Teneo AI AB (publ)

Good morning, all. It's nine o'clock. I think we'll go ahead and start. I want to make you just make sure that you all understand that this is being recorded. So we are all aware of that. And thank you very much for attending our Q2 report at NEO AI. This marks a year of being Teneo AI rather than artificial solutions. I'm very excited to present this report and what's happening around us as we speak. So my name is Per Utzon. I am the CEO of the company since about four years back. And Fredrik, the CFO, similar, also came in at the same time. And we're here to present to you today. I'll start and then Fredrik will dive a bit deeper into the numbers. So I'm going to start with the market update, but we've seen at Teneo another quarter of a great year of year growth. We have a fantastic pipeline development, a great gross margin development, but maybe more importantly is what's happened in the industry over the summer. So I'm going to start with that and talk a bit more about that. We at Teneo have been preaching the benefits of making it easy for customers to reach your customer care, your support, your customer experience organization. And we believe that that is through the phone. And what we've seen during the summer is that the phone has had a renaissance and has sort of popped up again as being the most important way to provide service to customers. Chat is a great way to talk to, for example, your personal AI agent. I chat with Gemini, ChatGPT, et cetera, all the time. But it's not a great way to get service from customers. So if I'm a customer of, let's say, Telia, and I go in and chat, you'll find that the chat is very limited. And there's many reasons for that. There's security reasons. There's the format itself is difficult. And it's also how much resource has been added to actually building a great chat in terms of connecting at the back end systems, which, again, has to do with security. and the pain of making it secure. So chat is not really the way that the world is going forward. We've been preaching and this summer has really validated that. And then you can also say, just download our app and you'll get the support through the app. But downloading another app with 99 apps on your mobile phone is also not the way to go. So phone is having a big moment right now. And this small Swedish company, Teneo AI, with a great team in Spain, in the US and in Sweden, have built a solution which is the best in the industry when it comes to automating phone calls. So let's start with what's happened in the industry. So there's a company that only does research in the contact center industry. Again, the contact center industry is this industry where you have software that receives the phone calls, routes it to the right person, records, et cetera, and does all this stuff with the phone call itself. And that industry, the leader in that industry is Genesis. And the leading conversational analyst in that space is DMG Consulting. And in the latest DMG Conversationally, I report that Donna Flass publishes. Donna is the CEO of the company or the president of the DMG Consulting company. She says that CAI is replacing legacy IVR at pace. What does that mean? That means that going from press one, press two, press three to reach invoice, to reach support is something that people are no longer wanting to do. And we've been preaching this, of course, for a few years. But what we see now is that there's real solid interest. We see it in our pipelines. But we also, of course, see it in this report where she says that there's a doubling in customers that are going to replace keypad with a real IVR, which is a conversational AI, so a way to speak. Welcome to Teneo AI. How can I help you today? She's seeing a big increase in that. Also, of course, multimodal voice, so having voice on both sides. and being able to use voice, but also get a WhatsApp maybe, or get a confirmation on an iMessage. That's also quite important. Also something we've been preaching and using for the last few years. So very excited to see that. DMG Consulting was rated the best independent research and audit firm in this small niche called the contact center. This is obviously not the gardeners, the foresters. These are focused only on one thing. They're focused on the contact center. So a great amount of people listened to the contact center industry. What they also did during the summer, which then again supports the fact that I say we're leading in this space, is that they did a report on CAI companies and rated the companies. And one of the companies they rated is a company called Teneo. And in Teneo AI, we won in all categories. So we were the best vendor in all categories. This research is a technical deep dive together with our team, but it's also deep interviews with five of our customers. And she's done the same. So her team has done the same across many different vendors. There's vendors like Cognigy, which we're going to talk a bit more about, vendors like Google, Microsoft, Amazon, et cetera, in that. And we ranked number one. We had a perfect five in all these different categories that you see here. So very, very proud of that. But of course, very strong testament to what we do. This is a researcher that is used by companies like Genesis, which is the leader in the contact center industry and also frequently cited by them in their in their market communication. I missed putting this in the in the presentation, which is on the web, but we do have a webinar with Donna on September 3 for those who are interested in hearing more and also hearing how you can return on investment with conversational AI, so with deploying Teneo technology. It's a bit of a long URL there, but you can just Google Teneo DMG and webinar, and you will find it on the web as well. So I can recommend you to tune into that. So that's something that's very key to us. Now, the second key thing is that Genesis, that we started partnering with at the tail end of Q4, has really developed into a strong partnership together with us. So Genesis is the biggest contact center provider. Number two in this space is nice, nice in contact. And then number three is in our space, the enterprise space is AWS Connect. We work with Genesis and AWS Connect. There's good reasons for that because we have a very, I just see your lady shared an easy link in the chat if you want to click and join that webinar on September 3. So Genesis is the biggest, AWS Connect is number three. We work intentionally with those two because we complement their offering. So if you look at Genesis, we have a synergistic integration. Our technology integrates with their technology without taking the call out of their platform. And that's key. Everybody else is trying to move the call out of their platform. And that leaves the customer without statistics, without all the analytics, et cetera. And it's not a good solution for the customer. Obviously also not a good solution for Genesis. We don't, we keep the call within the platform. We also are aligned in terms of the commercial model and how this grows for their salespeople. So we drive what's called Genesis AI experience tokens when they sell us through their app foundry, which is their marketplace. We're collaborating now with Keep Regional Leaders, but also the CSMs, so the customer service managers, the people that make sure that the customers are happy, but also the account executives, of course. And we have several campaigns ongoing. We have 162 customers that we have started working on together with them. So we're looking at their biggest customers, the ones that have more than a million phone calls a month, and are working together with them to give those customers the experience that they deserve as well. So very happy with that. And the real crown jewel that happened in the last few weeks is that we were invited to speak at the Genesis Experience event in Nashville, which is their big customer event. And we're invited to speak on stage there, which is quite key for us as an app foundry partner to be able to do that. So very happy with what's the development within Genesis in the last few, in Q2, but also during the summer. Now in this space, the other thing that happened is that there was a big acquisition. There was an acquisition of Cognigy. Now Cognigy is a company that is building technology the same way that we build technology. And this is a validation that you're not gonna be able to just take OpenAI, ChatGPT, Gemini, or Amazon Bedrock, and just put an interface to that and hope that it's going to provide the right answers to you. It's incredibly difficult to teach ChatGPT in your own model to recommend buying a meal instead of buying an individual hamburger and a french fries. It's incredibly difficult to teach an LLM to do things like that, whereas in our space it's not. So we call this the hybrid model. Cognigy has a very similar technology to ours, They also have been copying our website for quite some time. They are a company that is primarily in Germany, which is part of the reason why this was acquired by NICE. They have a very strong presence in Germany, but have gone more in many, many customers and not the really large implementations, but very similar in this space. And they were a partner of NICE. Now NICE went ahead and acquired them for a billion dollars. which is 26 times sales. And that sales includes professional services, which of course we don't have. So it's a very interesting, both valuation of our type of technology, but also the fact that like Kane Sims, who is an influencer in this space, says that the AI arms race in CX has now begun. And I think that really strengthens our position together with Amazon Connect and so AWS and together with Genesis because they also need to now counter this and make sure that they have a great offering on voice automation. So very, very interesting development. It shows that pure LLM together with an interface is not going to work because then NICE would not have paid this type of money for the company. There's plenty of those where you take an LLM and just slap an interface on top of it. I call that putting lipstick on a pig. but instead it requires a real platform and that's why NICE plugged down a billion dollars. What also happened during Q2 is that we got word from one of our customers about the accuracy that they're now seeing with their multi-million calls a month implementation of Teneo. What you see here is that it started out a year ago with 40% of cases automatically resolved. So people calling in and getting an experience where they talk and they solve what they called about, which could be support question. It could be a question of invoicing, et cetera, et cetera. This is in a large, magnificent seven customer. So very large volumes and 91% was sold automatically. 9% were transferred to an agent, but then it gets transferred together with a string, which shows what the customer is calling you about. So it's a much faster, you could transfer to the right person, but it's also a much faster way to meet the customer need. And of course, this provides happier customers. The cost difference between a person answering and in this case, and the automation answering is $5.60. And this is 10 million calls a month. So 9.1 million calls per month are $5.60 cheaper than working with a human. It gets better service, you answer much quicker, customers are happy because they get instant service, but also very, very big savings. So another update going for 40, we had 60 in the fall, and now we're at 91% with this customer. So very interesting development. Now, what's the reason for all of this? And for those of you who haven't seen these presentations before, it is because we have a higher accuracy and understanding. That same customer says that we have 99% accuracy and understanding, and that's something you reach after fine-tuning the model in a few hours or, well, we just had a case where we did it in six hours and reached 99%. This is done by an external company. The table you see was done by an external company, and that company is called Ciara. They are the biggest testing company for voice solutions, again, within this niche, which is compact center. And what you see here is as compared to some of the other ones. And we just heard a very interesting thing from a large customer. We're working in the pilot, sorry, in the proof of concept where Google dialogue flow that they currently have cannot discern between yes and no. So in 48% of the cases, when you say no, it actually thinks you said yes. And that's because one syllable words are very, very difficult to discern. for traditional AI models, which are not hybrid like ours, the TLML model that we use. So with that market update, so in summary, big things happening, big acquisition happening, showing that this is the right route to have a platform that has this hybrid type of technology. That's a nice acquisition, rated number one by the biggest, the most trusted analyst firm in our space. and the partnership with Genesys really moving along very, very well as well as with AWS Connect. But our main focus is right now is still Genesys with only one case going on with AWS Connect, whereas most of our pipeline is together with Genesys. So moving on to a business update, which is more numbers like, we had a 129% net revenue retention, still very proud of same store sales of what our customers are achieving. Very, very happy with this. ARR 89 million in constant currency. The dollar impact is quite large. Also, what you see now is seasonality in our numbers, meaning that as since we're at capacity at both of these customers, like I said in Q4 and Q1, the projects we have, we're now doing 100% of the calls. That means that now we see impact of seasonality. So the way we calculate the ARR is we take the last three months and we take that times four. The average of the last three months divided by. So one month and then times 12. That's how we calculate it. And then you see an effect where it actually looks a bit softish, but I believe that we're still tracking to our goal, which is, I sometimes say $20 million, sometimes 200 million sec. We have, of course, calculated goal on large US customers in dollars. And the dollar, we're not really sure what's happening with the dollar, if it's up or down. It hasn't been this low since 2021. But in concert dollars, 89 million. And we believe that we're definitely on track to doubling that with the new projects coming in. So that's still our goal. And that's still what we're working for. So the growth in SaaS ARR year over year, 60%. In that total ARR, we did have some customers that we have removed. These are chat customers that has to do with our upgrade to the latest version of Tenio, which is coming, where basically we're going to be maintaining one code base. And we've been sort of forcing customers to live to the code base that's now because we can't maintain several versions backwards. That just costs us too much money for chat customers, which typically have quite low revenue as well. Bit of movement in the ARR, on track for the goal, which is our 200 million sec, $20 million goal, and to reach that in Q1 with a pipeline map. 88% gross margin, very, very proud of that. That means also that our EBITDA is actually in line, although we're slightly softer on the revenue line, having to do with the dollar as well. And then revenue growth on SAS API calls is 81% year over year. Still growing very, very rapidly year over year with some seasonality seeing from Q4 and Q1. So how are we doing the investment in new sales? You probably also seen that our cash burn is lower, but we did invest in new sales. We are slightly, we're moderating the investment a bit pending getting those first customers in, which out of the pipeline. But if you look at our pipeline development, It is kind of difficult to follow if you're from the outside, but maybe it's just best to say that it's doubled almost from Q1 into June. And the reason for that is primarily that we're moving our into the sales stages, the later sales stages. So it's not adding too much from Q1 since we added quite a lot in Q1 in terms of qualified leads. Now we're more in the later phases, which is where we're defining the project or we have a pilot or a POC or even in negotiations. So our pipeline is only measuring the license or the subscription. We never use the API calls in our pipeline, has to do with many things, but the most important part of that is that it's very difficult to estimate that. So that's why we have that as a target and we don't put that in the pipeline. Several interesting developments here. Cloudhesive is an AWS Connect implementation partner that we signed up with. I think that was Q1, but we've been working with them for a short while. And we have our first proof of concept, sorry, pilot together with them, where Cloudhesive is going to be building that out for a PE-owned company where the PE owns many similar companies, and they're going to be using that solution for all of them. And interesting is AWS Connect has decided to participate in that and are very interested in this. So that's our first case also together with AWS Connect. Genesys, I already mentioned. Azure, we have in the pipeline, two cases that were Microsoft has come to us. So we're quite happy with that too. But again, the strongest that we see right now is Genesys and AWS. EBO is our second, Second way to work together with the NHS, actually third CGI, which is renewed together with them, our contract with the National Health Service. But EBO delivers AI solutions into the National Health Service and we're now collaborating together. A proof of concept. actually in Qatar so not really not in the NHS but to show that's also an english-speaking hospital to show them to be able to showcase real live usage of this solution to neo into the NHS as well so ebo very happy with that partnership very interesting company as well the others well the other new one is FGS FGS is a division within the Vodafone company it's a tech implementer. So it's an ice, let's call it an implementation specialist on technology that is owned by Vodafone in Turkey. And Turkey is sailed up as a very important part of our pipeline. Of course, Turkey has a large in house, sorry, in country population, which means that companies have a lot of inbound phone calls. And it's also quite a strong space for Genesis. So that's how it's sailed up and FGS established partner that is helping us in these cases as well as going to be participating in implementing them. So very happy with that development too. In the investment in new sales that the drivers, the big investment this year is of course the US and the big drivers are Michael and Lee. Lee having come from Genesis and then worked in adjacent spaces to Genesis is our key. It's our key liaison with Genesis of course. being very well known within the Genesis community, also within the partners. And then Michael Kenney, who has been a head of business development for companies like Ingram, Dropbox, and Symantec, is leading the charge in the US. So very happy with our progress there in terms of building pipeline. We're going to start seeing deals in Q4 in the US. And in the meantime, of course, Europe is delivering in Q3 as well. So one thing I get quite a lot of questions about, apart from are LLMs going to eat your lunch, which of course is a nice answer by plunking down a billion dollars on a company that uses the same type of hybrid technology as ours. The second question I get quite a lot is what's the impact on tariffs and other things happening in the US. And I added the point from Q1, which is the fourth one, We do see a lot of uncertainty in making decisions in Europe, primarily at this point, because that's where we're in the negotiation phase with several customers. But we're seeing that there's more hesitancy in actually committing. So what we added during the quarter is we build out pilots or POCs for the customer to show that it works very, very quickly and easy to implement. And that's, of course, because of our great solution architect team that are able to do that as well as being solution architects and presenting the solutions. Otherwise, the dollar impact is, of course, quite large to us, as you see in the constant dollar versus the other reporting. And cost savings are in focus in the US. That is positive for us, especially when we are on the voice customer, because that delivers a lot of cost savings. And of course, we have local US delivery, so we're not really impacted by tariffs. at least at this point, and I don't see any real way of doing that either. So that's the impact from what's happening in the US. Operational highlights before we move into financials. So some interesting renewals that have happened, of course, like CGI, Medhelp. We also have moved BPM, which is an Italian bank, to a SaaS offering. We're very happy with that. That means that we now have a bank in the European Union that is using the Software as a Service solution. That means that the Software as a Service solution can be used by pretty much anybody. So we meet all the security demands with also the new ones, DORA, D-O-R-A, that have been applied to banks. That means that anybody could use our SaaS offering. It's very highly secure and the most secure I was looking at a picture, Donald Trump's going to say the most secure and beautiful in the world, but it is the most secure, the most certified ISO, SOC, et cetera, that we have, that we've implemented during the last few years. Obviously the 81% year-to-year growth, very happy with the SACE API call growth, volume growth, and improving profitability is quite important to us. Of course, that gross margin is what pushed us to cashflow profitability end of last year. And that's something that we see that with adding these new customers in the pipeline, we're going to get back to that as well. So Q3, Q4 are going to be strong with that high gross margin. So very happy with that. And with that, I'm going to move over to Fredrik to give us the financials in a bit more of a deep dive.

Thank you, Per. I think we can jump to the next slide there. Thank you. You've seen this slide before, shown by Per. So I just wanted to emphasize, I mean, that we are reporting a very strong year, year over year. We continue to see a very strong NRR. And also quite important, you know, also if we look a bit for the future also that our revenue model really scales and I think we have also mentioned that we are working quite a bit to lower our delivery costs etc. in the past quarters and we also see impact from that so in essence I mean the significant volume impact from higher API call volumes show that we actually have a very high-degree operational leverage in our revenue model, And that is also emphasized there in our strong and record gross margin of 88% in the quarter. And for us driving the business on a daily basis, I think this is key, you know, that we can see that adding more volumes will further improve our profitability and also our gross margin. And that is what we see in the quarter, I would say. We can move to the next slide, Per, please. Again, we experienced a very strong growth rate year over year in all our sales numbers. And in the second quarter, the internal focus has been very much on securing renewals with our existing customers. But also as Per have mentioned, you know, that we are we have been qualifying the pipeline that we have created in the first quarter 2025 and also building further for our long-term growth very much in the quarter. As has been apparent in our revenues, currency has had a significant impact on our ARR and revenues during the second quarter 2025. We have been guiding for our currency exposure. I think during the fourth quarter of 2024 and also the first quarter 2025. And it's apparent with close to 70% of our revenues in US dollars, the appreciation of the SEC in 2025 has had a negative impact, obviously. Currency adjusted, our SaaS ARR still grew with 60% year-over-year, which is a very strong number, I would say. We also see continued growth on our SaaS API called volumes and revenues growing 69% and 81% respectively year-over-year. and as said in the quarter we have renewed with existing customers and also focus very much on our pipeline and also maturing the pipeline coupled with also then continuously trying to drive price increases with our existing customers as well. Also, which is important for us working in the company and have been part of the company for four or five years, It's key that we also continue to increase SAS revenues as a proportion of total revenues. And in this quarter, we had 63, 73 percent of totals coming from SAS revenues. So very, very important there. And also, we continue to only have recurring revenues. and we think that is quite important and also then looking at a bit on the company that was acquired that had a significant part being professional services at the much lower gross margin usually we see you know having pure software revenues is key for long-term value creation so that is something we will continue working with gross margin as said growing steadily and at 88% this quarter which is a record level we also invest in sales and marketing as communicated in Q4 and Q1 but we also keep a strong cost control and we can also see that we have improved our adjusted EBITDA versus previous year amounting to minus 3.9 million SEK in the quarter and we also see a strengthening or improvement in our cash flow generation as well versus prior periods which is also very positive I would say. Also, we talked about the impact on our revenues from especially US dollars, but also Euro. We can also conclude that we have a lot of staff outside Sweden as well, and also other costs denominated in USD and Euro. So we also get a kind of a natural head share also from having costs as well, not just revenues in those currencies. So I think that's important to stress as well. We can continue to the next slide, Per, please. Our NRR basically measures how well we manage to grow our existing accounts. And a number exceeding 100% means we are growing in this aspect. And in the quarter, we had an NRR of 129%, which I think in the B2B enterprise software space is a very, very strong number. And yeah, we're very pleased with which continue to show that kind of high level on our NRR numbers. Next slide, Per. And for those of you that have been with us on these calls for a period of time, you're well aware of this, but I'll reiterate still, because I think it's an important thing to consider. So API call volumes on SaaS, I mean, that's a key indicator of how our business grows. So this is a key, KPI is an indicator of how our customers' application and usage of them are growing. And the more applications, solutions, covered regions, the higher API call volumes. And we grew the volumes versus Q2 2024 with 69%. But we also experienced a slight decrease versus Q1 2025. And the decline in SAS API call volumes during the second quarter is related to seasonality or built out solutions. mentioned by Per already. And we see higher volumes also in the beginning of the third quarter. So we can already now see that, you know, when we look at the July numbers, they are higher than the numbers we have reported in the second quarter. Also important to stress new volumes are on the way as we can see from our pipeline development and volumes coming as we close new customers, obviously, but also new projects with existing customers. So I think very hopeful for the future. And we also expect existing accounts to continue to build out, as said, and also that we will be able to really deliver on our pipeline shortly. So we see a lot of potential for the future, basically. Next slide, please. ARR, as said, currency had a negative impact on RIR in the second quarter. Therefore, it is important to show the currency adjusted growth rates. And the sales ARR in constant currency versus Q2 2024 grew with 60% year over year. And the total ARR grew with 21% year over year, Q2 2024 versus Q2 2025. So overall, very solid numbers, I would say. We can move to the next slide, Per. Basically the same slide as as the previous slide, but with unadjusted currency and obviously the growth rate in actual exchange rate amounted to 49% year over year for SAS ARR and 13% for our total ARR. So a bit softer numbers when looking at actual reported numbers versus currency adjusted numbers. Next slide please. Very pleasing again with our gross margin. We continue to improve our gross margins in Q2 2025. 88% is a record gross margin for us and show that basically that we can scale with higher API call volumes. We also show this including and excluding commission costs since the commission costs can have a significant impact on us and the gross margin in a short period perspective. But in this quarter, we did not acquire any new customers and therefore the gross margins are the same. But as you can see at the higher level than before, so a very solid gross margin in the quarter, I would say. Next slide, please. OPEX in Q1 2025, we guided for increased costs as we continue to invest in sales and marketing activities. That is still the case. But despite our guidance there, we have flattish OPEX run rate Q2 2025 versus Q1 2025. So, in essence, we still keep a lot of cost control as per already also mentioned in his earlier here during the call. And we will continue to invest in sales and marketing. But we will carefully steer investments a bit based also on our new customer wins. So cautious approach and on investments, but invest in the right things. That will be key going forward in H2 2025. Next slide, please. cash position looking strong as we started Q3 cash included including collected receivables and the quarter amounted to 49.4 million SEK so we in essence we start the quarter with a very strong cash position for capturing the opportunities here in Q3, Q4, and it's going to be very interesting to see the execution of our pipeline here in the next quarters. Next slide and over to you, Per.

Well, thank you very much, Fredrik. I'm just going to reiterate a bit and add one more thing. Very strong growth year-over-year, as we said. Very interesting to see what's happening with our Tenio 8, which we're launching actually in six or seven weeks, but we're already using this in some customers. And of course, that's one of the reasons why Banco BPM can move to software as a service. So we hope that that's a trend that we can push more customers over to software as a service, especially those that are willing to use voice, because that's really where the future is. But the last point here is something that I added in this operational highlights. So we have three opportunities right now in pilot POC, and these are large opportunities and one in negotiation. What does that mean? Well, if it's a negotiation, they've already made the decision to buy. It's just a question of getting the contracts together. So this one should be announced very shortly. And if it's in pilot and POC, there's an evaluation period, but also all of those three are within this quarter. very strong pipeline and the reason that the pipeline is double is primarily because we're moving those opportunities forward towards a closing. To get to that $200 million, $20 million target, what we've said is we need essentially three of the size of our largest customer or five of our mid-sized customer to reach that and that's definitely what we have in the pipeline. Very happy with our development of our pipeline. Very happy, of course, with the results and the fact that our technology has achieved great results with Donna in DMG Consulting. So with that, I'm going to leave it over to Q&A. And as always, you have to raise your hand. I unmute you, and then you get unmuted as well. And the reason I hesitate is because I don't see that. on my screen, but let's see what happens. Let's see, Forbes, if I can unmute you. I can. There we go. And now you can unmute yourself, Forbes.