoperability challenges and opportunities at the same time with customers. So these FDs discover those opportunities, help to reduce challenges, and ultimately we see them influencing great outcomes.

The team is getting to maturity in terms of headcount, but depending on the opportunities and future that we see, we obviously have the option to increase the growth of that team.

Thanos Mushopoulos (Analyst)

Great. I’ll pass the line. Thank you.

OPERATOR

Your next question comes from the line of Paul Triber with RBC Capital Markets. Your line is now open.

Paul Triber (Analyst)

Thanks very much. Good afternoon. Just a question on guidance. It’s nice to see the very strong bookings this quarter, but my understanding is that guidance didn’t reflect full upside from some of these larger deals. So can you speak to what’s reflected in guidance from here going forward in terms of new wins versus contribution from ones that have already closed? Okay then. And looking forward in terms of, you know, the sales pipeline, you know, sales efficiency, close rates, things like that, with the strong bookings over the last several quarters, I assume you’re seeing an improvement in all those metrics. Are you planning or do you expect to increase sales investments through this year to drive stronger growth in the back half and in 28?

Laurent Simoneau (President and Chief Technology Officer)

Well, this is Laurent. So look, we continue to see opportunities in the industries that we are focusing our investment on: industrials, distribution, complex retail. So we are going to invest in a robust fashion to acquire these new customers, but also to expand the existing customers. I discussed the FD initiative earlier on. The FD initiative also discovers some opportunities at our large existing customers. So we’re going to continue investing in there, but in a disciplined fashion.

In other words, we’re going to double down on what works and monitor, reassess, and fix what doesn’t work as much. Well, let’s put it this way.

OPERATOR

Your next question comes from the line of Doug Taylor with National Bank Capital Markets. Your line is now open.

Doug Taylor (Analyst)

Yeah. Thank you. Good evening. I want to ask another question on the bookings growth versus the revenue growth. You notice the CRPO is up 15% year over year, which would seem to bake in more contribution from some of these recent bookings than what’s flowing into revenue. So I guess I’d like to start by asking about the ramp-up and the cadence of some of these recent larger wins, and maybe you can refresh us on the status of those and how you expect that to unfold.

Corinne

Thank you, Doug, for your question. Maybe I can remind everybody here that, you know, when we report a booking, per se, it’s because we are ready already to recognize the revenue on such bookings. Sometimes in the past, for sure, that might not contribute much, but in the future, going forward, we’re expecting to get the revenue recognition from those bookings, as you highlighted. Indeed, CRPO was growing at a higher rate than GAAP revenue. But as we’ve always said on CRPO, Doug, it’s very highly dependent on renewal timing and seasonality and so on.

So, you know, I’m always careful on that metric, which is not always reflecting the growth on the revenue side.

Doug Taylor (Analyst)

Fair enough. As my next question, anything to make of the way the geographic performance showed this quarter? I was seeing very strong international and Canada growth, a bit of a different story in the US, and perhaps that’s just based on where the cohort of strategic versus legacy customers sit. Anything you’d point out there?

Corinne

I don’t have anything specific to point out. I’m guessing you’re referring to some of the information we’re providing in the financial statements with regards to geographical revenue per region, is that right? No, I think we’re pretty comfortable with the growth we’re seeing across different markets. And you know, GAAP revenue always shows a bit of a lag.

Doug Taylor (Analyst)

Yeah, yeah. Okay, thank you. I’ll pass on.

OPERATOR

Your next question comes from the line of David Kwon with TD Cowen. Your line is now open.

David Kwon (Analyst)

Hi. Just getting back to the guidance. I guess when you look at the Q3 guidance and then the updated full-year guidance, it seems to imply that the Q4 kind of SaaS subscription growth is slightly up from what we’re seeing in H1, despite, you know, there’s no kind of tough comp as it relates to Salesforce. You’ve talked about kind of strong bookings. So I was just wondering, why are you just being more conservative, given what’s going on in the world these days, or are you seeing kind of still the higher churn than you might want to see, maybe at the bottom end of the customer base?

Just curious to get your thoughts on that.

Corinne

Thank you for your question, David. I think you’ve been following us for a little while, so I hope you see us guiding responsibly and to the best of our knowledge every time. With regards to what you’re alluding to in Q4, I think your math is right here. And, you know, don’t forget that the model of this company is revenue contribution. Generally, bookings contribution in H2 is generally stronger than in H1. So that also reflects on the quarterly growth as well.

You should continue to expect from us that we’ll guide in a responsible way and in a responsible manner. With regards to your churn question, I can tell you that churn is unfolding the way we have expected, and if there is something abnormal or changing in our assumptions, of course we’ll reflect it in our guidance going forward.

David Kwon (Analyst)

Great. Thanks, Corinne. And then just if you talk about, in terms of the opportunities in the pipeline, compare and contrast service versus commerce and then within commerce, the B2C versus the B2B opportunities.

Laurent Simoneau (President and Chief Technology Officer)

Thank you, David, for the question. I think last year we announced that we were seeing convergence between commerce and knowledge, and we’re seeing that. We have applied that into those strategic businesses, into those industries represented by distribution, retail, industrial, and also specific knowledge industries. So we’re seeing a lot of opportunity there. Our large customers are obviously coming from those areas. And again, I think in the prepared remarks we mentioned the Linde case, where it’s really agentic commerce that includes a lot of knowledge into this.

So Linde is in distribution, complex distribution. And that’s how we are looking at the future of the business from a go-to-market perspective.

David Kwon (Analyst)

We appreciate it. Thank you.

OPERATOR

Your next question comes from the line of Sutantuk Marvit Stiffel. Please go ahead.

SA (Analyst)

Hey guys. This is SA speaking on behalf of Suzanne. For my first question on the sales process, we’ve been seeing some more deal activity for AI on the enterprise side and more positive proof points on AI monetization. So I was curious to know how enterprise behavior has been impacting your pipeline, and how would you categorize how that change has gone specifically over the last three months?

Louis Taitou (Executive Chairman)

Yeah, great question. This is Louis. Very much so. As we pointed out in the past few quarters, we’ve seen an ongoing maturing of the market. The conversations we’re having today with our enterprise customers and prospects are just radically different. They’re not the same as the ones we were having two years ago. There is, first of all, clearly a tailwind that comes from the C-suite and the boardroom, to your point, to generate results from AI that really hit the P&L. And I think we check that box very well. There is also a much more mature understanding of the stack and the technology that’s required, in particular the ability to ground AI at high precision within enterprise data, which is squarely what Coveo does. So we check that box as well. So definitely, the adoption of AI is driven by competitive necessity, but also by the desire to generate financial returns that are measurable and hit the P&L, whether it’s increasing revenue or reducing costs.

This is the driver, and it’s good for Coveo Solutions.

SA (Analyst)

Thank you. Thank you. That was helpful. For my next question, could you provide just a brief update on the partner channel, first as a whole and then particularly how SAP is trending now? And just given the agentic platform, how will that help to accelerate the pipeline?

Laurent Simoneau (President and Chief Technology Officer)

Thank you for the question. So we’re quite happy about the level of involvement of our partners, both from an ISV standpoint—SAP would fit into this—but also from a system integrator standpoint in the core industries that we’re going after. They have a level of specialization and expertise that helps customers deploy and leverage the Coveo capabilities.

SA (Analyst)

Thank you. And then just lastly, on M&A, with the new acquisition today, is there room for more acquisitions in the year or the next year? And on Anglera more specifically, as far as revenue contribution from a synergy standpoint, what does that look like next fiscal year? And yeah, that’s my question. No, it’s okay. All done. Thank you. Go ahead.

Laurent Simoneau (President and Chief Technology Officer)

Yeah. So let me— Sorry, I did not want to cut you. All right. So look, on the first part of the question: our priority really remains growing Coveo Solutions organically and maintaining a strong balance sheet. So Anglera is a targeted investment in a great capability that complements our commerce offering and our offering into those core strategic industries. So if and when we find other companies like this one, we will definitely consider, as we’ve always said, we are opportunistic.

Having said that, maybe for the second part of the question, Kevin.

Kevin

Yes, sure. So Anglera contribution for fiscal 27 is not expected to be significant, as I said on the call. And then the longer-term opportunity is to bring those capabilities into our Coveo Solutions’ platform. We’re not planning to provide a separate FY28 revenue outlook just for Anglera per se. On a broader perspective, as we do for every single product innovation, we expect this to increase the overall value delivered by the platform to our customers.

And we’re very thrilled and excited by this addition to our team.

SA (Analyst)

Okay, great. Thank you. And I’ll pass the line.

OPERATOR

Your next question comes from the line of Kevin Krishnaratna. Your line is now open.

Kevin Krishnaratna (Analyst)

Hey there. Good evening. Thanks for taking the question. Maybe just first, can you talk about the pipeline within your existing base of potential customers that maybe are, call it, like a six-figure customer today, but could realistically expand to seven or eight over time? How do we think about that opportunity and how you would size that? And how are you working with these customers to educate them on the benefits of taking more of your solutions and expanding over time?

Laurent Simoneau (President and Chief Technology Officer)

Yes, thank you for the question. So we’ve invested in account management. We’ve invested in FD over the years to really, really grow these customers, I would say, from multiple angles. Sometimes it’s more consumption, sometimes it’s additional use cases in specific customers, sometimes it’s simply new projects. So we manage these opportunities constantly. What has evolved versus maybe last year and two years ago is the completeness of the team to go after these opportunities.

We have an integrated team with technical knowledge and with business expertise, especially in those areas that we focus on.

Kevin Krishnaratna (Analyst)

Okay, thanks for that. Maybe the second one on NER: on an ex-churn event basis inflecting up to 105, it’s the first time in a while that it inflected up. Wondering first if you have a number on what the NER would have been excluding the expansion, the eight-figure deal, and then secondly, do we expect improvements quarter over quarter here from the 105?

Corinne

Thank you, Kevin, for your question. Indeed we’re very pleased with the 3 percentage points, as you noted, on the NER this quarter. Of course a bit of that was captured by the large expansion you’ve been referring to, but also by us lapping the large single-customer churn event we had last year as well. As a reminder, the timing and size of customer expansions as well as renewals can affect NER quarter over quarter. It can fluctuate over time, but it’s certainly going in a direction that we’re really happy with.

Kevin Krishnaratna (Analyst)

Great, good to see. Thank you. I’ll pass the line.

OPERATOR

Your next question comes from the line of Roddy Sultan with UBS. Your line is now open.

Roddy Sultan (Analyst)

Awesome. Yeah, thanks for taking the questions here. So you guys have closed multiple seven-figure deals and, you know, an eight-figure deal this year. And if I just compare that to the average ARR per customer of, you know, 220,000, what are the biggest hurdles to closing that ARR gap for the rest of the customer base, and where do you think that average ARR per customer can ultimately get to?

Laurent Simoneau (President and Chief Technology Officer)

Yeah, thank you for the question. So as you know, our business includes landing new customers and then expanding them. In some cases, when there’s a clear project, we are more than happy to land a seven‑figure customer right away. It may take a little bit more time, it requires a little bit more work and complexity, but we’re more than capable and excited to do that. Sometimes we are going to land faster at a smaller amount in a more defined project that we’re going to measure the results and the outcome more rapidly, and then it creates an opportunity to expand after that. So we adapt depending on the customers, depending on the opportunity, quite frankly.

Roddy Sultan (Analyst)

Awesome. And then maybe just a quick follow‑up on the FDE initiative. I just want to ask on the sort of financial impact of that — like, how should we be thinking about how that flows through the P&L both from sort of a revenue standpoint? Is there any explicit services included in revenue, and how should we think about the headcount? And how that would impact margins. Thank you.

Laurent Simoneau (President and Chief Technology Officer)

So right now FDE is included in our SaaS subscription offering. So we are not driving revenue from that motion. We believe that down the road this provides significant value to our customer and that gets reflected back to the subscription. From a margin perspective, this is part of our cost of subscription that you can see in our P&L.

Roddy Sultan (Analyst)

Thank you.

Louis Taitou (Executive Chairman)

On the topic of FDE, if I may — this is Louis. I think this is a very important motion. You know, Coveo Solutions is a platform with broad applications. You know, our model, as Laurent said before, is land and expand. So we sort of find a wedge to sell a first use case and deploy a first use case. But when FDEs get involved, we can really show an enterprise the art of the possible — the spectrum of applications that we can support and where we can create value.

We get more intimate also with the value we create, which obviously helps us with both conversion and price power and expansion. So it’s, it’s, it’s actually… We’re already — we can certainly report that we’re already seeing some very positive metrics when our FDEs — when our forward‑deployed engineers — are involved, in terms precisely of uncovering more opportunities and growing the accounts. And so to your question about the impact on margins and so on, as you know, our subscription is north of 80% gross margin. So as we grow that subscription, there’s a lot of contribution here. So it’s definitely… Solid economic model.

OPERATOR

Your next question comes from the line of Koji Ikeda, BofA Securities. Your line is now open.

George McGree (Analyst)

Hey, this is George McGree in for Koji. Thank you for taking our questions. I had one — just with record bookings, GenAI contribution to that being 50% versus 30% last quarter, trending in a great direction. I wanted to ask what signals would it take for you guys to invest more heavily in go‑to‑market and chasing and pursuing that strategic customer cohort growth that’s out there? Thank you.

Laurent Simoneau (President and Chief Technology Officer)

Look, I believe we are constantly looking at signals and investing in consideration of those signals we’re getting. Of course I’ll be providing some longer view on FY28 as we move, but right now I’m pretty satisfied with some areas of our spending, especially around strategic cohorts and so on, when I see us getting those very exciting customers where I know we can have a strong, strong differentiation. Having said that, there’s always areas where we are being more cautious, or we are revisiting to make sure our money is put at play. When I look at our P&L, frankly I feel like spending relative to the growth and so on is decent, and we’ll revisit constantly.

Louis Taitou (Executive Chairman)

George, Louis again. Look, obviously we ask that question all day, every day. Timing‑wise, I would say certainly, as we reported last quarter and this quarter, we’re seeing a much more favorable climate in terms of the maturity of the buyer and the understanding of the differentiation and value of Coveo. There are really three levers here to the model: increasing demand, obviously — so we’re investing quite a bit in making sure that the company matters and how it’s differentiated in the marketing area and how the company is understood and so on.

Number two is the conversion — so we’re investing in the industries where we really have a differentiated moat and sustainable moat. And number three is obviously the size of the deals — investing in the industries where we create lots of value. While one might think that you just double the reps or you just build a bigger infrastructure, we’re really focusing on the health of the economic model. And then we scale that, and there’s a timing to all of this which coincides with what we think are stronger tailwinds right now for the company. That’s really how we’re thinking about it.

OPERATOR

And there are no further questions at this time. I will now turn the call back over to Laurent Simoneau. Please continue.

Laurent Simoneau (President and Chief Technology Officer)

All right, okay, great. Thanks, everyone, for joining us today. And I want to thank all of our shareholders for their continued support. I look forward to updating you on our progress during our Q3 results. Thank you.

OPERATOR

Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.