Teneo AI AB (publ)

Okay, I think we're going to go ahead and start because I'm going to just give a thumbs up like Nicolas. I see you. Can you give a thumbs up if you hear me well? Excellent, thank you. Great, you can find the presentation as PDF on our investors page, which of course is artificial solutions.com investors and I'm also going to be sharing it here in the teams channel. There's also recording of this. in case somebody would like to see it later, we can organize that too. Yet another quarter of really strong growth. We are in the middle of a bit of a tornado when it comes to artificial intelligence. I can assure you that we are in the middle of it. We know exactly what's going on and we're working with all the right parameters in the new space that has popped up as well. And the big question that I have for this year is new customers. And we are building a very solid pipeline of new customers as we speak. So it's really looking promising with our new positioning, which is open question as a lead into customers. So I'm going to go in a bit more into that, but I just wanted to share that the team has presented yet another great quarter, great management of our existing customers and really, really good growth. Presenters today, me, Per Ottesson. I've been in the space for a long time. I am obviously quite old then, but I do have big experience both from AI but also from the space of conversational AI, which is the space we're in. Fredrik, our CFO, lots of experience from private equity and SaaS companies, and also from Pareto. So great experience that management team presented to you guys today. So any questions are welcome. So this is artificial solutions for those of you getting a bit of a crash course. For those of you who are new to this, I'm going to start up at the top, the top left. It's a very busy slide, of course. We're founded in 2001. So if we look at valuations of companies that are founded this year in this space, they're exorbitant. And it's actually good to have experience in this space. So I'm a bit surprised about that. The space of GPT is no different than the space of conversational or natural language applications that we've seen before. It's a different way of processing. It's a different injection. We used to have maybe more of an old-style carburetor and now we have injection. But it's still the same thing to build a car pretty much on the outside. So very interesting for us that we have such long experience. We have patents, very strong technology platform in this space. Our solution that we take to market open question optimizes routing. We call it intelligent routing for the contact center to better serve our customers and reduce the cost of serving the customers. So it's a very strong offering in that space with the biggest references in the world. Some of these like Telefonica doing millions of calls per month where the system picks up the phone. Tineo is unique in that it's built from the beginning to be language agnostic, so it runs 86 languages and dialects. We have in operation roughly 18 languages today that's expanding as we speak, and some of these customers, as they're expanding, they're also adding new languages, which of course adds new volume, which is a revenue driver. So Tenio, the base platform, allows humans to communicate with applications through voice, speech and text. What we sell is the open question on top of Tenio because that's our B-chat into the customer. Once the customer has taken that into their heart, they can start doing the other things as well and build more use cases. Tenio can leverage either GPT as an engine or CLU or Google Dialogflow, Amazon Lex or any of the other AI engines out there in supporting our customers. So it's very easy to integrate whatever AI technologies are out there. Before we take the bottom left, I'll just move to the bottom right, sorry, top right. Great customers, great references. I'll go into a few more quotes on this as well, but very stable customer base growing quite well as we will see as well, their usage of the platform. Again, that's a prime revenue driver and also of course the driver of gross margin. So at the partner side, again, the top right, you see three partners at the top. These are ecosystems that we're now a part of. That was an important goal that we had this year in this quarter was to become a part of the Google and AWS cloud offerings as well and not just the Azure. And what that means is that if a customer is developing a contact center based on AWS or on Google, then they have an approved solution from us that they can use. Meaning that when we come to a customer and say AWS Connect, it's easy for them to start using our solution open question on top of that platform. So that's very strong for us, very important to us. Azure is a very important partner to us, but they're not leading in the contact center space. The leader right now is AWS and number two is Google. So that's why we also needed these this year. So great references, three great ecosystems to be part of. And then we have partners that are actually taking this to market as well. Some really, really great companies out there working with us. And of course, integrating GPT, CLU and other technologies into the solutions at the customer. So a lot of our pipeline resides together with these partners. Take Mahindra, for example, great partner with lots of great cases going on in the US as we speak. And then I'm going to go to the bottom right and talk about some of these numbers. We already spoke about the languages, but this software as a service API call growth is quite astounding. And the interesting thing with this is that we don't need to do anything with our organization or change anything in the platform for this growth. The way the platform has been built over the years just means it scales very, very well, which is not a given in the software as a service space, as we all know. So very, very strong growth and very happy that the platform is supporting this growth without any problems whatsoever. Eight and a half API calls happened per second in the platform during Q2. That is very strong. That also, again, is a testament to the performance of the solution. And there's no competition that's really close to that. So we have some competitive solutions out there, but they're more in the space of maybe one API call per second in the installations. Huge DIFFERENCE IN THE AMOUNT OF PERFORMANCE THAT WE CAN CRANK OUT IN IN THE PLATFORM WE HAVE US OUR ARR TARGET 200 MILLION AND OF COURSE CASH FLOW POSITIVE BEFORE THAT IN 2024 WE ARE TRENDING ON THAT LINE OUR REVENUES ARE SHRINKING THE COST GAP AS WE SPEAK WE'VE ALSO DONE SOME COST OPTIMIZATIONS AND WE'LL CONTINUE TO DECOST OPTIMIZATION SO GAP IS DECREASING FROM TWO SIDES AND WE'RE GOING TO BE CASH FLOW POSITIVE BY THE END OF NEXT YEAR and the 200 million SEC ARR target is, of course, very important for the valuation of the company and way beyond what any of the other high-value startups in the US that we've seen in the last few months have. Interesting stat is that Swisscom measured the transactional NPS. Transactional NPS is the net promoter score. So the customer satisfaction, how likely are you to recommend the solution to your friends, your family, your customers, the people you interact with? versus the other solution. So the other solution was a human picking up the phone and our solution was the bot picking up the phone and routing you to the right place. And it was 18 point higher transaction NPS. So lower cost and higher customer satisfaction when you implement open question. We also have both SOC 2 and ISO 27001 certifications now. which is very important to our customer base. That means that they can entrust us with their data. We also even support confidential compute, which we're absolutely by far the only one to do in this space, which means that the data is encrypted even as it's being processed. So even in memory, quite important. Now the bottom left, look at this chart. We're really, really trending very well on this. The SAS product was introduced in Q1 of 2021 and the customers that that are now growing are the customers that we took during Q2, Q3, Q4. So we did a consolidation. We worked very hard to make sure these customers were successes and make them references. And then this year we launched open question to start then taking more new customers. But all this growth is from that customer day. So I'm very happy that they're happy with our product, but also the fact that it's growing very well. So we're exiting Q2 here with 32.1 ARR. in the software as a service base. You see the total revenue on the side there approaching 40 million, which is also then very, very strong numbers that we're doing right now. So very happy with the quarter, very happy with the development so far this year. And moving over to the market that we're addressing, not going to go through all of this. Some of you have seen it before. I do want to highlight the 48% CAGR. This is a Gartner estimate. I also want to highlight that the market is quite small still in 2023. It's still a lot of professional services in this market. So a lot of building. But as we move along, it's going to be more and more software content. And we are very strong in this market. We have in the range of 15 to 20%. So we've grown even more since we looked at this last. We're growing faster than the market. But we have 15 to 20% of the API calls or sessions or transactions in this space. what Gorton calls interactions, which is very, very strong. And again, the biggest references by far in this market. We have some interesting drivers. There's a law in Spain that says that a call center has to limit their wait time to three minutes. That's going to be a driver for us. We think more countries in the EU might be moving in the same direction. We're sick and tired of waiting on the phone. We're sick and tired of pressing keypads and getting lost in long menus. We want to get service immediately, which is of course what we should expect as consumers. At the top there says open AI. Of course, chat GPT or GPT as is the base model here has done a lot to this market. There's been a lot of experimentation during Q1 and Q2 by customers. A lot of people are trying. What's really being deployed right now is mostly GPT in tech companies as a part of their offering. So somebody like Grammarly you might have seen. and deployed quite a good GPT use case. In the enterprise so far, we have not deployed any live GPT deployments because there's still questions on how to use this, how to train the model or not to train the model and use what's called prompt injection instead. And nobody really knows where that's going to move. That though has died down a bit, the hype, and now the hype is get real use cases in and the call center is going to be one of those hot use cases during the autumn. So really looking forward to that. and GPT has really helped drive the awareness about what AI can do. So we're very happy with that. Here's our offering. And as you can see at the top, it says teneo.ai. We don't take artificialsolutions.com to the market right now. That's our investor name. What we're really taking to the market because we saw what customers really know about is Teneo. Teneo is the platform you open up. It's the platform you work in. It's what customers see every day as they work in our in our technology, in our SaaS platform. So, Teneo AI has launched a product. That's the first product we launched. And it's a way to, within 60 days, accomplish something that customers have not been able to accomplish before. And that is, customers are tired of being forced to listen to what key to press. They're tired of press one for invoice, press two for support, press three, four. And then once you press three, two for support, Do you want support on your iPad? Do you want support on your... So the whole menu structure and tree is something that is replaced by open question. And why do you want to do this? Well, because 15 to 20% of all calls are misrouted, either because customers are just pushing their way out of the tree or because they don't understand the tree because the tree is not their problem, it's your organization. So they don't know how to maneuver these choices. And we've done a big study together with Contact Babel, who have looked at this, and 15 to 20% of the calls are misrouted. We can decrease that and actually give a cost saving of 9% out of the box in 60 days with open question. And that's what we're taking to market. So instead of a keypad navigation to NEO or open question the solution based on the NEO picks up the phone, listens to why you're calling today, you express yourself in a natural sentence, and it will intelligently route you to the right person. And that's the first step. After that, you can build all sorts of automations and do all sorts of things to make customers even happier. But that's the first step and it takes 60 days to deploy. It used to take years to deploy this type of solution. So results are happier customers and lower total cost of ownership. And we have the references to prove this. Again, the only ones in the space to have large references. Swisscom, very big user of our system. Telefonica, very big user of the system. And they're happy to talk about this. There's YouTube videos, Vimeo videos, all sorts of testimonials. And of course, other large users of this platform are very happy in using it. Biggest references in a space that's growing and space that's got more attention now with AI and conversational AI focus thanks to GPT. And that's what we're building our pipeline on to get the new clients in now that we lowered the cost of bringing new clients in. So very happy with the development with the pipe and with this solution. Just very slow, just a brief summary of where we stand and why we are where we are today. So we started in the year 2000, started building on technology. It was what we call a professional services driven black box. So we would install it, we would run it for the customer. That's what most conversational AI companies do today. We then started with what we call fake SaaS. We put something in the customer site, or sorry, we put it in our own server, our own data center, but we ran it for the customer, but it was still, a server or a virtual server for that customer, still supported by professional services. We started doing omnichannel and transactability very far ahead. And we then took that technology, patented it, rebuilt it into a software as a service platform where everybody runs in the same code base. But of course, they're all separated, so there's no data leakage. And that's proven again by certifications. But it means that we can now run more customers with the same organization instead of having to scale the organization with customers. So very strong SaaS offering built in 2021. Started getting our first customers, starting getting the feel for what solution to develop on that platform, that's open question, but also how to run that platform in a cost efficient way because it was quite costly to run it in the beginning and during this autumn that cost will go down and that enables us to bring in more customers as well in this and that's the running of the complete platform. Open question launched during 2022 great references in 2023. We wanted the partnering with Google and Amazon as well as the Microsoft that we already had get on their marketplaces and we started them pushing open question in the market end of Q1 and are now looking for sales expansion in the US and some countries, the large countries in Europe. That's our that's our focus space. So that's our brief history. It took some time to get here, but we are certainly poised for growth ahead. And we're already delivering growth as well. So here's some July numbers that we're sharing today since this report is a bit late. Of course, being a small company, we're waiting for all the big ones to report first. But being a bit late, we also have the benefit of having July numbers already. and the SAS ARR growing from July 22 to July 23 from 21 to 34 million sec. So massively up performing the market still and the API call volume growing very healthily and more than doubling which is also a testament then to customers really growing their usage of this platform. Of course, API calls makes the biggest gross margin, but customers are expanding seats and the base platform, which is why the revenue is expanding a bit slower than the API calls. But we will see more connection between that in the future as the gap as the API calls become a larger part of the total revenue. So I'm going to give it over to our Chief Financial Officer Fredrik to talk a bit about the Q2

operations and numbers. Switch on here.

So good. So let's start a bit. So we have some really promising highlights that we also kind of showcased in our Q2 report. So we now are partnering with Google. And that is a very important step in us, you know, being on the three hyperscalers platforms. And also we have, we are now available also on Genesis app foundry with our open question solution. And in addition, we also held an AGM in June and the key highlights from the AGM was that we now have two new board members with Lars Root and Mattias Bjorkholm joining the board and both of them with very kind of knowledgeable in the SaaS space and also in the contact center software space. So very happy to have them on board. Then we also had a new warrant program launched. And also what can be important for shareholders to acknowledge there is also that the existing employees in order to take part of the new warrant program, they also have agreed to surrender their old warrants in the previous warrant programs. warrants will be canceled here in Q3, when we have onboarded all of the employees in the new warrant program. So some of the old warrants will be canceled basically. And then as Per mentioned, I mean, we have very, very strong growth in our SAS ARR, 60% plus year over year, June versus June. So very satisfying numbers there. And also the same then also on API called volumes. And also I will go into more details on EBTA and OPEX going forward. But the kind of trimming activities that we have taken on reducing OPEX is clearly visible in our numbers in Q2. and will also be perhaps a bit more visible also in Q3 as well. So far, maybe we can move to the next slide. Thank you. And on this slide, I mean, I think I will just mention a few highlights. I think we have mentioned a lot already on our SAS ARR and API call development. But obviously that we have the sales metrics that keep growing both on our SaaS business, but also on our on-prem businesses is really satisfying. And of course, we are also then experiencing strong quarter-over-quarter and year-over-year sales growth on basically all sales metrics, whether that is on SaaS or on-prem. So really happy about that. And our recurring software revenues amounted to 14.6 million SEK in Q2, so plus 60% versus Q2 2022. And obviously we are then also growing faster on our recurring revenues than on total net sales. And that is also a consequence of the transitioning from a kind of hybrid PS license model into a pure software model or SaaS model. and our net sales amounted to 14.8 million SEK in Q2 2023 versus 10.2 million SEK in Q2 2022 so up 45 percent and basically the delta then 200 KSEK roughly in non-recurring revenues only and that is also I mean If we look on the graph, we can also see that we now in the quarter had 99% recurring revenues as percentage of total sales. And that is, of course, an important metric in showcasing we are now a pure software company today. Q2 gross margins amounted to 72% and was a big improvement versus Q1. partially because of lower commission, but also that we also increase our volumes on both the SAS volumes, but also on the on-prem volumes. So that's a consequence of that. And we also continue to reduce our OPEX in line with what we guided in our Q1 report. And headcount wise, I mean, we are eight people less when we leave Q2 versus when we left Q1 this year. And that is obviously being visible in numbers. But we have also on top of that also, of course, run through other OPEX as well to become more efficient in how we run our business. And this also resulted in improving our EBTA. So our EBTA adjusted EBTA amounted to 13.9 million SEK in this quarter versus close to 21 million due to last year. So a significant improvement and I will come back a bit more on OPEX as well on the coming slide. And we also ended the quarter with close to 60 million in the bank and I should also say that we also in this number we also have one customer a big customer who has changed a bit their way of invoicing and I think if we would have received that invoice we would have more or less close to 60 million in the bank end of Q2 2023 so on solid grounds for for continued growth basically. We can go to the next slide please Per. Just briefly on our SAS API call volumes. Per mentioned this already, but this is obviously a a key KPI or indicator on how our customers' application and the usage of them, and also as a trend follower in showcasing how they are growing, whether they are growing or not growing. And basically you can say the more applications slash solutions and covered regions slash number of use cases, the higher API call volumes. And our SaaS API call volumes are growing in a fantastic way, and the growth pace in July 2023 is even higher than in June 2023. And then we can also see that, I mean, those two months are, you know, record all time high months in terms of, you know, volumes and revenues. And we also expect that our existing customers will continue to grow volumes. And the key driver for that is also additional live use cases that we expect to see volumes from in the second half of 2023. And then one interesting note on this is also that given the volumes we have now on the SAS on SaaS API calls, we can just see that if we are continuing to grow faster than the market, so i.e. 48%, according to Gartner, our SaaS API call volumes within, I mean, year end this year, more or less have 10, grown 10 times in two years time. So I think that is quite an amazing number just to see that we have actually delivered a lot during these two years. And also then if we look on concrete numbers, we can just see that the monthly SAS API call volumes grew 117% year over year, June 23, and also then 7% quarter over quarter. And then if we look ahead into July, we can also see that July 2023 versus June 2023 showed an increase of 11%. So growth continues also following end of quarter. I think we can go to the next slide. Yeah. Not to say too much about the obvious here, of course. The growth in our SAS model is also evident in our other key metrics SAS ARR. SAS ARR grew with 60% year-over-year June 22 versus June 23 and 61% year-over-year July 23 versus July 2022. And then we also saw month-over-month growth, July versus June of 7%. So same message as on API core volumes. We see very strong growth and going forward, it's looking very promising on continuing growing volumes as well. Next slide, Bernt. Yeah. And this is basically, I mean, just outlying both the SAS business and also the on-prem business. And obviously, as you can see from the right-hand side there, total ARR growing 57% year over year and SAS ARR growing at 60% year over year. So clearly we see growth, a bit higher growth, on SaaS, but also very solid numbers also coming from the on-prem business part of our total business. And of course, I mean, as I already mentioned, I mean, the transitioning into pure software company, it's very encouraging. to see that our recurring revenues is continuing to grow in a very high pace. And currently we do see significant volume potential also from our existing customers to continue to grow. And yeah, we are very confident in the continued growth basically. But overall, I mean, just to conclude, a very strong performance in the quarter. And also if we look versus also with our internal budgeting, I think we're exceeding those numbers quite a lot year to date. So I think it looks very promising going forward. Per, OPEX slide, please. And then just as we mentioned in Q1, we have simplified our operations. And as part of that, we have also trimmed the organization and also reduced the number of head counts with eight people, quarter over quarter. but also reduced other OPEX costs in the quarter and we see the impact in reduced OPEX already in the quarter and we have also provided a bit kind of adjusted numbers on this as well as there are some costs that or activities that we have implemented and we know will be visible in Q3 as well so but on this we are not planning any further headcount increases nor decreases short term. And now with annual adjusted OPEX run rate going from 116 million in Q1 to 113 million in this quarter. And that is obviously excluding extraordinary items and cost of sales. All in all, this also means that we currently have a monthly OPEX level of slightly more than 9 million. But also if we look for the rest of the year to give some guidance, I think we will obviously continue to trim OPEX, but also our costs of sales costs, which is which is also part of our compute cost for delivering the SAS business to our customers. So we will continue to trim those costs, but we do not see any material reduction from the current OPEX levels. So I will conclude with that.