Teneo AI AB (publ)

Okay. Let's kick off. So a very big thank you all, all our shareholders for participating in our capital race here in the beginning of the year. We're very thankful for that. And we'll make sure to use these funds responsibly in our continued growth. Three major things that we're reporting today. Our Q4 report is delayed because of the capital race. So for all sorts of legal issues, it had to be today rather than when it usually would have been. But at least now we are happy to present it and happy to present what's happening in the company. So three major things have happened in Q4. First of all, our strategy to focus on growth in existing customers is really paying off. We have solid growth and this has also spawned a solution on top of our platform. And as you may see, I have a different background than Fredrik. and I'm going to get into that a bit more as we move into the call. The second big thing is the launch of ChatGPT. Now, ChatGPT has really raised awareness about our area. It's moved from something that is discussed with people that are in the know or directly responsible for these type of solutions to something that the CEOs are talking about as well, which is very, very good for us. You may or may not know that Microsoft is now a 49% owner of Chatty or of OpenAI, which is the parent company of ChatGPT. And as such, given that we put all our bets on Microsoft as a partner in the cloud space and became an independent software vendor of the year last year, we also have access to the technology behind ChatGPT, the GPT model, the large language models behind it. That means that our customers can now implement even faster because it's a complementary solution to what we do and is one of the services that we can use within the Microsoft universe. So now our customers can implement even faster than before. The third thing is that Telefonica 02 passed the 1 million calls per month mark in Q4 after less than a year and a half of implementing the solution. Now we have several 1 million plus calls per month references, but the interesting with this is also that it has moved very, very quickly. And if we look across the globe, there are no other solutions with the same type of speed and volume. So there's no other 1 million plus picking up the phone references out there. So not from Google, Amazon or anybody else, but also the speed at which this has happened is also quite incredible. And talking to the executives has led us to some of the other things, the solution set that we've been managing to produce during Q4 as well, which is quite exciting. So I'm going to just back up the tape a bit, talk a bit about... Sorry, I forgot. Presenting today is Per and Fredrik. You probably met us before. If you haven't, here we are. I would say now our legacy is mostly formed by what we've accomplished here. You'll judge us more on what we're talking about today than what we've done before. This is the area we are in. We're in the area of managing the conversational flow between a human and a machine. So understanding what the machine says and then taking action on that. This is called conversational AI. That's a general area. The market segment that we are in is called the digital contact center. and the digital contact center is going to be one of the biggest software markets in the world, which is why companies like Microsoft is putting a lot of focus on this, but also Amazon and Google and many other companies are focusing on this particular area. We have the largest references in this space today and the space that we are in there is called virtual assistants. So the virtual assistants is when the phone is being picked up by a bot or a piece of software, rather than being picked up by a human. So when you call somebody, we answer the phone for you, but it's the software doing the work. The interesting thing with this market is that it's growing with a 48% CAGR. Maybe even more interesting is that we have 15% of the total interactions in this market today. So there's a small portion of this that is software today. A lot of this is consulting. but it's growing more and more software. And as the volume grows, we see also in our customers, our revenue is growing. So quite exciting development there. Open AI, of course, again, really has changed the dynamics of this market because now executives are talking a lot about using this type of technology in their ecosystem. Very brief introduction to artificial before we move into talking a bit about the exciting news, both the numbers and the exciting solution news for the quarter. You can see here at the top, that's our most important number, the SAS model that we introduced in 2021, which is a pure software as a service with a shared code base of multi-tenant is now generating an ARR in Q4 of 25.1. ARR obviously forward-looking, so it's the last month times 12, but this is a key focus for us. Also our recurring revenues are growing quite well. So we have total recurring revenues growing, which includes then the legacy, where the legacy used to be license maintenance and PS, but now it's also been transformed to be just license. So recurring revenue on the software side. So very solid growth, as you can see from this. So our ARR growth year over year, 167%. And that, of course, shows our market leadership here. We have a lot of really solid customers, which we spent most of last year taking good care of so that they would grow. But also that enabled us to develop the solution, which has enabled us to really expand our partnership base. So we have lots of new partners, but we also have lots of more momentum in the partnerships today because of the solution set. So I'm going to move into that. Another very important thing is that we during Q4 received our ISO 27001 certification. And that of course means that we're free to sell to things like healthcare banks and others so that more companies can use our solution as well. We did a large cost reduction program in 2020, 2021 and reduced our costs quite aggressively at that point. And then we have been building up the organization during 2022. And we're now going to be flattening out that curve going into 2023. So still quite a large cost reduction vis-a-vis that sort of 2020, 2019 run rates. So with that, I am going to dive into what we feel is the biggest news for the quarter, except for the great growth. And that is that we have launched a solution on top of our platform. So with the implementations at Telefonica, but also Swisscom, we saw that what the management really cared most about, so in meetings with these customers, what they really cared most about was the fact that their customers no longer needed to do a key press when they moved in, when they called the customer hotline. When you call to Swisscom today, you no longer press one, two, three, four, five, or you no longer need to understand the keyword that you need to say like invoice or something like this. And 90% of the enterprises in our target markets, which is Europe and US are still using keypad navigation. So large call centers still using keypad because it still hasn't really been possible to implement a true open question type solution. So what is open question? Well, instead of having keypad, when you call, and we're all been frustrated with this, you call Apple, you call any large company today, you're going to have to listen to what they say, understand what they're saying, and choose the right choice with a keypad selection. And once you've done that, you probably have another few keypad selections. In fact, in average, 122 seconds are spent pressing keys before you get service. So customers hate the experience. Are our customers still used to experience because it's very difficult to implement, but no longer. So if you see Swisscom, you see Telefonica official references for this technology, you see that this is also now quite easy to implement and provide that service. So the solution is there. I really recommend you to look at Roger on YouTube as he talks about the solution and the frustration we keep had, but also the Swisscom management and the Telefonica executive management really love that we managed to get rid of the keypad navigation. And the solution we have in this space called open question is going to route 90% of calls correctly in 90 days. And this is today, 15% of all calls are misrouted. And this is a large expense because now at least two people are talking to the same customer and the customer gets increasingly frustrated. But on top of that, keypad navigation is frustrating customers. So in the traditional IVR space, when you have to pay attention before you get lost, 42% of customers are irritated before they even get to state the purpose of their call, the question of why they're calling. So that's no longer the case with open question. You can now just call and say, hey, my last invoice was just too high. What's going on? And the system will recognize why you are calling, route you to the right caller, maybe even fix your problem automatically. And if it doesn't understand, it will just ask a few questions so it really understands. No thinking on the part of the customer. All the thinking goes on now in the contact center instead, which is the way it should be to have happy customers. So customers are really, really frustrated, but there's also a large cost for these misrouted calls. Solution that we already have now, we're taking this to market now, and that's part of why our partner base has expanded that much. We took a lot of care of our customers, managed to build this solution. So we've taken the knowledge from that, built the solution. And now we're going to market with this and we're pushing that and cultivating partners to also take this to the market since this is a very simple way for them to get into the virtual assistant space. So that's the exciting news. We have a brand that's Teneo.ai. That's the brand, that's our platform. That's what we're taking the market as our brand to make it a bit more clear to our customers instead of having the artificial solutions, which they probably don't know because when they open up the app, it's Teneo. Within Teneo.ai, we today have one solution that's open question, implements in 90 days and gives you a really good effect on customer satisfaction in those 90 days. Nobody else has the same. Nobody else has these references. and nobody else has been able to provide this with that type of speed and implementation. So very proud of the team, very proud of our customers for taking this forward. Let's move into some Q4 operational highlights and then Fredrik will take over and do the numbers. So it's important to us to have this ISO 27001 certification. We got that at the tail end of Q4 and it's really going to help us with the customers, the large enterprises that have a lot of requests for this type of certification. We launched open question, which is this conversational IVR solution. It's the way to get rid of keypad navigation. It's a complete solution. Documentation is there. The pre-built flows are there. It's very easy to implement. We launched at the O2 Telefonica virtual assistant now handles plus 1 million calls. That's after less than a year and a half of implementation. So very, very rapid pace to scale up. And of course, scaling up in our existing customers is our prime strategy. That's how we make more revenue. We've renegotiated our credit facility with the help of some shareholders, also the help of our investment bank here. It's now running at 4% per annum fixed rate, but it's also still a pick rate, so payment in kind. It's still an interest rate that gets paid at the end of, and that's now 2021. six, so end of the period. So very good for us in terms of our costs going forward as well. Of course, very happy that you all participated in our rights issue and that we brought the money in in Q1. That's going to help us through this financially difficult year, but business-wise, I think this year is going to be absolutely great with the cost focus of our customers. The growth in SAS API calls, if you compare quarter over quarter, December to December, 373%, and an annual number, 167%. So really, really solid growth in our ARR and in our revenues. And that is of course the main highlight of this. Our model that we introduced in 2021 is really paying dividends. So with that, I'm gonna hand it over to Fredrik to deep dive a bit into the numbers.

Thank you Per. So a bit kind of continuing on where Per left us. I mean our SAS business model is clearly ramping up and this is of course I mean very significant or very clear when you look on the graphs on the key KPIs that we use. One of the key KPIs is obviously then SAS API calls. which is the variable component related to how much the platform is used by our customers. Since we have a variable fee for these interactions, that is obviously immediately paying off in the SAS ARR metrics as well. Really satisfying is, as Per said, I mean, we're growing 373% year over year, December versus December 21. And also when we look on January numbers, we can also see that the growth is continuing. So we also see a 14% increase December 22 versus January 23. So the growth trajectory is continuing basically. And that is also at 343% year-over-year growth. So very pleased to see that development in our existing customer base. And this of course then translates into 25.1 million seconds per already mentioned on the SAS ARR. So 167% year-over-year growth. Next slide, please, Per. This is also, I mean, just to, I think we have shown this for our shareholders now for the last 24 months, but it's a bit to showcase our business model where we have on the one hand side, we have subscription fees, which is the license part on the SaaS model. So customers pay per month based on the number of seats that they are using in the platform. And the other component is API calls, and that's fully variable. So we charge customers $0.008 per API call. So as we grow the volume, it's times this 0.008 number that we get the revenues for. Then we also have data as a limited part of our revenue contributions. And then we also on top, even if we are not focusing on the PS side, we still have some legacy contracts which we need to honor. And I think on a quarterly basis, it's one million SEK only. But I think the more important part is, of course, the graph to the left. where we have put this in the context of type customers. And for a small customer with not as high volumes that we perhaps want our customers to have, the main part of the revenue piece is the subscription fee. But of course, then as part of our strategy is to focus on open question, but also customers with significant customer center operations, we are focusing on customers that have more than 500 operators in their call centers. That is our targeted group of customers. And for those kind of customers, the variable part is very, very important. So that's why we are emphasizing so much on the API call growth, which clearly also then is, you know, something that is benefiting our gross margin. When we take a customer into our platform, initially we don't have that high gross margin, but on the high volume API calls that we have on a handful of really big customers, we also see that the margins on those revenues are in excess of 90%. So that's why we are also targeting the large customers. Next slide, please, Per. To a bit kind of continue on sales numbers, we are very pleased with our sales development. And I think it's a bit kind of a crowded slide here, but overall, we can see that we are growing the recurring revenues year over year from 8.8 million in Q1 2021 to 12 million in Q4 2022. So 36% growth. But also then, as we have also said, SAS revenues are growing even at a higher pace, which is the most important ones. But overall also then I mean the recurring revenues from all our customers is growing at a speed of 36% and that's very pleasing I would say. Then on the kind of Turquoise line and then also on the yellow line we showcased both the rolling 12 month number which is increasing from 30 million up to 41 million and on the ARR for the total, not just SAS, we are growing from 36 million up to 50 million. So a steady growth in that part. And as we have already said, I mean, the SAS ARR is growing at 167%, so clearly at a much higher pace than our legacy customer ARR. Next slide, please Per. I think we already mentioned most of the metrics here. So I will just try to focus on the parts which I think are essential. The first hand is if we focused on the slides, two graphs. We are showcasing some KPIs that we are tracking in the company. And that's basically to increase the percentage of SAS recurring revenues. and we see that we continue month over month and then also quarter over quarter to grow this part due to the higher growth rate in SAS. And now in this quarter it constitutes 52% of total recurring revenues. And then the other part is of course to emphasize as we have gone from this hybrid model with significant parts of professional services a key part has been to translate more or less up to close to 100% of the revenues coming from recurring valuable revenues. Now we are at 92% and I think that is the highest level we have ever experienced. So that is also very pleasing to see that we are also growing this part or this ratio as well. Then we can also, I mean, we haven't touched up on net sales, including then recurring revenues of 12 million. And then we have 1 million in professional services fees, as already mentioned. We're growing at 32% year over year in the quarter. So very good. And then overall, I think we do see only, I mean, positives in all the revenue metrics that we look at. So very pleasing quarter, I would say overall. So we are very pleased with the numbers that we are showcasing. On costs, as Per mentioned, I think we're flatting in out, and we also had an EBITDA, adjusted EBITDA of close to minus 19 million, increasing somewhat, but that is also part of what we have guided for in the past quarter as well. as we are also building out or have built out the sales and marketing front end functions in order to enable growth. But this is going forward, will be kind of flattening out. And then also on our cash position, end of year we had 80 million in cash position. And then we closed the 96 million rights issue in Q1, adding 96 million gross in proceeds from the rights issue. And then we have also recouped 5 million over tax credit from the Spanish government, basically for R&D work that we do in Spain. So more or less 100 million plus in Q1 from additional contributions from external sources. And next slide please Per. Very briefly on OPEX. So we do have the OPEX that we showcase here is excluding extraordinary items or non-recurring items, and also cost of sales. And we can see that we have increased the run rate from 119 million to 126 million in Q4 22. And this is a delta of, I mean, 600,000 sec on a quarterly basis. And that's the increase that we have had in the quarter. but also going forward as many other companies, we are also a bit, of course, reviewing our costs and we don't foresee any cost increases going forward. Per, I leave the floor to you.

Thank you, Fredrik. So I'm going to leave this slide up as I try to summarize and then we go to Q&A in a minute or two. This last year, 2022, we focused on helping our customers build out. And as you saw with Telefonica O2, very rapidly scaling up. Although Telefonica O2 does lots of automations and many interesting things and so does Swisscom, what they really, the standout thing that the management really cares about is that they got rid of keypad navigation. So going into this year, 2023, We are now going together with contact center partners that we also signed up during Q4. We are going to go to everybody that has keypad navigation, the large, again, it's the 500 plus contact center. So not everybody, but large enterprise that has keypad navigation. And we're going to be selling the solution, which is a 90 day implementation solution done by the partner of the customer. We don't implement of course, but this way we have a way in and the easier entry in so we can reduce the sales cycle and also reduces our customer acquisition cost, which was the issue before. So the strategy of focusing on existing customers gave us lots of good revenue growth and also now the position where we have a solution where we can attract new customers. We have both the reference and the solution, which is something that people want to do. So very exciting to go into this year. And with the advent of ChatGPT, this also gives us a lot of push in the market right now. So very excited to see that Q4 has showed the growth, but also very excited that teneo.ai is launched. If you haven't looked at our new website, please do, which is our platform website. That's the offering, that's our registered trademark, of course. And then OpenQuestion, which is also on the registered trademark, which is the solution built on teneo.ai. Artificial Solutions, of course, remains as our investor site. But teneo.ai is what the customers see because that's what the customers are really buying. So very, very interesting development there for us going into this exciting year. So that's what we had to say this morning. So with that, I'd like to hand it over to see if we have some questions. And just go ahead and unmute and post your question or chat your question if you wish instead.