Coveo Solutions Inc. has filed to go public on the Toronto Stock Exchange, making it the second software enterprise company led by serial entrepreneur Louis Têtu to head to public markets – and the latest in a slew of Canadian technology companies to do so.
Quebec City-based Coveo filed a preliminary prospectus with regulators Wednesday for an initial public offering co-led by BMO Nesbitt Burns, Merrill Lynch Canada, RBC Dominion Securities and UBS Securities. The underwriting team also includes Canaccord Genuity, National Bank Financial, Scotia Capital and TD Securities.
The target size wasn’t disclosed but a source familiar with the matter said the company is looking to raise between $150-million and $200-million. The Globe and Mail is not disclosing the identity of the source because they are not authorized to discuss the matter.
The Globe first reported in May that Coveo was testing the waters for a potential IPO this year.
The public filing by Coveo, which sells search engine technology to giant corporations, was made on the same day two other Canadian technology companies, D2L Corp. and E Automotive Inc., went public. Montreal online advertising company Sharethrough is also in the process of going public, while Vancouver-based social media management company Hootsuite has been meeting with investors to test the waters for a potential $200-million IPO.
The flurry of activity continues an unprecedented run of new issues, with Wednesday’s two offerings bringing to 19 the number of Canadian technology companies that have raised $50-million or more in TSX IPOs since July, 2020. By contrast, there were just 12 Canadian tech IPOs on Canada’s senior exchange in the 11 years ended December, 2019. But the performance of the pandemic-era IPOs has been uneven, with eight trading below their issue price.
Coveo sells artificial-intelligence-powered technology known as “insight engines” to more than 475 customers, including BlackBerry, Salesforce, Lee Valley, BRP and Xero that offer the same kind of personalized, relevant search results on their websites as those powered by Google or Amazon.
“At Coveo, we don’t just democratize AI, we democratize relevance,” Mr. Têtu writes in a letter to prospective investors in the prospectus. “And we want to contribute to redemocratizing business.”
Market research firms Forrester and Gartner rank Coveo as one of the global industry leaders, alongside France’s Sinequa SAS. Coveo last month bought London-based Qubit Digital, which provides software used by retailers and consumer products makers including Kate Spade, LVMH and Estée Lauder to provide personalized product recommendations and gather customer insights on their e-commerce sites.
Although Coveo didn’t disclose the value of the Qubit deal when it was announced, the prospectus reveals it paid US$42.9-million for the U.K. company, which was founded by a team of ex-Google employees in 2010. That’s slightly more than the US$40-million Qubit raised in a venture capital financing in 2016 led by Goldman Sachs and backed by the venture capital arms of SAP and Salesforce.
The 625-person company’s main outside shareholders are U.S. investment giant Elliott Management Corp., the labour-sponsored Fonds de solidarité FTQ, the Quebec government’s Investissement Québec investment arm, sovereign wealth fund Qatar Investment Authority, and Ontario Municipal Employees Retirement System. Mr. Têtu holds an undisclosed amount of multiple voting shares.
Coveo generated revenue of US$37.7-million in the six months ended Sept. 30, up 23 per cent from the same period a year earlier. The company’s revenue grew by 25.1 per cent in its last fiscal year, ended March 31, and 16.9 per cent in the year before that. Coveo generated an operating loss of US$14.1-million in the first six months of this year, more than double the level in the corresponding period a year earlier, and posted operating losses that expanded faster than revenue in its past two fiscal years, including a US$20.54-million negative return in the 2021 fiscal year.
The 57-year-old Mr. Têtu invested in Coveo in 2008, four years after its founding. He joined as CEO in 2012 at the request of co-founder, president and chief technology officer Laurent Simoneau, the same year Mr. Têtu’s previous company, Nasdaq-listed Taleo Corp., was purchased by Oracle for US$1.9-billion.
Mr. Têtu was joined by Jean Lavigueur, the chief financial officer, and chief operating officer Guy Gauvin, who have worked with him on several previous companies dating to 1990, including supply-chain management software company Baan SCS and Berclain Group.
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