Teneo AI AB (publ)

Okay, I think I'm going to go ahead and start with just some housekeeping stuff and then we'll kick off in 30 seconds. So you are all muted by the system. If you have a question, raise your hand. I will unmute and after that you will have to unmute as well so that we there's two unmute procedures and that's and of course the presentation you will find this recording. It's being recorded and you will find the recording on our website. probably later today. And with that, I think I'm going to go ahead and kick off. I think you've seen us before. It's Fredrik, our CFO that you see on the screen, and I presenting this. Now, this of course expresses what we did before we arrived here, but at this point we've been here for about two and a half years. So now it's probably more relevant to speak about what we're accomplishing here. And then in February of 2021, we launched a completely new platform. It was a cloud based platform. Multi tenant is based on Microsoft Azure. And it's a real software as a service platform. So what I mean by that real software as a service means that you don't install one platform per customer. You have one platform that you run all the customers in, meaning that you reach a state where everybody has the same code base, which is a very important step in making sure that you can have increasing gross margins as you grow. So it's a very important step for us to be a pure SaaS company. Two years later, so today in 2023, and in March of this year, there were 7.3 API calls per second into this platform. So 7.3 times per second. This is the platform that didn't exist in 2020, We launched it in February in 2021, put the first customers on it in April, May of 2021. And now 7.3 times per second an API call happens to this platform. And it's B2B enterprises, professional users that are putting these systems into place. So it's not consumers, it's not gaming, it's really business processes that are running on top of this platform. And I just think it's an astounding and amazing accomplishment by the team of engineers that we have here at Artificial Solutions. It's not a big team, but it really is world leading. This is in my, what I know in my experience, I have no concept of any platform in the AI space, which is B2B with this type of volume. Now there's of course lots of gaming type and chat type applications out there, but this type of volume for real business processes, 7.3 times per second. is just absolutely astounding. So very happy with our accomplishments. And if we then translate that into Kronor, which is also quite important, we see that our growth in ARR is 134% year over year. So the ARR went from 12.9 to 30.2 million sec. Now we're just talking about the new SaaS, right? The platform that we launched in 2021. So something that didn't exist in February of 2021, it was launched at the tail end of 2021. is today a 30.2 million SEC ARR business. On the API call side, even more astonishing growth, so from 5.4 to 18.9. And that means that the growth rate in using this massively outperforming the market, as you probably, or some of you may know, we were already at 15% of the technical side of the market. So the amount of transactions in Gartner's projections for this virtual assistant market in the contact center, And since we're growing with 243% this last 12 months, obviously we're also taking more and more market share in there, although we don't have any updated numbers from Gartner in there. So that said, astonishing by the team, customers really love using our platform since they're growing their usage. It is a small team of B2B customers that are really more and more embedding this into their business processes, really, really like, and that builds the foundation for us going forward. I want to quickly touch base on what is conversational AI for those of you who are new shareholders. Of course, we have some new shareholders this quarter, also very happy with that, and welcome to the team. Conversational AI is you have a piece of software where a person comes in and asks for something. It's a service request, it's a request for information, or can you help me get something done? And then the software orchestrates understanding what the customer is talking about, finding the information, connecting the information, and maybe also doing something like, for example, reconfiguring the person's router or ordering an iPhone for them or sending them a box to send their iPhone back in. So an action needs to be taken. So the system needs to understand what the person is talking about, but then also coordinate the business process throughout this. And what you get, is you're going to get better net promoter scores and cost savings if you implement this in the right way. An example is where AT&T today has more than 300,000 support calls per month that are managed totally by the system. So no human even gets involved in that. And those are support calls about routers in the home and what they call smart home solution. So very, very powerful cost savings if you implement this in the right way. And we'll come to a bit how we think customers should be implementing this going forward. The market we are in is called the contact center software market. And we are a part of that, which is the virtual system market. I'll come to that in the next slide. But the global contact center software market was worth 29.5 billion in 21. And it's growing with a CAGR 21% to 165 billion in 2030. So this is relevant because of the size of this market, a lot of new players are coming into the market. but probably most important is that today it's the large hyperscalers which are taking this market. So it's the Microsoft, Google, Amazon that are taking a large portion of this market. We have the largest references in building a virtual assistant in this market in the world. So we have official, very large references that nobody else has in this market. And that includes the hyperscalers and other associated companies along there. So very proud of the achievements we've done in the last few years in getting these references. For example, Swisscom recently became the third highest valued brand in the world, according to markets or brands, and partially because of the high customer satisfaction they have, which the CEO has been out commenting is born on this solution that we have. So very interesting market, it's growing. And in that there's a sub market that we call virtual assistants in the contact center. That's the one I mentioned, Gartner, that's growing 48%. We are roughly 15% of this market today from a tech perspective. And as customers grow their usage, we will also get more and more revenue. Today, this market is largely a services market. Most of our sort of legacy competitors, they build services for their customers. So they have a lot of professional services, they install them on a virtual server, and then they and then they maintain that for the customer on-prem. We, of course, have a different model, so we have less revenue in the beginning, but more as we grow. But we're 15% of the total transactions in this market today. Obviously, OpenAI has changed the trajectory of this market, so I think this forecast is probably going to need to be rewritten. What happened for the last two, three quarters is that all of a sudden CEOs are talking AI. That was not the case four or five, quarters ago, but since let's say December timeframe, the kids of CEOs have been coming home and saying, oh, I used this great protocol chat GPT and now everybody talks AI. Of course, different strands of AI, but also I can. I'm very happy to say that we're part of the Microsoft inner circle, so when we made the bet in 2021, which hyperscale it to go with, we had no idea that Microsoft would be the lead investor in open AI, but that also means that we get. the first data versions of everything that comes out from there. And we are leveraging today GPT-4, which is the model that is not the one you would normally access, but the next model in OpenAI, leveraging that through Azure in beta still, and still not ready for enterprise use, but several of our customers are trying what they can do to enhance the platform effectivity even more using the OpenAI platform. It's a very interesting space. Lots of stuff happening with open AI, even more interest and specifically I would say from investors in the US and CXOs in the US and Europe. So that fits us very well from a customer perspective. I'm not going to read all of this. I want to point to the graph at the bottom. The SAS ARR is 30.2. You also see we still have a sizable legacy business. That's also growing. That means our legacy customers also growing their usage. quite happy and proud of that as well of course we are trying to move everybody over to SAS because that reduces our cost of maintaining them and we definitely hope that our customers will follow us into the SAS world as well now that they see that very large customers are using this so O2 Telefonica official reference they spoke in June about having about a million calls per month into the platform highly likely that they have a lot more now without officially without. Of course we know how many they have, but they haven't been officially spoken about that since actually July last year. But with O2 Telefonica, a highly regulated market is Germany and they're using this platform. That means that pretty much anybody could be using this platform. It's being used in health care. So also very highly regulated environment, HRSA public sector in in the US. So we see that customers are really ABLE TO USE THIS PLATFORM EVEN IF THEY'RE IN HIGHLY REGULATED INDUSTRIES WHICH MEANS MOST CUSTOMERS SHOULD BE ABLE TO MOVE OVER AS WELL TO OUR SAS PLATFORM SO THAT ALSO OF COURSE INCREASES THE GROWTH IN THE SAS PLATFORM IT WILL OF COURSE ALSO GRADUALLY MOVE THE LEGACY OUT BUT AS YOU SEE OUR TOTAL REVENUE IS ALSO GROWING SO WE'RE QUITE SURE THAT WE'RE GOING TO KEEP GROWING THAT TOTAL REVENUE PARTNERS WE'VE BEEN WORKING QUITE HARD TO SIGN UP NEW PARTNERS BECAUSE THE PARTNERS ARE IMPLEMENTING OUR SOLUTION AND With the momentum in AI and with the momentum in our growth and seeing that we're closing the gap in our cash flow, we're also investing now in getting new customers. And the first one is an interesting one. It's AVH. AVH signed with us in, I think it's February, March of this year, maybe January, at least it was in Q1. AVH is a partner and a customer, so they're going to be building for themselves, but also going to market with the solution. And the interesting thing is, they're using the solution in reverse of what all the other customers are doing. So in the US, if you have affiliate networks, you get a lot of leads and those leads you are allowed to call. In Europe, this is not a business that's very appreciated, but you can then call these customers or prospects and ask them some qualifying questions and then put them in with an account manager. That today is done by call centers, primarily in Mexico, but they're now looking to replace those with technology. So having Tenio, our solution, call out and do that pre-qualification and then connecting or scheduling with an account manager or salesperson. The volumes here are very, very big. So this is a very interesting area. AVH is an investment company that has lots of these types of companies underneath and very interesting to see. We just started the implementation there about a week ago. It's probably going to be done somewhere in the range of Q2. Azure, of course, still a very important partner to us. We are a what they call marquee ISV, independent software vendor in the cognitive space, which of course is also where all the open AI solutions are in. But we were also ISV of the year for Microsoft here in Sweden. Of course, our contract with Microsoft sits in Sweden since we're a Swedish company. So very much we are using Microsoft to help us appear a lot larger than we are. We're of course large from a tech perspective, but not from a company perspective. So that's very important for us in the US market primarily. Tech Mahindra, some beautiful implementation in Germany and are working now. with several new prospects, CGI as well. We're doing events together, CSG growing healthily as well. So very interesting partner base growing quite a lot. I need to just highlight this as well. I know we said in the Q4 report because it was delayed, but it's quite important. We have also ISO certified this new platform, also that in record time. So very happy with the team in this. So let's move to the thing that happened during Q1 I touched on this during the Q4 call as well. And some of you might have noticed this on the website. So we've moved to using teneo.ai as the brand that we take to market. And in that brand, we have a solution and that's made possible by the advancements in AI in the last few quarters, maybe even months. So this really came to us when we were talking to Swisscom and Telefonica that are using our technology for many things. And what this executive layer of those two companies said was the thing that has really transformed how we work is that we no longer force our customers to listen for 200 seconds to different choices and then choose with the keypad or with the keyword where they want to come to when they call us. So the keypad navigation or the old IVR, the old phone system, why everybody still has that is that it's been incredibly difficult to implement an IVR type system in the world with, sorry, I'm getting some here in Sweden, that's very uncommon, so I need to just move around a bit. So we, instead of having keypad navigation when you come in, so press one, four, press two, four, press three, four, what Swisscom and Telefonica were talking about, the executive management we're talking about is we really liked that we got rid of that because now they greet their customer with, why are you calling us today? Please state in a full sentence why you are calling us today. And if the customer can't clearly state why they're calling, the system will ask disambiguation questions. It will ask questions to understand why you're calling. And this is made possible by Teneo. Many have said that they do this before, but nobody has really succeeded, which means that today a large portion of the world, when you call a large company, it's going to be keypad navigation. And that's something that we can get rid of thanks to the new development. Ontineon AI, which is our platform, which lots of customers are using and building new solutions. We built a solution which can now be implemented in 90 days. And that is also a much easier way for us to go to market. We don't need to sell to AI people necessarily. We sell the end product. So the use of the AI. So getting rid of press one, press two, and all the way to 10 is something that's really going to impact customer experience. And we've already seen that. And Contact Babel, which does research on English-speaking companies in this sector, they say that 82% of the enterprise world still has keypad navigation. A further 9% has keyword navigation. But the type of open question that we have implemented, they are not aware of any such references. And we have them, and oh boy, are they big. Swisscom, for example, every time you call their hotline, you will be talking to Teneo. And you will be doing that in five languages. So if you happen to be speaking French, which people of course do in Switzerland, then you will be able to speak French to it. If you're speaking English, it will speak English to you. So it switches this automatically. And you see here that Christoph, who is the CEO of Swisscom, he talks about this as he's out talking to customers and to investors about how this really changed the hotline experience for them. In here, there's a video. I encourage you to look at that on YouTube or Vimeo, which is Roger Dill, who implemented this at Swisscom. He's a Swisscom employee, and he talks about how this was implemented in 90 days. So it's a new solution where you utilize all the latest technology, ChatGPT, OpenAI, CLU from Microsoft, which is also a revolutionary new product that arrived in Q1. All of this you can utilize and build fantastic experience in the contact center by just picking up the phone and routing to the right person. So getting rid of the keypad. You don't have to force your customers to pay attention. You don't have to force your customer to listen in and understand your divisions. You could just have them quickly say why they're calling. So you see that Contact Babel says that 42% of your customers are irritated before they even come to stating the question. So arriving at the right person, arriving at the right queue, is something that already irritates customers. So it really is a problem. Customers are frustrated if you reroute. So if I now, let's say, I called this morning, for example, Dandryts kommun to ask about if I have to submit a change request for changing the color of my house. Apparently I had to, but before I called, I had to listen and I chose the wrong one because there were five choices and none of the choices was really what I was looking for. It was how they're organized. So it's always outside, inside out. Instead with open question is outside in. So the customer states what they want to do. And again, it's something we implement in 90 days. The total cost of ownership here is very low. So we're talking that routing is going to cost you very little. It's going to cost you a few cents on the dollar. However, rerouting customers is going to cost you a few dollars. When I now arrived at the wrong person, I had to speak to that person, and they had to reroute me, so reconnect me to somebody else, and that costs a lot of money. So we launched OpenQuestion, which is a solution. It sits on the platform Teneo.ai. That's now our main website. That's our main go-to-market. That's our brand. It's a registered brand since many years back. And artificialsolutions.com, which is a bit long of a name, is now where our investor solutions collateral set. So when you as an investor want to find that you go to investors.artificial-solutions.com. But if you want to look at our platform or solutions, it's into neo.ai. So with that, I want to give over my presentation now to Fredrik. Actually, no, I'm going to do the first one, Fredrik, if that's OK, because there's still some non-numbery stuff there that I would really like to do. And Q1 operational highlights. First one, we just discussed launch of open question. It is what we're taking to market. We're really, really pumping this in the market space today. And lots of emails going out, lots of meetings happening as we speak. And this is how we're going to be attracting new customers because with the revenue base, seeing the growth in customers, we're not comfortable with also going out and recruiting new customers. Although we do know that it takes a little time to start making cash on new customers. We believe that this is really the time, especially with what's happened with ChatGPT. And the integration that we've done through Microsoft Azure Cognitive Services is gonna be something that our customers are gonna be able to use in real production usage, probably at the end of Q3. And this has to do, of course, with data protection, with who owns the data, who processes the data, but also it's a bit of legal ramifications right now around this. But we believe at the end of Q3, they'll be able to use this in Teneo. So Teneo is the process layer that manages the dialogue with the customer, manages your processes, and then calls the different AI solutions that are needed to fulfill the request of that customer. Also calls the more mundane things like your inventory system, your CRM system, your invoicing system, et cetera. So we are the orchestration layer for that. And that's where we excel. We launched Teneo.ai, the new offering website. I encourage you to go look at that too. We're really working on the search engine optimization of this. Our marketing department has been working overtime and we now at number three in generic search. Generic search is really what drives traffic. Ad-based search is not that effective. But generic search, we're now number three in Google in the US for this open question solution. So if you search for conversational IVR, of course, this depends a bit on time of day and so forth. But in general, when we test it, we are on the third place. So we also, of course, successfully closed the rights issue, 96 million SEC. Very thankful for investors and very much for new investors. Welcome. Fantastic to have you with us in these times of AI. The first outbound calls trials initiated when I spoke about AVH, also very interesting that could open up a whole new revenue, so like a new solution. So open question, not sure what that would be called, but outbound calling could be something in the same space. Of course, SAS ARR, very high growth, 134% year over year, March to March. And again, in a product that really was launched in February, March of 2021, first customer sold in April. a brilliant result. Growth in SAS API call volumes 243% year over year. This is really something that customers like and customers are really, really using this. So very happy with that. We also made some simplification measures. We found that our organization was set up more maybe according to what it was before we took the 25% cost down in 2021, 2020, 2021. So we also simplified the organization further, which leads to some cost reductions as well, but really the point was to just make decision-making faster and less focused on anything else than building and selling at this point, which is really the most important things to drive, of course, our revenue and cash flow. So with that, I'm handing over to Fredrik, our CFO.

Thank you, Per. Thank you. Let's move to the next slide there. Thank you. So a bit of a continuation of growth and ramping up, but we are, as Per already said, I mean, we are very, very excited about the development we have on our platform and also the revenues and API code volumes generated there. So I think it's a key message in this report, which we are also very satisfied with as as you can probably imagine. On this slide you see this SAS ARR development quarter by quarter and we can just see that the two KPIs that we are tracking is SAS API call volumes and that's the key operational measure that we drive the business on and we will also showcase in this presentation a bit more on why this is important and so on. But we also then see that our SAS ARR has grown to 30.2 million in March 2023. So that is kind of year over year growth of 134% and also quarter over quarter. So Q4 22 versus Q1 23 with 21%. continued strong growth on SAS ARR. And if we then also look on the slide there, we also showcase that actually our SAS API call ARR revenues have grown with 46%. So that basically means that our volume linked revenue base is growing faster than our subscription piece on SAS, which is also very much linked to what we have driven the business against. So we can just conclude that overall, I mean, very strong growth and it's also looking very promising going forward with significant volume potential on our existing customer. I think we can go to the next one, Per. and continuation of growth and graphs. But with this slide, we just want to showcase, as I already said, I mean, API called volume is a key KPI that we track and follow monthly and over time. And here we can just conclude that we grew volumes with 243% year over year and 36% quarter over quarter. So a very strong growth on the usage of our platform. We can go to the next slide, Per. Here also showcasing, I mean, what I already said in the initial slide, it's basically to showcase that a key driver of our SAS ARR the last year and also quarter over quarter has been API call growth. And as you can also see, then we have less of growth in the other piece, which is basically, I mean, the revenues that are not linked to API calls, so subscriptions, data, et cetera. And that is also an effect of the fact that we have focused the organization on driving growth on our existing customers. And the reason for that is also that it costs less for us as an organization to drive that type of growth. So also a kind of evidence that what we have driven the business against or towards is also materializing in results that we wanted to achieve. So very positive with this development. And also, I mean, coming back a bit to where Per started, I think, I mean, we have close to 600% growth on API call SAS API call revenues year over year and 46% quarter over quarter and this is also I mean an evidence of what we have communicated I mean the last two years I would say that we have some really interesting blue ship customers that can on their own behalf continue to grow and scale dramatically from the levels that we have seen in the past and also from the current levels. So this is clearly an evidence of the scalability in our model. and also what is interesting is also that we now have one large SAS customers generating plus 90% gross margin at the current API call volumes and for those of you that have been on similar calls previous quarters also recall that we have you know showcased this hypothesis and it's very satisfying that we now can showcase in with actual numbers that we also reach this plus 90% gross margin on our customer level. So yeah, this showcases our hypothesis and that we also will reach those gross margins on our existing organizational levels with our customers. So we're very pleased with this number as a CFO, I would say.

Next slide, please, Per.