Earnings call transcript: Teneo AI AB Q1 2025 sees mixed results, stock dips

Teneo AI AB’s recent earnings call for Q1 2025 revealed a mixed financial performance, with the company reporting an EPS of -0.02, in line with forecasts, but falling short on revenue expectations at 29.5 million USD against a forecast of 30.25 million USD. Despite an initial 2.96% pre-market stock price increase post-earnings, the stock later plummeted by 19.24%, reflecting investor concerns. According to InvestingPro data, the company’s market capitalization stands at $34.81 million, with analysts anticipating sales growth in the current year. InvestingPro’s Fair Value analysis suggests the stock is currently fairly valued.

Key Takeaways

• Teneo AI AB met EPS expectations but missed revenue forecasts.
• The stock initially rose but then dropped significantly by 19.24%.
• Notable growth in SaaS ARR and strong gross margins were reported.
• Strategic partnerships with Genesys and Microsoft were highlighted.
• Future revenue growth remains a concern for investors.

Company Performance

Teneo AI AB showcased robust growth in its SaaS ARR, achieving a 101% year-over-year increase. While the company reported an 86% gross margin, InvestingPro data shows the last twelve months’ gross margin at 16.34%, suggesting potential variations in calculation methodology. The revenue shortfall compared to forecasts raised concerns about growth momentum, though historical data shows a strong revenue CAGR of 12% over the past five years. InvestingPro subscribers have access to 12 additional key insights about Teneo’s financial health and growth prospects.

Financial Highlights

• Revenue: 29.5 million USD, below the forecast of 30.25 million USD.
• Earnings per share: -0.02, matching the forecast.
• Gross margin: 86%, indicating strong profitability.
• SaaS ARR growth: 101% year-over-year.

Earnings vs. Forecast

Teneo AI AB’s EPS of -0.02 was in line with expectations, but the revenue miss of 750,000 USD suggests potential challenges in meeting market demand or competitive pressures. This revenue shortfall, while not drastic, may have contributed to investor caution.

Market Reaction

Initially, the market reacted positively, with a 2.96% increase in pre-market trading. However, this optimism was short-lived as the stock price later fell by 19.24%, closing at 0.68 USD. This volatility highlights investor uncertainty despite the company’s strategic partnerships and operational strengths.

Outlook & Guidance

Looking ahead, Teneo AI AB aims to achieve an ARR target of SEK 200 million by year-end, focusing on acquiring large customers and shortening sales cycles. The company continues to invest in expanding its presence in the US and UK markets, leveraging partnerships with industry giants like Genesys and Microsoft. InvestingPro analysis reveals the company operates with a significant debt burden, with a current ratio of 0.9 indicating potential liquidity challenges. Discover comprehensive insights about Teneo and 1,400+ other companies through InvestingPro’s detailed Research Reports.

Executive Commentary

Per, the CEO, emphasized the company’s leadership in voice-based AI automation, stating, "Voice really acts as a firewall in itself." Fredrik, the CFO, highlighted the company’s focus on increasing customer base and API call volumes, noting, "We are focusing on getting more customers and driving API call volumes."

Risks and Challenges

• Revenue growth uncertainty: The revenue miss raises concerns about future growth.
• Competitive pressures: Increasing competition in AI automation could impact market share.
• Market volatility: Significant stock price fluctuations may affect investor confidence.
• Dependence on strategic partnerships: Reliance on partners like Genesys and Microsoft could pose risks if these alliances falter.

Q&A

During the earnings call, analysts inquired about the dynamics of ARR growth and the company’s partnership go-to-market strategy. Executives clarified their approach to currency effects and hedging, providing insights into their financial strategies amid a challenging economic environment.

Full transcript - Teneo AI AB (TENEO) Q1 2025:

Per, CEO, Tenneo: So for all of you to know, this meeting is being recorded. So just from a privacy perspective, you’re aware of that.

Presenters today is gonna be me and Fredrik. Fredrik is our CFO, and, of course, I’m the CEO of Tenneo. And I think most of you have heard us talk before, so I’m not gonna do a whole lot of more introduction than what you see on the slide. So this was a very interesting quarter with a lot of activity happening in Tenneo. Obviously, one of the big things is that our investors or a few investors, but very strongly decided to support our growth in The US, which has also been our main focus for the quarter.

So hiring has been a large portion of what we’ve been up to, and we now have a complete organization covering The US with both customers and partners. We also spent a lot of time on renegotiations. Typically, our MSAs, our master service agreements, are three years. So of course, a lot of those have come up now for renewal, which means that we have renewed with our large customers. And in a few cases, also managed to increase the prices for the ones who don’t have big enough volumes.

We pretty much we’ve been quite hard on increasing prices there as well. So that’s also been an important milestone this quarter. But most importantly, it is the pipeline building and a totally different momentum in the market. So what I would like to do is start with a market update to tell you a bit about what’s going in the market on in the market and, how we’re capitalizing on that, as we speak and why that is helping us grow our pipeline right now. So the first thing is that everybody talks about AI being something in customer care.

I am in The US today. I was at a dinner yesterday with a lot of people from the industry. And, the big thing, of course, the big piece of news is that OpenAI is not gonna go for profit. So it will remain a nonprofit organization. That is very interesting because that means they won’t be able to bring in the types of money that they were looking for to further expand their LLM footprint.

Of course, they’re the ones who’ve spent the most and might be in the lead or not in the lead, but everybody thought the LLMs were gonna be the the solution for customer operations in the beginning of the year, but the sorry, beginning of twenty four. But that has switched shifted, a lot recently, and we are now capitalizing on what I would call the second wave, which is a bit after the trough of dissolution with the LLMs. We come in and we show what we can do. Here’s another way to look at the TAM. This is from Statista.

The total addressable market, of course, the left one is AI market, which is tremendous growth, and we saw Microsoft capitalizing a lot on this in their quarterly report. We are on the other side there. We’re gonna be in the AI for customer service market, which probably did not grow as much in ’24 in revenue terms, although a lot of companies have been there to do that. And one of the reasons is most of them have built their, technology on top of OpenAI in different guises. It could be Azure OpenAI, or it could be OpenAI directly, and, of course, build chatbots.

So that has been a big focus for a lot of customers in ’24, and actually even beginning in 2023. Now the biggest example of that, and I’m not picking you specifically on this company, it’s a great company, But, the biggest example was Klarna that came out and said, we’re gonna take out the staff in customer care and replace them with an AI powered chatbot based on OpenAI. Now all you say, Klarna and OpenAI have the same investors, so there’s there’s a bit of a synergy for them to talk about and and, you know, raise both company profiles, in doing this. But, there’s a company called, Voiceflow, and they test these type of of applications. And, essentially, probably a few of you have tested this as well, they don’t like it.

And it turned out that Klarna did not fire any of the staff because the chatbot is actually not connected to your personal information. It will just give you a link so that you can see your personal information after logging in to your account. So we’ll give you a link to look at your transactions and give you a link to complain about a transaction, etcetera. And as you see, there’s a very, there’s a very strong criticism here on the customer experience of that chatbot. Now a large portion and reason behind that is if you expose a chatbot, which is LLM based directly to, the web, which a lot of people, again, in the beginning of ’24 thought was gonna be the, the answer, you first of all, you, subject yourself to the potential for hallucinations.

Here are some recent examples. Air Canada, for example, they had a chatbot which provided incorrect refund policy information. They ended up paying people business class tickets for bereavement for for a dollar instead of charging them for them. There was a Chevrolet dealer that agreed to sell several cars for a dollar because somebody managed to manipulate the prompt. So when you have a chatbot that’s exposing inner internal systems through an LLM, what happens is you can do millions of chats, without any real cost to you.

All you need is some compute power and, of course, the network. However, that is totally different if you were to use voice, which where the voice acts as a firewall. So this this is examples of things where companies have or people have been able to manipulate the prompt. And in some cases, not even manipulated. It’s just purely hallucination.

So you have, for example, the New York City small business chatbot, which was based on OpenAI as well. And somebody came in there. The the one that I really liked the most was that somebody came in and said, I wanna start a restaurant to serve human meat. And the chatbot answered, okay. You need these permits, and, you know, we really like you to open a restaurant that’s great for small business in New York City.

Or in this case, if it’s a rodent eating cheese, what I do with it? Well, it just said just cut away the piece that the rodent ate on, and then you can serve the rest of the cheese. Obviously, these are not correct things to say. And that’s because LLMs hallucinate, because LLMs are just a they’re just prognosticizing what the next few, let’s say, syllables are gonna be in the language that you that they’re putting out. It’s called tokens.

And then another reason why, the big market shift is happening here on the chatbot side is, this is Johan Ria Barriar. He’s a he’s not Swedish, but he’s a Swedish originally from Sweden. And he works at electronic arts as a Red Hat, so a person that hacks stuff for electronic arts. And these are the three risks that he talks about when it comes to LLMs. So it’s misalignment, jailbreaks, and prompt injections.

Essentially, having a chatbot exposing LLMs to internal systems is a bit of an issue. So what is it that could solve this? How do you now use the latest AI technology but still let your customers essentially get at the internal systems? Because that’s the that’s what you really wanna do. You wanna allow your customer to, without talking to a human, be able to look into SAP, Salesforce, ServiceNow, whatever internal systems might be, systems of record, but also knowledge bases, of course, like Slack, etcetera.

So how are you gonna do that, without subjecting yourself to these hallucination risks, but also to these potential security threats? And that is, there’s a simple answer to that question. You’re gonna do it through the phone. So if you do this with voice, you first get a firewall because, first of all, it’s not possible to do millions of phone calls, because it’s very costly. You have to have a phone line, etcetera.

We had a we had a security incident in August of I have to think. I think it was ’23, but anyway, where it was then said to be Chinese state actors had got ahold of WhatsApp numbers, and they were dialing into voice based solutions. However, that is still quite costly because each one of those WhatsApp numbers cost a lot of time and effort to get, but also they cost money. So voice really is, acts as a firewall in itself. And that is why we go to market with only one thing.

We automate voice. Customers may still build a chatbot on our technology, but voice is where we shine, and it’s where we are the leaders. And that is what we’re selling now in this go to market motion in, The US, UK primarily. And then, every once in a while, we’ll have customers popping up in other geographies, but that’s our focus geographies. So what you see here is, is an example of a customer.

This is our large tech company. They have today 10,000,000 phone calls a month, and 60% of those cases are resolved automatically. So that means that no human is involved in that. So backing back into Klarna, did Klarna fire 60% of the staff? No.

They did not. Did anybody who deployed the chatbot based on LLMs actually managed to make an ROI? But we’ve seen lots of articles that that did not happen. So it’s been McKinsey, BCG, etcetera, are all talking about the lack of ROI in these implementations. This one has really ROI.

The 60% automation, those calls cost 40¢. That includes everything. It includes the contact center. It includes the the zip lines or the phone lines and and also the cost of Tenneo and the project. And then the $6 is when a human picks up the phone instead.

So the difference is $5.60. And if you do that, 10000060% automated, 12,000,000 times $5.40 per month sorry, $5.60 per month, you see that it’s over $30,000,000 of ROI. So this is quite important that, this type of AI actually has the ROI, and it can also be deployed in a secure manner. That, together with our unique selling point accuracy, is why we’re so bullish in the market and why we’re putting all our eggs in in now building pipeline in The US, UK primarily, as those markets have very large phone consumers. So so companies that have a lot of companies calling into them.

This accuracy was tested by, Sierra. There’s two numbers that we use. We use a number 99% in marketing sometimes as well. That is what’s, what has been reached by, for example, Telefonica Germany. They’ve gone out and said that they have 99% accuracy in intent recognition.

So what is this? There’s fur the first step in speech in, any phone or any chat for that matter too is to take the text and get that in the text string. So this is the text that was transcribed. So as I’m speaking now, Teams would could make a transcription of what I’m saying. It’s gonna be about 95, 90 four percent correct.

However, understanding that text is very is something very different. And it’s simple things like, please show me all your sofas. I hate furniture in the living room. Don’t show me any sofas. Those two words could easily get you to sofas in a in a traditional transcription based solution.

However, in Tenneo, we understand what you said. So after transcription, we then take the understanding, and that’s what was tested here by Sierra, the actual understanding of the text. That’s where we ended up at 95%. Again, Telefonica Germany is saying 99, and then you can see So we are going head to head, with these large, companies in in our pipeline today, and we’re seeing that we’re we are doing pilots and pox to prove this accuracy because it is a key point, and we’re seeing that that works to prove in a in a fairly short time frame.

And that’s our path now to shortening the sales cycle, which is gonna be the step that we’re gonna be focusing on going forward now. We have a pipeline which is big enough to reach our target for this year, which is to exit the year with 200,000,000 SEK ARR. We now need to shorten that sales cycle and get these customers in during the next few months. So who said our AI has no ROI? I use this in the Swedish contact center setting and and and a large gathering of contact center people.

Although we don’t focus on the Swedish market, it was still quite interesting to test this out. So one answered phone call called 60 SEK. I heard numbers in the audience of 200 SEK. So people are saying that Swedish companies spend 200 SEK to answer a phone call. If you have a million calls, that’s 60,000,000 SEK.

You automate 1%, that’s 600,000. If you do 60% automation where we are unique, and this is can only be done with Tenneo today, that’s 36,000,000 SEK in savings. So it’s starting to be that we could probably, at the next year, once we’ve now reached that that ARR target for this year, we can probably start moving into other markets as well because you can see that the ROI is there even if it’s not the $35,000,000 a month, which we saw at the large tech company. This is still very big ROI numbers and and certainly something where we could make money as well. But, again, our focus this year is still on those really large consumers of phone calls.

That is why I’m in The US right now calling you from Atlanta. This is where the large consumer companies are. Not necessarily Atlanta, but all over The US. And this is where they are. So there’s a there’s a second part to this, this graph here.

The statistic graph shows the AI for customer service market, and, we are now partnered up with Genesys. That is our go to market, prime go to market. Genesys is the largest contact center as a service provider, so they sell these phone systems. And you see at the bottom of that, this is our AppFoundry listing. So you can now go in and buy Tenio off of AppFoundry, I.

E, directly from the Genesys web. You don’t need to negotiate with us, and we don’t have to do all those MSAs, which take quite a lot of time with these large companies, those massive service agreements. And we have the same arrangement with Microsoft, by the way, which is also, coming to fruition. So but the the text at the bottom there is the interesting one. So in their q one twenty twenty five, which was, June 2, so that ended in September of twenty four.

But in their q one twenty twenty five, which was the, last time they reported the amount of calls, was 5,000,000,000 calls going through, Genesys. So we have less than a percent of that. We have several joint customers today, but we have less than 1% of that 5,000,000,000. Our target is, of course, to get that up to at least 10%. And the reason why we’d be able to do that is that we now built very strong commitment with Genesys since mid q four when we started that that journey.

And we were, at their sales kickoff, invited by them in Nashville this this February, late end of February. So that was the sort of kickoff of building pipeline together with Genesys, and that is a large portion of the meetings I’m doing here in The US are exactly related to that. So coming to business update, brilliant quarter. We had a 42% NRR. Our ARR slightly softer than last quarter.

This has to do with a few factors, one of them being that one of our larger customers has sold a portion of their business. The interesting thing with that, that was like a PE in between, and then it was sold again. It was sold to, somebody who’s now our prospect because they realized that they don’t wanna add humans to do the support on that piece of the business. So that was a bit of a drop in there. Of course, there’s a bit of currency effect, not that much this quarter, given that most of our revenue is in The U.

S. Great growth in the SaaS ARR. If you look at year over year, we had a very, very nice directed share issue together with our shareholders. I’m very, very thankful, and and the the whole team really is firing on all cylinders with this money going in, now into building out The US, which I’ll come back to. Great gross margin, even better than, than the quarter before.

And, of course, the revenue growth in SaaS API calls year over year, a 85%. So we’re continuing on a on a doubling trend there almost. So what are we gonna use that money for? We have a slight increase in cost. We’re guiding that that cost is gonna go up a bit more in the report as well, because we hired now a substantial team over in The US.

So first, wanna talk about what has this given so far. Now, again, Most of these people started in February and March. Right? So the the whole team, which I’ll come back to, started in February, March, but it’s already paying off in terms of building a pipeline. So we have our EMEA team firing as well.

That’s three people. But this team of seven people in The US is really taking off in terms of building out the pipeline right now. So I wanna talk about that pipeline number to really give an understanding of what it is. We said in q three, we were gonna start reporting on pipeline, and that that we did that in q four. First time that you said, oh, it’s actually in the q three report.

That’s the October number. Q one report is the February number, and then the April number is, of course, now then. So you take an average large Tenneo customer, they would pay us about €10,000 per month in the subscription. Twelve months of that is about a hundred 20,000. So what if this was a qualified opportunity?

This is a customer that we could sell to with a 20% probability. That means we know they have a project, they have a budget. We know what that we’re talking to the right people, and we have a chance at at selling. That’s a qualified opportunity. So if if that was in that pipeline stage, we would see €24,000 in the pipeline for that.

So it’s important to realize that we don’t take the API calls into the pipeline at all. We also don’t sell API calls upfront. The API calls come after the customer implements the solution. It’s a very important part of our business model, and that’s why we measure it in this way too. So this pipeline, is definitely enough to hit the 200,000,000.

We need about four or five large customers out of this pipeline. This pipeline is more than 15 qualified large customers, so it is definitely enough to hit that, that number. And what you see here is the development of the pipeline. So it was 260 in October, ’4 ’60 ’1 in February, and €1,000,050 in April. So double just between February and April.

And, of course, that’s the effect of the team coming in, the kickoffs that we participated in in February and March, and April has been a lot of that work to build that out. On the right, you see that a pipeline is affected by a few things. AWS, where today we’ve decided that, we’re primarily doing AWS Connect together with a partner that’s going, to sell this AWS Connect together with us as a service. That is a company called Cloudhesive that you see in the bottom left. We have Genesys.

That’s our prime, that’s where we go direct to we go direct to all Genesys customers. We have all those customer lists. We go direct to them. We go together with the Genesys sales reps. We go together with their PS team and also with their CSM, so their customer success management to these.

A large portion of those customers are gonna be MWM customers, so that’s another partner that we’re working with. MWM was partner at the year 2024. It’s a combination of MWM and Carousel, two important partners in the Genesys contact center space. Sorry. And InterVision, Kenway Consulting, working with them as well in more starting now April, May in in marketing.

And then AppDirect, a bit of a pause there right now because we’ve put so much effort in the the other parts here. So that’s where we stand right now. We have a great pipeline. It’s being built together with these partners and primarily in the Genesys space and through Clouhesive and AWS Connect space. So the two most important hires over in The US, Michael Kenny has been the head of business development at several large companies that work in the same model that we’re working in, Dropbox, Symantec, and Ingram Micro.

So very relevant. He runs this motion in The US. And then we have Lee Kane, who is former Genesys senior vice president of sales, has several had several positions within our contact center space, and he is running the Genesys relationship. So it’s a person that also hired a lot of the people on the Genesys side. So very, very important two people.

And between the two of them, we have a team also, that covers the whole of The US. So we split The US into three different parts. As, Jun is actually a a Swedish descendant. Jan, we call him Jan here, of course, Henry and Jeff, and they’re running the the this. We then also have a a presales team, a solution architect team, which is, Anne, Howard, and Julia we added there.

So all these people are new people that we added during the quarter and coming from a very strong background in building solutions like ours on our competitive products as well, so, Google, and Flow, etcetera. So she, when we called, she was very happy to join knowing that Tenneo is the best solution in the in the market. Julia has also worked with Tenneo and other solutions, And Howard comes from Sierra and was part of that testing that did that 95% accuracy. So very important movements in The US. We have a team coming into this quarter that’s really gonna be able to fire on all cylinders.

Now I do get this question a bit. Is there an impact for Tenneo on, what’s happening in The US? Well, we have local US delivery, with source code, escrows, etcetera. So a US company doesn’t really need to care about anything about us being in Europe. We deliver from the three regional clouds of the Microsoft in, Azure in, in The US.

So that’s not really an issue. We have a local organization. We have a local company. We invoice from local companies. So there’s no right there’s no tariff discussions, anything like that impacting us right now.

What is happening in The US, and I can attest to that, I I came in on Sunday. I had meetings yesterday. I’m going for additional meetings today. Cost savings are definitely definitely in focus in The US. So take UPS, for example.

They’re looking at reducing at least 20% of the staff. They’re based out of here in Atlanta. Of course, many, many companies are now looking at serious cost savings. And, of course, what can we provide? We can provide serious cost savings.

So that’s quite important. Of course, the dollar impact, we do report in Swedish krona, and, we do have majority of revenue in dollars. That is going to impact us, but it’s not going to impact us from a business perspective, of course. So, we’re quite bullish on both U. S.

And UK, and the broader European markets having some cases coming in as well. So some of the operational highlights before I give it over to Fredrik. Hundred and eighty five percent year over year growth in SaaS API core revenues. That is our prime driver of margin. It is our prime driver that we drive our organization on.

We sell first to the customer this $10,000 a month thing that they start building on. That’s Tenio. And then it starts generating API revenue, and that’s when the customer really starts making money. So that’s quite important to us that that grows. And, of course, 101% SaaS ARR growth as well year over year.

SaaS API volumes, 154% up year over year. That’s also quite important. We have a consistent profitability with 86% gross margin. Once these investments start paying off in The U. S, we’re, of course, going to get ourselves back to cash flow positive again, and that’s going to be through this gross margin, which is, again, on the APAC course.

Many large renewal agreements that have taken quite a lot of time and effort legally, and we’re very happy that going forward, our proposals that are on the table right now are going through these marketplaces, meaning that we don’t have to do these large managed these service agreements, which master service agreements, which take quite a lot of time and effort. And of course, again, thank you, shareholders. A successful directed share is here, 60,000,000. That gives us this investment potential in The US that is already starting to pay off, but that’s gonna pay off handsomely for us. I’m quite sure, especially after being here now only only for, what, twenty four hours so far, but definitely gonna see a big big spike in The US revenues during this year.

So with that, I’m gonna hand it over to Fredrik, who’s gonna go through some of the financials.

Fredrik, CFO, Tenneo: Thank you, Per. So I think actually, we can move to the next slide, Per. I think we touched upon the financial summary earlier as well. So take the next slide there. Just lots of numbers here, but I just wanted to start off a bit, I mean, on what has been the focus of the year.

And clearly, we are experiencing a very strong growth year over year in all our sales numbers, as you can see. And in the first quarter, focus has been obviously closing the successful direct to share issue, which was oversubscribed, and we had lots of interest from yes, very interesting investors, existing and new ones. So very thankful for that. But on top of that, obviously, a lot of internal focus has been on securing renewals with our existing and large customers. So very important for us to ensure we enable to continue working with them.

And as Par already mentioned, also building pipeline, obviously, that is key for our long term growth and also building and yes, setting up all the related activities related to building sales organization in The U. S. So I think that is very important to bear in mind. Key in the quarter has been clearly to continue to grow SaaS API call volumes, and we’re growing them with 154 year over year. And we also have a slight increase versus Q4 twenty twenty four, which was a record quarter, we should remind us about as well.

And as said, we renewed major MSAs with large customers. And in those discussions, we also managed to drive price increases, which is also very important for us long term as well. And as you can also see, our SaaS API call revenues, they were growing even faster than our API call volumes, 185% year over year. And that is a result of these activities that we have been doing and that will benefit us long term as well. And obviously, we have very happy customers that continue to work with us since we have a very unique platform for managing large volume of calls, basically.

And that’s also manifested in our NRR of 142. What is also very pleasing to see is that we continue to increase proportion of SaaS revenues now at 73%, as you can see in one of the graphs. That is very pleasing as well. And as communicated in the Q4 report and also in connection with the directed share issue, we plan to continue to invest in sales and marketing activities during 2025. And we see a slight cost increase in the quarter, and that will also continue to grow in Q2 as well.

But given still given those investments, we still improve our adjusted EBITDA standing at 1.4 minuteus in the quarter. So we keep cost control, and we continue to drive the execution plan that we have been communicating to the market and also to our shareholders in connection with the directed share issue. So very pleased with the quarter as such. And I will also come back a bit on gross margins and cash positions later on. So I think we can move to the next slide, Per.

For those of you that have been on these calls previously, it’s clear that for the last three years, our strategy has been to grow on our existing accounts and helping grow a number of use cases as well as also growing the existing use cases. And NRR is a key KPI for us. And that also is, I mean, simplified, you can say that it measures how well we manage to grow our existing accounts. So a number exceeding 100% means we are growing in this respect. And we had 142% in the quarter.

And in the business to business enterprise software space, this is a very, very, very strong number. We usually compare with two external sources here, and Redeye is one that is measuring these in the SaaS universe for listed Swedish and Nordic companies. And in Q4, we were ranked as the number one in this respect in their universe. But we also look at external parties to benchmark ourselves versus and one is the SaaS investor, Montero, a Swedish Nordic venture capital firm, which is focused on B2B SaaS businesses basically. And interesting there, the average or median in their portfolio companies during 2024 was 105%.

So if we then compare 142% with 105%, I mean, it’s an extraordinary strong number that we present here in the first quarter. I think we can conclude just a very strong performance here in terms of NRR. And we can move to the next slide, Per. Also, coupled with NRR, obviously, API call volumes is a key indicator of how our business grows. So basically, you can say that it shows how our customer application and usage of them are growing.

And the more applications, solutions or covered regions, the higher the API calls, basically. And year over year, we grew the volumes with 154%, and we also experienced a slight increase versus Q4, not very significant, but a slight increase. And I think our outlook going forward as well is that we also see a lot of potential in our existing accounts to continue to grow. And our customer success team are having very interesting discussions with our customers, and there is high potential in further growth in expansion of our existing accounts. And then also, as Per mentioned, we also have a very strong pipeline with high API call volume customers.

So we are, yes, looking forward to the coming quarters. So in short, I would say, strong and good numbers. We can go to the next slide, Per. Lots of numbers here, but you see in the graphs here, SAS ARR and total ARR. And we grew SaaS ARR with 101% year over year, Q1 twenty four versus Q1 twenty five.

And total ARR grew from with 51% Q1 versus Q1 twenty twenty five. And also here, we can see that currency adjusted, we also experienced growth in SAS ARR versus our record quarter in Q4 twenty twenty four. So overall, very solid numbers, I would say. We can go to the next slide. We also record stable gross margin development in versus Q4.

And in short, we are reporting both gross margin, excluding commission and including commission. And the reason for that is that when we acquire a new customer, we usually pay commission, and we also have start up costs associated with setting up new customers. And therefore, initially, the contribution is relatively low. But as the API call volumes grow, the gross margin also expands significantly. And in individual quarters, commission can have a significant impact on our gross margin, and that’s why we’re showcasing both of them.

But this quarter, we did not acquire any new customers, and therefore, the gross margin is all the same basically, but still at a very stable level at 86 percent. We can go to next slide, Per. Our OpEx, we showcased 115,000,000 in OpEx or adjusted OpEx run rate in Q4, and we had EUR 117,000,000 in Q1 twenty twenty five. And the increase is according to plan. We communicated also in connection with the directed share issue that we concluded in Q1, but also in our Q4 report that we plan to invest in sales and market activities in 2025 and that we plan to increase cost with approximately 10% versus Q4 twenty twenty four run rate.

So I think we are on the path there to somewhat increase cost in Q2 and potentially a bit in Q3, depending on how we steer the investments, but still in line with what we have communicated. And we’re following up on costs cautiously day by day, I would say. So we have that under control. We can go to the next slide, Per. Cash position.

So we had 54,000,000 in the bank end of quarter, but we also had receivables that we have collected shortly after the quarter end. And we have large customers who tend to sometimes pay somewhat overdue. So we are not yes, this is something that happens. And as a relatively small company, you always try to push, but sometimes you may not have the result you want. But we have customers that pay sometimes a bit late, but they always pay, so no risk there.

But adjusted for those late payments, cash in bank would have been close to SEK 64,000,000 instead of SEK 54,000,000. So we are in a steady cash position when we start the quarter. And I think we will also since we also have a lot of renewals in Q1, Q2, There will also be a lot of cash generation coming in during the second quarter as well. So we are in a very solid position going forward. Over to you, Par.

Per, CEO, Tenneo: Thank you, Fredrik. Yes. So again, just in summary, very good growth year over year. We are set on renewals with our largest customers. We built a solid pipeline already with a new team.

We hired we have a new team of seven in The U. S, but we hired in total nine to support this go to market in Q1. And they started February, March, of course, since we brought them in after the capital raise. So thank you again, shareholders, for that. But this is really the partnership approach is paying off in pipeline growth.

So I think at that, I will leave it and open up for Q and A. And before Q and A, I need to unmute you and then you unmute. So you raise your hand and then I unmute you or Christina, whoever is fastest here. I see a hand there from Fredrik. Let me see.

Oops. You pushed the wrong button. I have now unmuted, Fredrik. And now you’re mute. There you go, Fredrik.

Analyst: Thank you, Par and Fredrik. I want to start with the SaaS ARR that was roughly flat in the quarter. I mean, the last two quarters were very strong, and you mentioned that customer that divested some of the business. But I mean, could you perhaps give some kind of quantification of that impact? And I mean, why is there such a big difference from quarter to quarter?

I mean, the year over year numbers are still great, but it’s very, very lumpy. So could you give us some elaborate somewhat on that, please?

Per, CEO, Tenneo: Well, the way the ARR grows is you add new projects, and then those projects come to fruition. And those come to fruition sometimes at the same time, which is the case in q four. And then there’s a bit of a consolidation period as that new project went. So it could be expansion in languages. It could be expansion in there’s this tree of things how how usage can expand.

And, yeah, this q one, it was more of a consolidation period, some currency effect, and, yeah, some some divestment effects. But overall, it’s just that there were no big projects that were delivering dividends in this quarter, so to speak. So there were no big expansions in the big accounts that delivered this quarter. So it’s not a shrinkage. It’s a consolidation at the level of Q4 until new things come along, new projects start delivering.

Analyst: Okay. Great. And regarding the SEK 200 target for ARR, that would require about SEK 30,000,000 in additional ARR per quarter for the rest of 2025. Is that realistic? Is that what we should expect given that target?

Per, CEO, Tenneo: Well, that’s our goal. That’s not our forecast, right? It’s our goal. Yes, the 200,000,000 ARR or the $20,000,000 is probably the way to that we measure it internally now. The $20,000,000 ARR is definitely still the target.

Now it does not require $30,000,000 extra per quarter. It requires that we have that exiting the year, right? So the ARR is, of course, forward looking. So yes, it’s four to five large customers. And looking at the pipeline we have, that is definitely very doable.

So the big focus now is going to be to shorten the sales cycle, which is partially why the two new names you saw, they’re also coming in in Q1, Anne and Julia. They’re helping us shorten the sales cycle by doing a seeing is believing type approach, where we’re we’re building POCs and pilots, where we use basically customer data to show the customer that it’s working in their environment. And then the other thing, of course, to shorten the sales cycle is the partnerships. But yes, the pipeline supports it. We need to shorten the sales cycle, but we have the methods to do that too.

Analyst: Okay. So one last question from me. I mean, pipeline increased rapidly as you as you mentioned. But what share of that can we expect to be signed over signed over the next six months approximately?

Per, CEO, Tenneo: So four to five large customers. So customers of the size that we have today, right? That’s the expectation we have. We might sign some smaller ones as well, but it’s four to five of the large ones that we expect to get out of that pipeline, which is essentially at this point, that means we’re closing out about 6% of the pipeline. So it’s not we’re not counting on closing out the whole pipeline this year.

Analyst: Great. Thank you very much.

Per, CEO, Tenneo: Okay. Forbes, I see you have a question, so I allowed you a microphone. Thank you, Fredrik.

Forbes, Analyst: All right. Thank you. Yes. Going back to the ARR, could you just remind us about The U. S.

Or North American exposure? And I would like to know also how big FX had of an impact for your ARR growth here in Q1.

Per, CEO, Tenneo: No, it didn’t have a big impact this quarter. But Fredrik, do we disclose

Fredrik, CFO, Tenneo: the I think what we mentioned is I mean, I think a bit from competitive reasons, we don’t really want to reveal too much. But I think we you get a hunch of that. But if you look what we stated in the Q1 report, I think there we’re comparing Q4 twenty twenty four versus Q1 twenty twenty five in terms of SaaS API call revenues. And there, we could there, we see an impact of 1.5% negative.

And it’s a combination, obviously, majority being currency, but to some extent, also impact on the number of days in the quarters as well. So Q1 had fewer days than Q4, obviously. So not super significant. And we also stated that we, in The U. S, have in excess of 60% in the Q1 report as well.

So obviously, the main impact on the dollar or the strengthening of the krona versus the dollar happened mid and end of the quarter, right? So we don’t have the full impact in the quarter. But essentially, we can conclude that if we have the same level on the krona versus the dollar, we would probably be a bit lower on revenues in Q2 like for like, if you see.

Forbes, Analyst: Yes. Any other FX effects on like the result for the period or anything like that we should think about now for Q1 and also going forward for Q2?

Fredrik, CFO, Tenneo: No. I mean, we are not hedging since we also have lots of costs in dollar and euro. So I think from a net net perspective, I think since we still have more costs than revenues, I think we’re probably, to some extent, benefiting net net even if we obviously want to focus on growing revenues. But as said also in the Q1 report, I mean, when we drive the business, we focus on the key KPIs that drive value for us, and that’s essentially to get more customers and drive API call volumes. I mean that’s what we, in the company, are is focusing on primarily.

FX is yes, it has its own life. And still, we are pretty well hedged naturally with our revenues versus our costs.

Forbes, Analyst: All right. I have two more questions. So firstly, nice to see some boots on the ground in The U. S. And could you just talk about what your expectations are for the, like, US go to market team that you have over there versus the partner side of things, who is going to do what and, yeah, who’s gonna bring in the deals now in the near term?

That’s my first one.

Per, CEO, Tenneo: Right. So we go directly, but we go to the customers that are Genesys and WM customers. And then we also go with a partner to the same customer. So we don’t rely on driving it as a sort of indirect revenue. The difference, there is one, one other one there, which is Clouhesive, where we only support Clouhesive.

We don’t talk to their end customer. They sell a service based on Amazon Connect, which is a complete service, And that can be to, like, local air conditioning company in Florida or these type of companies, which are typically not large enough for us to go after directly anyway. So we have a direct with a a customer list that we go after where we set meetings, we do marketing activities, etcetera. And we do, for example, a webinar here in in an hour, which we also then actually do we do it twice today because we also do it suited for West Coast time. So so we do go after direct and indirect.

So it’s actually both. So Lee would be engaged and the direct seller would be engaged in the same customer pursuit.

Forbes, Analyst: All right. Thank you. And final one from me is maybe you mentioned this, but could you just remind me of the price hikes that you did in the renewal contracts? And just I’m guessing this will support ARR growth from Q2, right?

Per, CEO, Tenneo: Right. So where we got the price hikes through were the ones that didn’t have huge API volumes. So we didn’t really get any other ones with big API volumes to raise the API price. We did raise the monthly prices a bit, but that doesn’t impact all that much. But essentially, the monthlies, we’ve raised 11% list wise, basically offsetting some kind of inflation that that is will be done in these MSA renegotiations.

So it’s not gonna have a huge impact. It’s more I I think it’s more a testament to the strength of a small supplier that we managed to do that. I think that’s quite quite strong. Of course, everybody’s trying the other way around, right, to push the price down, but we managed to retain it and even bring it up a bit in these large bands.

Forbes, Analyst: Good to hear. Thanks.

Per, CEO, Tenneo: Okay. Thank you, Forbes. I will now open up for Matija here who, raised his hand first.

Hernan, Analyst: And you need

Matija, Analyst: to presentation. Happy to see. Maybe I’ll address this one to you, Frederic, to start with. You added six consultants during the quarter from five to 11. It’s quite a sizable number.

Is that something we can expect to stay on that high level? Or it will go down again? Or you will take consultants into payroll? Or what’s the plan there?

Fredrik, CFO, Tenneo: No. I think I mean, the way we operate is very much that some of our headcount tend to want to be their owns. But in that respect, I mean, we handle or, I mean, for us internally, they are working with us as employees even if they are invoicing or we have a third party invoicing people. And that’s also the case since we also have people working, I mean, in jurisdictions where we don’t have company then it’s easier to work with external parties to sign them up as consultants through them. So I think that’s just I mean, you should look at them as the same when you look at us.

Also, as Per mentioned, I think I mean, we have done the hires that Per mentioned, and I think there could be some select more hires. But I think the big additions have happened in Q1, basically.

Matija, Analyst: Okay. One more, Fredrik. If you look at net financial items, it says the net financial item for the first quarter impact with CHF 14,800,000.0 of currency exchange rate differences. Can you elaborate about that? Because it’s quite a sizable number.

And you before said you don’t have any currency hedges. So a little bit more color on this one will be freight.

Fredrik, CFO, Tenneo: Yeah. I think this has to do with our legal structure. And as you are aware, I mean, over the years, we have simplified the legal structures. We had, I think, ten, eleven subsidiaries or something like that. We have liquidated some of them to simplify the corporate structure.

And we also have two holding structures or I mean, we have a Swedish subsidiary, which previously was a holding company of ours, and we also have a Dutch unit as well. And this effect that you see in the financial net, that’s pure accounting. So that’s more since we are lending from the topcoat downstreams, since we also have the loan and with the covenants and how we can stream money, that also means that we are lending internally, right? So I think from my end, I’m not focusing at all on what is the accounting effect in the financial net. What is important there is, obviously, what is our financial cost and that we also state clearly in the quarterly report.

And that’s the key thing for us when we drive the company. So it’s purely our setup that has this impact. And going forward, we may change that setup as well. But yes, you know that also these things can take a bit of time. And if you also have other counterparties that you need to discuss how you want to do it, it can take even more time.

So but it has not been an issue for us. But it looks a bit ugly reporting wise, I agree. But it’s not a concern of ours really, operationally, etcetera.

Matija, Analyst: Perfect. Thank you. Just one more from my side, and I’ll address this one to you, Peri, then since maybe it’s not self financial. Look at all the events after the quarter. You’ve been out with a couple of press releases, and that seems very encouraging.

When can we expect to see revenues coming out of those deals or transactions?

Per, CEO, Tenneo: I think revenue from those is more in the in the q three. But we do definitely believe that we’re gonna be able to close out some of these. We are in in still in end negotiations with a few customers where we’ve had to take this approach that I spoke about where we we need to do seeing is believing. So we’ve implemented pilots and POCs, proof of concepts and pilots. So that will have revenue effect a bit faster than those because those are more building pipeline as we speak, whereas we have a pipeline for direct sales.

And, literally, what we should expect is kind of

Matija, Analyst: a hockey stick going into the after summer period? Yes. Thank you.

Per, CEO, Tenneo: In terms of a in terms of ARR development, that’s definitely what it’s gonna look like.

Matija, Analyst: Super. Thank you.

Per, CEO, Tenneo: Thank you, Matthias. Next here is Harman. Harman, I will now allow your microphone, and now you need to unmute.

Hernan, Analyst: Oh, Frederic, thank you for a good presentation. Actually, my my question was touched upon, now briefly, but Genesys and NWM, could you elaborate a bit more about how these deals what these deals look like? And, for example, for NWM as a reseller, how is how does that work on your end in terms of, you know, how you get the revenues and in terms of ARR?

Per, CEO, Tenneo: So so Genesys and sorry. I just got a I just got a delayed notification on my flight, which really sucks. But, anyway, that’s what it’s like in The US. So in terms of Genesys and in WN, so we have we are on the Genesys app foundry. That’s a very small percentage that we give to Genesys to go through and flow through them.

So in terms of Genesys, it’s the product team that we’re working with. So the people that provide the what’s called Genesys Cloud, which is the their their complex center as a service. This team we work together with to prove to the customers that it’s better for Genesys if they use us because Genesys now gets a happier customer. It’s better for the customer because the customer can save money. NWM is one implementer reseller of that into customers.

So Genesys has a few customers that are direct customers, but most of their customers are, customers through somebody like NWM or Intervision or one of the other partners. So we would then work together with NWN as well and maybe maybe not do the deal through AppFoundry, maybe do it directly through NWN. But it’s not gonna have any direct impact on the on the revenue that we see through these. It’s very small percentages that that go through that that are that that are left sort of with the reseller or the what they make money on as a services or a happier customer. I don’t know if that clarified the clarify the clarified that more, Hernan.

Hernan, Analyst: Yes. That was a good answer. Thank you.

Per, CEO, Tenneo: Okay. Then we have a question from Mats Nielsen. I will allow your microphone, Mats, and you need to unmute. You need to unmute yourself, Mats. Okay.

Right? Also, the true we are at the and the council clerk.

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