2023 Q3_Earning Release_Final
QUARTERLY REPORT JULY TO SEPTEMBER 2023
JULY TO SEPTEMBER 2023
- Recurring revenues amounted to 16.2 MSEK (10.9), + 50%
- Total ARR amounted to 62.7 MSEK (45.1), +39%
- SaaS ARR amounted to 31.0 MSEK (23.6), +32%
- SaaS API Call Volumes 18.2 million (11.4), +59 %
- Net sales amounted to 16.4 MSEK (12.4), + 32%
- Gross margin amounted to 63% (51)
- EBITDA adjusted amounted to -13.0 MSEK (-20.8)
- Earnings per share amounted to -0.3 SEK (-3.3)
JANUARY TO SEPTEMBER 2023
- Recurring revenues amounted to 44.2 MSEK (28.7), + 54%
- Total ARR amounted to 62.7 MSEK (45.1), +39%
- SaaS ARR amounted to 31.0 MSEK (23.6), +32%
- SaaS API Call Volumes 18.2 million (11.4), +59 %
- Net sales amounted to 44.8 MSEK (32.7), + 37%
- Gross margin amounted to 64% (55)
- EBITDA adjusted amounted to -44.9 MSEK (-58.3)
- Earnings per share amounted to -0.4 SEK (-9.6)
EVENTS DURING THE QUARTER
- Teneo.ai launched Conversational IVR Plugin for Amazon Connect
- Teneoi.ai launched Connector to GCP Google Dialog Flow
- Telefónica launched an integrated Teneo powered LLM pilot
- OpenQuestion 1.1 released - IVR implementation time cut to 60 days
- Renewal of license agreement with a major Swedish Food Retailer
- Renewal of license agreement with HRSA
- HelloFresh expands Teneo to handle voice in partnership with Google, which is expected to increase API call volumes in 2023 and 2024
- Partnership agreement signed with iSolutions, the largest dedicated Microsoft one-stop shop in Switzerland
- Confidential computing security in our SaaS offering
EVENTS AFTER THE QUARTER
- Board of directors initiates a review of strategic alternatives to maximize shareholder value
- Way of measuring ARR will change with start from fourth quarter 2023. ARR metric to be reported as an average over a quarter instead of end of month in order to avoid monthly fluctuations
- Telefónica presented an integrated Teneo powered LLM pilot
- HRSA launched a live Generative AI use case in Teneo
KEY FIGURES
(For definitions please see page 21)
| JUL-SEP 2023 | JUL-SEP 2022 | JAN-SEP 2023 | JAN–SEP 2022 | JAN-DEC 2022 |
|
| Net sales (MSEK) | 16.4 | 12.4 | 44.8 | 32.7 | 45.7 |
| Recurring revenues (MSEK) | 16.2 | 10.9 | 44.2 | 28.7 | 40.7 |
| SaaS ARR (MSEK) | 31.0 | 23.6 | 31.0 | 23.6 | 25.1 |
| SaaS API Call Volumes (Million) | 18.2 | 11.4 | 18.2 | 11.4 | 13.8 |
| Gross margin (*) % | 63% | 51% | 64% | 55% | 55% |
| EBITDA adjusted (MSEK) (**) | -13.0 | -20.8 | -44.9 | -58.3 | -76.6 |
| Earnings per share, SEK | -0.3 | -3.3 | -0.4 | -9.6 | -13.0 |
| Cash flow from operating activities before changes in working capital | -16.2 | -19.2 | -45.2 | -62.4 | -81.5 |
|
(*) The company has changed gross margin calculation and restated previous year figures for comparative purposes. Sales commission plan has been updated and is now linked to SaaS ARR growth. See Definitions on page 21.(**) The company has identified extraordinary costs reported as ordinary in 2022. 2022 EBITDA adjusted has been restated to make figures comparable. |
CEO STATEMENT
Dear shareholders, colleagues, customers, and partners:
We continue to show a strong growth momentum with our combined (non-SaaS and SaaS) recurring software revenues amounting to 16.2 MSEK which is a Y-o-Y growth of 50% in the third quarter 2023.
First Deal with google and deepened relationship with amazon
We are thrilled to announce some significant successes in our partnerships with tech giants like Google and Amazon. We have not only deepened our relationship with these industry leaders but have also closed our first deal with Google in the HelloFresh Contact Center. These developments represent a step forward in our growth strategy and our commitment to diversifying our customer base.
Amazon is the clear leader in new customers in the Contact Center space tightly followed by Google. Microsoft has not been able to convert the large pipeline of such transformations that we saw built up in 2022 and the beginning of 2023 which is why getting the two new partnerships is key to our continued growth.
The partnership with Microsoft has proven to be very valuable to us in a different and somewhat unexpected way in that they are the leader in AI, and we are part of their AI Inner Circle. Partially thanks to this, one of our customers presented the first OpenAI powered solution in the beginning of October.
DISRUPTION BY ROBOT CALLERS
Over the past month, we have encountered a unique situation in our US market as WhatsApp robot callers have caused a disruption to our customers processes, forcing many to suspend their WhatsApp channels fully. This unexpected disruption has had an impact on our Annual Recurring Revenue (ARR), which has fluctuated significantly on a month-to-month basis.
In light of these events, we have made the decision to adjust how we calculate ARR going forward. Instead of relying solely on the last month's recurring revenues, which can be heavily influenced by such external factors, we will from the beginning of the fourth quarter 2023 compute ARR as the average monthly recurring revenue over the quarter multiplied by 12. This change will provide us with a more accurate representation of our revenues over time and better mirror situations like the one described above.
As we navigate through the effects of the WhatsApp robot caller situation, we expect a gradual recovery in our revenues. The change in revenues from August to September for the customers affected was substantial, and it may take a month or two for these accounts to return to the same level as August 2023. We are actively working with our partners and customers to resolve these WhatsApp robot caller issues, and we are confident that we will overcome this challenge.
strategic review inititiated by the board of directors
The board of directors has initiated a review of strategic alternatives to maximize shareholder value, as a consequence of the rapidly evolving market landscape in the field where Artificial Solutions is present.
Our company has a strong market position as a clear leader in our niche, using AI to provide voice-based services. Teneo is built on patented technology and has during 2022 and 2023 shown very strong growth in recurring software revenues (+50% in the third quarter 2023 YoY) - in a market that is estimated by leading industry analysts to grow by 48% per year until 2031.
As part of this strategic review process, the board of directors will consider all potential alternatives that can deliver value to the company's shareholders. Such options may include a sale of the company (in whole or in part), other strategic transactions or the company continuing to operate as it does today with its shares traded on Nasdaq First North Growth Market.
The board of directors has mandated Pareto Securities AS, as financial advisor and to assist the company in its review of strategic alternatives. There is no timetable for completion of its review. For further information, please review separate press release.
strong operational performance and interesting time ahead
In conclusion, despite a temporary setback in the US market, recurring revenues grow strongly, and we remain resilient and focused on our long-term growth and meeting our four Financial Targets. The adjustment in our ARR calculation will ensure a more accurate representation of our performance over time, and our strategic partnerships are opening new opportunities for our business.
I want to express my gratitude to our team for the hard work that the last 12 months have brought with the integration of Teneo in two more Ecosystems while developing leading integration and use of Generative AI technology. A stellar achievement. And to you - our shareholders – your trust in us is what drives us.
Per Ottosson, CEO