Artificial Solutions

JULY TO SEPTEMBER 2024

• SaaS API Call revenues amounted to 9.3 (4.9) MSEK, +90%
• SaaS API Call Volumes amounted to 41.0 million (22.7), +81 %
• SaaS ARR amounted to 54.3 MSEK (34.4), +58%
• Total ARR amounted to 84.3 MSEK (65.0), +29%
• Recurring revenues amounted to 21.1MSEK (16.2), +30%
• Net Revenue Retention Rate (NRR) +127% (146)
• Net sales amounted to 21.2 MSEK (16.4), +29%
• Gross margin amounted to 79% (63)
• EBITDA adjusted amounted to -5.9 MSEK (-13.0), +54%
• Earnings per share amounted to -0.1 SEK (-0.3)

JANUARY TO SEPTEMBER  2024

• Recurring revenues amounted to 57.2 MSEK (44.2), +29%
• Net sales amounted to 57.6 MSEK (44.8), +29%
• Gross margin amounted to 79% (64)
• EBITDA adjusted amounted to -20.6 MSEK (-44.9), +55%
• Earnings per share amounted to -0.1 SEK (-0.4)

EVENTS DURING THE QUARTER

• Artificial Solutions changed name to Teneo.ai and new stock ticker is TENEO from August 20
• Teneo.ai secures new customer and OEM agreement with Valcon, a major consulting firm
• Signed renewal agreement with a large Swedish food grocery chain
• Teneo.ai strengthens the sales team in the US by hiring 2 strategic account and 1 technical account managers
• Teneo.ai introduces revolutionary streaming feature in latest Teneo 7.6 update
• Using Teneo.ai, a Fortune 500 Company has solved the multinational Pain Point of Serving Customers in Multiple Languages

EVENTS AFTER THE QUARTER

• Teneo.ai unveils groundbreaking LLM orchestration solution for customer service automation
• New Audit Committee appointed
• Successfully completed full ISO certification cycle
• Teneo.ai Leads the Future of Customer Service with the Launch of its AI-Driven, Generative AI-Powered Agentless Contact Center
• Teneo.ai Launches ACCelerator Pack for Seamless Migration from End-of-Life Nuance IVR Technology

KEY FIGURES

(For definitions please see page 18)

CEO STATEMENT

Dear shareholders, colleagues, customers and partners:

We are Teneo.ai and we will enable the first Agentless Contact Center in a top 500 Enterprise.

The third quarter of 2024 was a time of revenue growth and a major change for Artificial Solutions. We are no longer Artificial Solutions - We are now Teneo.ai. A large tech customer has proven a path for large Contact Centers which is incredibly enticing.  So, we have launched our vision of the Agentless Contact Center with associated strategy changes.

Teneo.ai

Our product, registered under the name Teneo, has been better known than Artificial Solutions and maintaining two brands for a small company is too expensive. Therefore, the change to Teneo.ai is an important stepping stone to increased our brand recognition.

Strategic Shift and Execution

In early summer our large global tech customer in collaboration with our partner CSGi, significantly expanded their Teneo-based solution by enabling support for 50 additional languages. This was done over a weekend, using the latest available AI-tools and without the need for a project for each language nor for any change in the infrastructure. This milestone cemented Teneo as the leading solution for large-scale call center automation. It became clear that we hold a world-leading position in a focused, yet highly profitable, segment of the AI market, specifically in automating customer interactions for enterprises with large call volumes.

Strategic Shift and Execution Capital

The third quarter of 2024 marked a significant transition for our company as we executed a new strategic focus on the US and UK markets for our direct sales motion. With partners like TechMahindra, Valcon and BSL we have coverage over the rest of Europe together with our marketing. These partners are able to consolidate several customers into one solution, making the customer size and amount of customers less relevant than the resulting API calls. We are implementing a similar strategy in the US and new partnerships will be announced there in the coming weeks. These partners are both go to market and implementation partners that have an important role also in our Direct motion in the US and the UK.

The strategic focus on high-volume customer automation aligns with the broader industry shift. As enterprises move from deflecting customer interactions to seeking efficient, automated phone channel solutions, Teneo stands as the only large scale option. Our unique capability to scale solutions across multiple languages with a single deployment has positioned us to be able to capture significant market share in the US and UK, where 90% of these companies reside.

Agentless Contact Center Vision and Teneo.ai 

We are committed to realizing the vision of the Agentless Contact Center, and Teneo.ai is at the heart of this transformation. We aim to power the first fully automated contact center for a top 500 enterprise, targeting sophisticated customers who understand both the opportunities and risks of modern AI technologies. Our platform helps these enterprises leverage AI responsibly, mitigating risks while driving operational efficiency.

Our Vision is possible although it will take time to realise but the path to the goal will create extreme savings for our customers.

Gecholog: A Strategic Review 

While Gecholog reached market readiness by December 2023, the market for real-world operational LLM models is not yet mature. As part of our third quarter of 2024 review, we decided to open-source Gecholog, offering it as an additional benefit to our customers. We are writing off associated accruals for Gecholog as a non-cash, one-time cost this quarter, and the team responsible for its development has left the company as of the end of the quarter.

Sales Performance and Market Realignment 

Our most important metric is SaaS API Call growth and we report a 81% YoY growth in the third quarter of 2024. This means that we have outgrown the market at a great pace. In fact our SaaS business which is only three years old has grown in SaaS API call volumes 59x, between the third quarter of 2021 and the third quarter of 2024. Furthermore, our existing customers still have untouched areas that we together can grow into.

To accelerate even more at the beginning of the year, we refocused our sales efforts on acquiring new customers and have successfully signed three new accounts. However, by the end of the second quarter 2024, we observed that we were losing a portion of deals, primarily from customers with smaller volumes and an initial interest in chatbots. These customers found it difficult to differentiate between competing solutions, which are often low-cost, thin layers over an LLM model.

Recognizing this, we pivoted in the summer to target enterprises with millions of phone calls requiring automation. Our ability to deploy solutions across multiple languages with ease sets us apart in this segment. We have replaced solutions from Nuance, Microsoft Composer, and Google Dialogflow at key customers and are confident in our value proposition for large-scale automation needs.

To support this renewed focus, we have expanded our sales and marketing teams in the US and UK and narrowed our customer targets to large enterprises, where the sales cycles are longer but offer significantly higher long-term value. As this means that we will have to keep investing in the Sales Process with likely delayed actual cash inflow, we have decided to provide greater transparency to our shareholders. Starting in the fourth quarter of 2024, we will introduce new KPIs to track the number of target accounts and potential consolidating partners in the qualified pipeline stage. Each new customer provides nominal revenue until API call volumes grow, with large customers expected to generate 1 MSEK in monthly revenue within 18 months. Partners that choose to sell one solution based on Teneo to several customers are expected to have a similar trajectory.

In Conclusion 

We still have the largest implementations for Contact Center Automation but attaining new customers in an “AI-noisy” market place has proven to take longer than expected. We maintain our leading position in user experience so our strategic shift towards large-scale call center automation is positioning us for long-term profitability, even though the upfront investment is substantial. The cooperation with our partners is an efficient way of covering a larger part of the market and adds significant market coverage to our approach. We remain committed to driving innovation and delivering value for our shareholders as we continue on our journey towards the Agentless Contact Center vision.

Per Ottosson, CEO

This disclosure contains information that Teneo AI AB is obliged to make public pursuant to the EU Market Abuse Regulation (EU nr 596/2014). The information was submitted for publication, through the agency of the contact person, on 24-10-2024 07:30 CET.