Teneo AI AB (publ)

okay it's uh nine o'clock and we're gonna kick this off uh Fredrik can you just tell me am i coming through loud and clear absolutely thank you uh great so we're gonna kick this off uh it is a a very different uh this time around than it was last time in our reporting Q1. Most of you have seen press releases coming out and not extremely communicative because there's been a lot of work that had to be done for each one of those. So I'm going to try to give a picture of where we stand. It is a totally different company. It's a totally different road to market. We're going to grow profitably. And also importantly, it's a rebuilt product. So with that, I'm going to start the presentation presenting. Oh, by the way, this is being recorded. as well, just to make sure everybody knows that. Presentation will be published soon on the web as well. So presenting today is, I'm presenting, I'm the CEO since five years here, so very much responsible for what's been going on, and Fredrik, our CFO, who is also going to be presenting and talking about the restructuring from a financial standpoint, but also, of course, the numbers for Q2. and and starting off with that it is a it's a very a lot of things happened from essentially from February to to June July but very much accelerating also in April so it is a it's There's no real way of sugarcoating it, so what I'm going to try to do is, of course, use AI to explain this in an infographic. Those of you who are avid users of AI will know that this came from Gemini. So Gemini Cloud and CodePilot, of course, get to be part of everything we do, as well as the open source models that we use internally. So I want to start by just going through sort of what happened and where we stand, and I'm going to use this infographic for that. We became very dependent on one partner in the US, and this was not a good idea, not necessarily because it was a partner, but more because this partner, we let them take over the control of the customer in such respect that they were building, and we trained them, and they were delivering to the customer. Now that's the way a partnership should work, but what we also needed to have is not just contractual protection against the partner taking over the business, but also we should have had more engagement directly with the customer throughout the process. So that's something that we totally have learned in how we're going to be approaching this. Now, I've never seen anything like this before, but of course it's been discussed in both Q1 and in other press releases as well, what's happened here. very very bizarrely people that have acted very very differently from what I'm used to in business but that's that's their problem and it became our problem so the challenge was also that we failed to adapt to the buying experience the buying experience today is very much driven by people using AI themselves at home, like ChatGPT or Gemini or something else, and then feeling that the way that we were presenting ourselves was not as cool or as easy to use as these tools are. So we really weren't providing that experience in the first sort of phase of it. And this very much was shaped by CRI and Level Labs and others that were sort of providing that experience upfront. That's something that we missed to adapt to, and our Teneo wasn't really perceived as being as sexy. We tried to plug this by always going for a pilot, but even if the pilot proved that we were much better, it still was difficult to get the CXO Lager essentially to accept that they wanted to buy that product. And also what we failed to do is implement AI for our development processes. So we tried many different ways to break out the old sort of Teneo stack and we broke it up. You might remember we made it into different pieces that communicated with each other so it would be easier. But we still failed to really take the latest AI development tools and use them for our development. And the AI development tools today are, of course, very, very powerful. And that also meant that we had both slower development, but also we failed to adapt the organization to that. So all this resulted in a significant revenue shortfall. It's not we're talking going back two, three, four years in time to see that type of revenue from Teneo, from the product. However, we still have great customers and we're seeing now also that the new product, which I'll come into, is providing great feedback from customers. So all this, of course, led to a liquidity crisis that was well published in press release as well. and liquidity crisis led to us not being able to pay, obviously, suppliers, but also salaries. Also, this led to a pause in the M&A process. We couldn't really keep discussing with the potential buyers when we were essentially in the liquidity crisis, which was breaching the components in the load agreement. So we had to do restructuring in that process as well. That is starting up again soon. I'll come back to that. So we have to make the changes during the summer in the hyperdrive and some of these changes are very painful. um but there was intense internal pressure to really save the company and i believe that that is what we have done so what we did was uh sorry i need to click apparently uh what we did was We started by looking at the Tenio product already back in March, April, saying, okay, since we're not really managing to use AI to rebuild Tenio 8, we're just going to build a new product with the same type of concepts that we had before. So it is a complete refactoring of the product that we've done using the latest AI tools, but also building our own model for AI development. We now have our own model for building, which is the model that not only builds, but also tests the software that we're building. So that's an in-house AI model that we've been building up during this period. Now that enables a lot of the changes that we've done, but it also was really crucial in order to get customers to accept And I'm going to dive into a bit more what it was and how that changes effects. The really regretful thing in this is that because of the cash squeeze and the fact that, well, there's essentially still no cash, but we'll come into that too. We were forced into a collective dismissal and restructuring of our Spanish entity. So there's a great AI team in Spain that is now available if somebody needs an AI team and we're going to be that on channels as well. As of today, essentially, that team is no longer with us. This is very painful. It's a team that's delivered really great results, and it's definitely not the best way to part ways, but it was the only way to sort of manage that the whole company wouldn't have to go into due to the liquidity. So very, very painful restructuring during the summer. which has now resulted in, which I'm going to talk more about as well, of course, the from scratch rebuild of Teneo, which then has produced what we call Teneo 10, is currently in preview, so because of the changes we can't really implement today, so we have a slight delay in implementation, because we're taking it into full production in October. And that of course has to do with the testing schedules. So we are, as you know, we have ISO, SOC, HIPAA, GDPR, EU AI Act, all these compliance things that we need to ADHERE TO AND THAT'S WHAT WE'RE TESTING CURRENTLY SO WE'VE SHOWN IT TO CUSTOMERS WE'VE DONE PILOTS WITH CUSTOMERS WITH THE NEO 10 GREAT FEEDBACK AND WE HAVE TWO CUSTOMERS ALSO THAT ALREADY HAVE SAID YES WE DO WANT TO IMPLEMENT THIS AND ONE IS METRONOMIC THEY'RE GOING TO PUT A VOICE TO THEIR SERVICE NOW an AI voice to their ServiceNow implementation and meaning that Tenio is the interface that gets to talk to customers and patients and employees rather than having an AI model that doing that directly so very very great message and of course ServiceNow runs a lot of the business processes internally at Medtronic and then we have the telco in Turkey which had already started where we're now gonna just MOVE THIS INTO NEO 10 AS WE MOVE ALONG AND THAT IS THOSE TWO ARE SORT OF THE BIG POTENTIALS THAT ARE ALSO GOING TO BRING US UP TO THE GOAL THAT I'M GOING TO TALK ABOUT GOING FORWARD ALSO WHAT THIS ENABLED AND UNFORTUNATELY NOT IN A GREAT WAY AS WELL SINCE These reductions in Spain happened very abruptly. It's a 50% cost reduction in the company. So the company is going forward with using an AI-built process and also running internal processes with AI, which enables us to really restructure very quickly. Now, there's a bit of a lesson in this that we might go into some time, restructuring and ongoing operation with AI is quite difficult. So this is really a complete rebuild of the company from scratch with a lot fewer people than before. but not done in the best possible way. But the results are now that we're going to be at a 50% cost reduction versus before. Also, very, very importantly, is because of the rebuild of Teneo, the cost of sales, so it's a factor lower, it's a factor 10 lower, meaning that we can enable now a much larger ICP. It used to be that we dictated who we sold to by the fact that our instances cost quite a lot to provision. So it costs a lot to set up a new customer, meaning we couldn't really sell to smaller customers, which is why we went after the 238 customers that we did. This ICP is much, much larger, and that already shows in the pipeline that we can now go after also and win business, but also make money on business that is smaller. So although that revenue footprint is not going to be as big, There's going to be as good. Well, the profitability is going to be good. So strategic focus going forward, given all this, the big restructure, the new build of the product and rebuild of the organization is that we're going to focus on the existing customers and pursuits to bring us to profitability. And that is the focus. So we're now moving away from trying to grow into a cost structure. Instead, we're trying to reduce the cost structure, get back to profitability and then build from there. Partly this is because it's obviously impossible to compete with the Americans that have like billions of dollars of venture capital. And we're going to compete instead from a happy customer perspective in a traditional sense, like a true Swedish company would do as well. So that is our pure focus. We're going to go cash positive. The whole organization is triggered on that, is bonused on that. And then we're going to be growing from there. Also, comment quickly on M&A and legal. M&A process will kick off again. That is not going to be the focus of the company itself, rather the board and of course JP Morgan. And there is still interest in that. The technology is still very interesting in the space. The legal process we're going to also not focus on, but we are going to try to find somebody that finances that. And we have discussions on that already. Somebody that finances the legal process, that is the process with the partner. And then the proceeds of that will, of course, come to the shareholders. So that's sort of... This is the infographic that captures what happened during the summer. A lot of really painful restructuring. Really like to emphasize again, we have a great team in Spain. that is very versatile and useful for AI development, but it's just too big for us and the revenue footprint that we have going forward today. So with that, I'm going to let Fredrik talk about the main work that's been happening on the financial side and the restructuring side during the summer. So Fredrik, over to you.

Yes, thank you. So a lot of happenings during the summer. As most of you have followed in press releases, as I mentioned, and one key event during during the summer was the fact that we in constructive discussions with our large lender Capital Four agreed on a principle agreement to restructure the existing senior debt of 290 million including accrued interest And this essentially means that the company is becoming debt-free. At the same time, we also managed to receive 10 million bridge funding from a shareholder. and that will partially be offset in the rights issue that is ongoing as we speak. So, 8 million will be distributed to the rights offering and 2 million will be later on be repaid to that shareholder. During the summer, we also agreed with the lenders that provided 25 million in a subordinated loan earlier in Q1 to essentially set off that against shares at 2.5 times the issue price in the ongoing rights offering. And following this transaction, Capital Four will hold close to 30% in the company. and they will also have the right to the first 25 million as similar to a profit sharing agreement that will go to the lender in scenario of a public bid and similar. And on top of that, in the rights offering, 10 million SEC will be also repaid to the lender. So I think all in all, a very favourable outcome for all parties in this transaction, I think, with the current structure. We can go to the next slide, Per. Just briefly on the rights issue that is ongoing. So there is a fully secured rights offering bringing in SEK 74 million to the company. excluding transactional costs and this was also then announced on August the 10th. Subscription price will be 0.05 SEK per share and the rights offering was covered with 20% of existing shareholders including board and and management, and 80% was covered through a guarantee led by Pareto. I'm coming back a bit on use of proceeds, et cetera, but as we mentioned, 10 million from the rights offering will be used to repay the lender as part of the agreement. 2 million will also be repaid to the bridge loan financier. There will be some some repayments and then we will also have some transactional cost of approximately 10 million for for the different transactions related to to these kind of joint transaction. I think they are all dependent on each other. So, um. And, uh, yeah. The intention now, as Per mentioned, I mean, it's basically to fund the operations and the development of Tineo 10 until we can hit cash flow positive. So very much as a smaller company and a lower cost base and then driving growth from there. And as you can see, also the dilution for shareholders not participating in the rights offering is quite substantial. So hopefully, as many existing shareholders as possible will subscribe in the rights offering. I think we can move to the next slide, Per. And just recapping on what Per already said. Unfortunately, we have been forced to take measures in order to reduce the cost base. And part of that is also that we are actually today dismissing and will dismiss over the autumn all employees in Spain which is a really sad day for us since it's a lot of well reputed and skilled people in Spain. But that has also been, I mean, measures that we have been required to do in order to also save the company given this challenging situation that we have been in during the summer and following the exit of the partner that Par mentioned earlier. I think we can... Over to you, I think.

Yeah, so maybe just add to Fredrik's there. Affärsvärden has been looking at asking us questions. Apparently our press releases have not been informative enough, but it's been in Affärsvärden as well. Fredrik, so the CTO, CFO, COO, so we're four people in management team today and we're all taking our pro rata of this. Maybe that's an important thing. Now, if we have been, press releases have not been informative enough, it has been very very difficult negotiations with many stakeholders at the same time and sometimes things could not be published and sometimes they could that's why we're trying to bring everybody up to speed now so everybody has the same information but yes we are taking our prorata of course in this and if you look at the valuation of the the 30 percent versus three and a million essentially the lender is converting at a billion valuation SEC, which is kind of interesting in this as well.