Teneo AI AB (publ) (TENEO) Earnings Call Transcript & Summary

Okay. I'm going to go ahead and start. Fredrik, a thumbs up if the sound working. Excellent. So good morning all. The presentation is, as always, available on investors.artificial-solutions.com. I, just as a backgrounder, we are going to market on Teneo.ai. So Teneo.ai is our go-to-market side, and Artificial Solutions is, of course, the name of the company that runs Teneo.ai for our investor site, and our publicly traded stock is ASAI. You'll find the presentation on investors.artificial-solutions.com. This is being recorded. just so you all know. And I'm going to kick off this with today a bit of a different layout. We're going to do a business update just to get back to a bit of what we are doing. And there's been some very interesting development during Q4 on the business side, which I think is important to highlight. So we're going to go through that and then move into the numbers and then go to Q&A as usual. So I'll start off with, it's Per and Fredrik representing. We've now been here for the better part of 3 years. And I come from a background together with the large part of the other management team in the back of the company called IPSoft/Amelia, which is basically in the same space, the same technology space, a different go-to-market space as Artificial Solutions. And Fredrik, a long background in different PEs, but also has worked also in -- as a CFO in Software-as-a-Service company before coming to us. We've done a bit of a turnaround of this company in terms of strategy and we'll come into a bit where we are on that journey. From a business update perspective, so our vision is that we can experience the world without cues, without keypad navigation with instant service. And we are delivering on that now. And also what we have, which I'm going to show today, is we also now have real proof on why it is that we can deliver that better than anybody else in the world. And I do mean anybody else, that includes Google, IBM, Amazon or whoever else you might put into that category. What we do is we reduce misrouting in call centers and we also automate call centers. So many of you might have read about Klarna lately, which is a chatbot that responds to requests into the contact center or the customer care center. We do similar things at our customers except, of course, our customers are older, much more complex environment and also they use voice. And that's where really the differentiation comes in. When you use voice, it becomes very, very difficult. And then what's stated here, the 99% NLU accuracy becomes incredibly important. I'll come back to that number because that is quite an important number. All this gives money to our customers. Our customers are realizing great gains by reducing the amount of people in the call center but also by having better transactional NPS score. So better scores of, would you recommend my company to another company after having talked to the customer care bot. So where are we on this journey that I talked about? It started out with the new management team back in 2021. We then started with rebuilding the product to a SaaS product. That was a rather large rearchitecturing of the environment and this almost launches to Teneo.ai. Again, that's our go-to-market. We also divested professional services. So the company had revenues from implementing, which we no longer have in our books. So that's also a large deduction in revenue at that point. And then in the beginning of 2022, we sold to some large customers in 2021. Beginning of the year 2022, we took these first customers live and started seeing what they were using the technology for. So this new SaaS platform, so that is something we host for the customer and the customer launches in and builds their solution in that or a partner builds that solution for them. We saw that, what they were using this for was what we call OpenQuestion and have now productized during 2022. And OpenQuestion is essentially pick up the phone, understand when somebody is calling and, to a large extent, automate that phone call without the need for a human to make that into what's called an unattended call. We then built the reference stories around this, published those. We focused on the growth in existing customers to make sure that they all became large users of this technology, and that's what we've been doing during 2023. We also set up with tech partnering with the 3 cloud providers, the 3 big ecosystems that are out there today, number one, with Azure, and that's actually where I am today. So meeting up with the Microsoft teams here in Seattle. And then we have GCP and AWS, slightly different tunes on these partnerships. I'll get a bit more into them in a later slide, but very important for us in this space since everybody uses these now to -- in different parts of their customer journey. They use 1 or maybe 2 of these ecosystems. Then we also set up partnering with implementers or the people that take this to market that help with the staff transformation, but also the tech transformation, largest one being Tech Mahindra, and CGI and Valcon. And then the new logo hunting we started, let's say, tail end of last year, and also this year, the big focus is to take us to a cash flow positive month, which is a goal that we shared 2 years ago. Okay. So partnerships with Hyperscalers as I mentioned, let me go into that a bit more. On the Azure side, we are mostly partnering up on the AI services side and that's also who -- the people we meet here. That's mostly for our product and our development. So that means that we, for example, were part of using GPT or what's called Azure OpenAI, early on in our development, probably been using that and we're talking about 2 years and also launched products during this quarter. In the Q4 quarter, we launched some products in that space, which I'll come back to a bit to as well. Google, mostly just that you have to be partnered with Google and we are a partner with Google. We have set up that we are in the marketplace and we're an approved vendor. And the interesting thing with them is that they are not necessarily getting into the complex center but a lot of customers are still using some of their technologies. So we did our first deal in the Google space together at HelloFresh during August of this year -- sorry, August of last year. But that is not a go-to-market partnership. AWS is more of a go-to-market partnership. In the AWS space, we are targeting the customers that are buying Amazon Connect, which is their big contact center platform. So they managed to break in and actually selling large contact center platforms. So contact center, you could just translate that with the platform that manages all the phone calls and all the agents that pick up the phone calls and all the automations in that piece of software, which used to be something you bought from Ericsson and put in a big room, which nowadays, of course, is cloud-based. So all of that, we take the market in Teneo.ai. We are selling this in the Azure what's called transact model, meaning that we don't have to negotiate with these large companies to -- on the terms and conditions of the contract. They can draw this down and make this part of what is called the MACC agreement, the large agreement with Microsoft. So quite an important way for us to work on the deals that we now have in pipeline which make at least a part of that deal process easier, which would be the legal part. So what this does is it separates its access to the blue-chip enterprise customers. You need to be able to tackle all these 3 to be relevant for somebody like AT&T and Swisscom. And as you see here, these customers are talking about us. We're talking about at AT&T Smart Home, which is anything that has to do with the home, it's fiber, it's routers, it's alarm systems, et cetera. They had a much higher customer recovery rates, meaning that they don't have to send somebody out to the customer. The customer talks to the system and resolves 15% of those issues without having to send a personnel to the actual home of the customer. So that's a large gain for them, of course, as that's quite expensive to do. Swisscom had also measured their customer inquiry hotline. So when you call, let's say, 1-800 Swisscom and very considerably more productive according to the CEO. Also, they've done testing on the transaction NPS and found that's higher when the bot picks up the phone and resolves immediately versus a traditional approach where you come to the queue and wait for a human and then get your solution. So we have a unique relationship with Microsoft in the AI space with a product that's called AI InnerCircle, which helps a lot with these products that we also launched during Q4. And the last portion of this at the bottom is quite important, and I'm also going to go into how that can be. But we are the only player today that answers millions of phone calls per month in several customers, where several customers are above 1 million from calls per month. We even have 1 which has 1 million automated, so unattended. So calls that no human need to take to, and I have an example of that moving into this as well. So it is truly a unique solution in the market today, which, of course, is what we are now taking to market with references and with the stories and now also the proof points, which I'm going to show to you. So what I'm going to do now is I'm going to show you -- I don't know if you read telecom at all, but I definitely get those e-mails. And I saw that Tele2 won Customer Care Of The Year in 2023. This is a recording of a call into Tele2. And I'm going to put you through the pain of listening to this for 2 hours. (sic) [ 2 minutes. ] And I'm going to ask Fredrik to do a thumbs up if the sound works. I actually think it's not going to work. I need to take off my AirPods, 2 seconds. Now can you hear me here, Fredrik? Thumbs up. Okay. Now we're going to try the sound and see if it works. Teams doesn't want to do it when you have your AirPods plugged in. So now my AirPods are out. Let's see if that works. [Presentation]

So note how, first of all, you've all seen this, of course, I'm not expecting any reactions on this Teams call, but you have all been suffered -- you've all suffered through a keypad navigation, but also notice how disjointed it is. So it goes back to Swedish although it's English because it's all scripted, and it's a very complex tree that they have to build. And also because it's complex to do identification, in this setting, they do it upfront. Even though if it's a support question, you may not need to identify yourself. So that's a waste of time. So that was 2 minutes and 30 seconds and you still haven't solved anything. You may have pressed the right button. And in fact, ContactBabel which researches this says that in 12% of cases, enterprises, people do not push the right button, meaning they end up in the wrong queue. So now they've done this, they come to the queue and then they need to be rerouted, which both cost money, but of course, frustration. So people are quite frustrated by the time they actually get to the agent to talk to, as you can see here on the picture. Now contrast this with the alternative solution, which is the one that's deployed here at Microsoft here in Seattle, it's 1-800-Microsoft. So that's not the number, but there are several different numbers. And this is the way you talk about customer care in the U.S., and you say 1-800. And in this case, same thing we're calling in the support to get support on the technical issue. And this time, Teneo picks up the phone, and note how they do it all in a way that is good for the customers. So for example, they do all the regulatory stuff, the stuff about being recorded and so forth, all that they do in a speed which is 2.7x the normal speaking speed. Because if you don't hear that, just hang up and call again. It's not a big deal. But that's -- most people that have called the call center and they've already heard all that. So they do that faster. But most importantly, it's an open question format, meaning you're not dictating what the customer can and cannot respond. And you can then also see that this is a fully automated call, I'm going to cut it towards the end, but the system has now understood why the customer is calling. And we have -- and we can establish what the next action is. [Presentation]

So in this case, the customer calls in. You don't need to identify the customer because you're just solving a problem for the customer and the customer is, of course, quite happy with this. This happens now about 1 million times a month. And you can make a quick calculation on that. That probably corresponds to about 1,000 call center FTEs, full-time equivalents, that do not need to be used for this process anymore, be used for something else, or in the case if it's BPO, they can be used at another customer most likely. So very powerful but also very, very high ROI on this type of solution. And when we play this for customers it's not like somebody else has something else. Now it's still quite complex to sell it because it's a large moving target here because you're often changing your contact center system to that Amazon Connect or one of the other systems in the market. But we still haven't found anybody who says, "Oh, I have that already." That just doesn't exist. And we also ask ContactBabel to go through all those 1,000 enterprise customers that they work with and we still haven't found anything like this. So quite confident that this is a unique solution in the market today. And the difficulty of understanding natural language is we need a proof point of why we can succeed with that within Teneo. And what we did is we used a data set called BANKING77, which is freely available on Hugging Face, which is banking conversations. So bank customer talking to bank employee. And what we did is we tested the accuracy. So we know what the customers were talking about. We use a testing tool called Cyara, which is the primary testing tool for anything natural language and used by everybody now developing LLMs and so forth. That's how you sort of track hallucinations. You can't fix the hallucinations with it, but you can flag the hallucinations with Cyara. Great product. And what we did then is we tested that with different -- so others have tested, for example, Google Dialogflow, they've tested it themselves on BANKING77. We tested Amazon Lex and Teneo with Cyara. And here's the accuracy number. Now I'm going to compare this a bit to humans. So a human would be in the 0.92 range, if that human is in the same country as the person. So if you're both in Bulgaria, you both speak Bulgarian -- sorry, you'd be in the 0.92. If it's outsourced, it'd be somewhere right below Amazon Lex, 0.88. But 0.95 in the initial data set test is just tremendously better. And that's why this solution actually works, because you don't get the errors that you get with other solutions out there. So Google, you might remember, they launched a solution where if you call the hairdresser and book your time and rebook your time, that solution never really got to market. And you can understand why when you see that they only pick out 74% of what the customer said, which is going to be, of course, you're going to be missing was it Tuesday or was at 2:00? So you're not going to be able to find the accuracy in that type of solution. So we now know that that's the solution as well. What we've done is that we have now just -- that was last week, presented this at the big Cyara CX event. And people, of course, were ecstatic of seeing that accuracy and that, that is the real reason why we can deliver something like we do at Microsoft. So we are today a prominent player. So we power the most amount of transactions as well in this market. It's a market that's growing at about 38% CAGR. We have the largest references in this high-growth AI market today. The market is even more in focus now because of LLM and, of course, the fact that Klarna went out and said that it actually saves FTEs is quite positive for us. None of our customers will ever do that. It's not something that large enterprises typically do, but very interesting the Klarna did that. And also the business model is scalable as we will see with improving gross margins in Q4, but on these existing customers, the gross margin just keeps improving quarter-over-quarter. It's very difficult to switch this out, and that has to do with that accuracy, which has to do with the patent and technology we have. It's the way we store that natural language and process the natural language. And that also is how you can afterwards train the model and make it even better and better. So it's quite difficult, it would be quite difficult to switch us out at a customer. So we have rolling 1-year contracts with the customers, which also lets us adjust the pricing, which we've done in the last 2 years. So we feel quite confident that customers like using the solution and that they gain much more value than the cost out of the solution. And then, of course, this platform also lets you use in absolutely latest technologies like GPT, and that's what's going to -- what I'm going to talk a bit about, the events during the quarter. Short status update on the strategic review. So this is from the Board of Directors. I'm just reading it out loud or rather just telling you guys about this. But the Board of Directors announced on October 26, that they initiated a review of the alternatives, the strategic alternatives to maximize shareholder value on Teneo.ai or Artificial Solutions. And that's because of the evolution in the market landscape, partially the references the attention we get in the U.S., of course, but also the fact that the LLM space where we also have now products in use in enterprise is quite interesting. So it's still ongoing. The Board sense of that there are still interested parties. There's no timetable for completion of this review. And also the Board has not committed to anything in terms of doing any further announcements on this until decisions are made by the Board. And the Board also emphasizes that this review discussion -- we are a leading player in the AI and Contact Center Software vertical and we're recognized by many as a large -- by many of the large players in the industry as a leader. And that's why they feel that these ongoing strategic review discussions are going to keep on going. So again, not something that Fredrik and I are directly involved in, but let's just phrase it as, there's interest for what we do and the Board is looking how to capitalize on that best way for the shareholders. Financials. So some quick summary numbers. I'll go through the events and then I'm going to hand it over to Fredrik to deep dive into the numbers. We had a net revenue retention of 145% in Q4 2023. We have an ARR of SEK 63 million. And for those of you who have been following us for a while, you know that we did have an ARR slightly above that. We don't -- in August of Q3, August of 2023. Now we moved our ARR measure to being an average of the 3 months in the quarter and then times 12. And the reason for that is that in August, we had a spike, which turns out to partially be because of a glitch in -- or a fraud attempt in the WhatsApp channel. I can say that WhatsApp is back now. We see growth again up to those levels in -- during Q1. But in Q4, there was a lot of fixing that channel, so the channel was out for a while. So the WhatsApp channel is partially chat into. So off-line chat, you can say, so it's messaging. But it's also the fact that a lot of people in the U.S. who have contacts into Latin America, they use WhatsApp as a communication channel. They just pick up the phone and use WhatsApp. They don't necessarily use traditional phone or mobile phone calls. So SEK 63 million, quite proud of that growth in ARR over the year, and the growth in recurring revenue was 47%. We still have this patent portfolio, seeing more and more that we can also now show the value of that technology to our customers like this testing of the accuracy, which touches 3 of those patents. And 100% of our revenue is recurring software revenue now. So large launch drop, of course, in our revenues since moving into a new revenue accounting, accounting for recurring revenue rather than upfront -- taking revenue upfront, but also, of course, from that we took out professional services, and that was then the beginning of 2021. So we are now 100% of recurring software, which is, of course, what we want to grow from and how we can also produce a good enough gross margin going forward or actually an excellent gross margin going forward. So last slide for me, operational highlights. We signed a number of renewal agreements on SaaS and on licenses during the quarter. You see some of them A1, Banca Widiba, Baco BPM, et cetera on the side here. We also saw then that Telefónica presented an integrated Teneo-powered LLM pilot. This is a pilot that is sentiment detection. So this is one of the first usages of OpenAI -- Azure OpenAI in an enterprise setting. So there's many test cases with this. But in this case, it actually also powered phone calls -- real live phone calls. So quite interesting. And there's valuation primarily on the cost side on that, which also takes us into a product that we launched during the quarter. We come to that at the bottom part of this page. HRSA here in the U.S. launched a live Generative AI use case in Teneo. So that's a chat-based. So similar to something like the one that Klarna uses but, of course, managed by Teneo with all the enterprise stuff that we have in the solution with role-based access controls. So not everybody gets to see what's in the RAG. RAG is the database that you use in these cases and not everybody can now go in and see all the salaries or all whatever that might be that you put in there, which is the case if you use a standard RAG, for example. So successfully also launched. We closed it in the beginning of Q1 2024. And thank you very much, shareholders, for this. It was oversubscribed quite heavily, the rights issue. And obviously very happy for the vote of confidence in that rights issue during December, January. In the Teneo.ai, we also unveiled what we call Adaptive Answers, and this is where essentially you don't get the same answer every time. So we use the LLM systems to provide new answers to customers on questions. So the answers evolve and sound a lot more human like if you happen to call 2x, 3x, 4x. About the same thing you have different issues, you may be an IT support engineer. So this just makes it much more personalized customer service in the Contact Center, also powered by LLM. We also powered -- we also launched what we call Generative AI Orchestration as built on something called a Stanford FrugalGPT principles. And this enables a whole 98% cost reduction. So essentially sending requests into -- you can take an example from Sweden, there's examples from everywhere, the municipality of Uddevalla, they have open up a chat bot and all of a sudden, they will be paying a SEK 1 million for GPT usage in 1 month. And of course, that's not something they had in their budgets, so they had to shut it down. What this platform does is if you develop that chat on top of Teneo, you will be able to steer which LLM model you send you request to. So some requests, you can just send -- them, not even to LLM, you can use the hybrid LLM model for Microsoft, the CLU, which is a fact of 10,000 cheaper than sending it to GPT-5, GPT-5 or GPT-4 Turbo, which is the one they would use through the API. So very much a solution to steer the traffic and make sure that you use the most cost-effective AI system in the background. And we also then unveiled advanced RAG solution for enterprise AI. We call it Teneo for RAG. And this is how you can use RAG in the complex customer service operation. And then essentially, what it does is it builds an answer platform, but then the answer is actually then coded into Teneo, so in TLML and it will then be able to respond just as snappy as you found on that call we just did to Microsoft support here earlier. So typically, you cannot use a RAG solution or an LLM based solution for picking up the phone. Because the response times are way too slow and there's too many components involved, but this way you can do it. So quite an interesting product that we launched and that's something that we push quite a lot right now in our marketing, as you might see on our web page. So strong growth in recurring revenue. The full year 2023 is 47% year-over-year. We're quite happy with that, obviously bigger than the market. But we are growing within our customers, and that's what we're quite happy with. And this year is all about getting some new logos during 2024 to continue that growth. With that, I'm going to leave it over to Fredrik to take us through the numbers in more detail.

Thank you, Per. So let's start with some financial highlights. So starting off a bit with -- for the full year 2023 and Q4 '23, we experienced a solid growth in recurring revenues, as Per already mentioned, and of course, also significantly improved EBITDA. And Per also highlighted the fact that we had 100% recurring revenues in Q4, which also is manifested that we are now a pure software/SaaS company now. So very happy with that. Coming back to recurring revenues. We experienced a growth from SEK 15.7 million in Q4 '23 versus SEK 12 million for the same period last year, so a growth of 31%. And Per already mentioned, for the full year, that number was 47%. So significantly higher than the growth rate in the market. And the growth has been driven by existing accounts, and that's also evident in our strong net revenue retention rate of 145%. And in Q4 '23, gross margin also improved. The gross margin also for the full year improved obviously. But in the fourth quarter, we grew the gross margin from 55% to 77%. And that despite, as you can also see then, that we had higher revenues and recurring revenues in Q3 versus Q4 due to the reason that Per mentioned. But volumes are back now again. And despite then a bit softer volumes versus Q3, we also had no commission in Q4, which also then improves our gross margin quite a bit. And I think that is also something worth mentioning a bit kind of on outlook going forward. We also have the same commission plan for the coming year, 2024, as we have had in 2023 for existing accounts. And that basically means that in order to -- for a salesperson to get a commission, you have to have a growth of roughly 10% per quarter. So adding up 10% every quarter, it's more than 40%. So that also puts a bit kind of where we have our targets on this year, and that's only for existing accounts. EBITDA improved to minus SEK 5.8 million. And the reason for that is primarily higher sales volumes, improved gross margins, obviously, and also that we have reduced our OpEx. So we are continuously closing the cash cap as we have also guided for and communicated in our previous calls. Monthly OpEx amounted to SEK 9 million in Q4, 2023. We will also look a bit on how the OpEx has developed over the period here as well. Cash position was SEK 15 million end of year. But as we will also go through in the coming slide, we will also show that we have had quite a bit of positive impacts coming in during the first quarter 2024, which is a bit kind of somewhat improving the cash position. So adjusted, we had a cash position of SEK 55 million end of the year. Next slide, please, Per. Just quickly on net revenue retention rate, which is a new KPI for us that we report in our earnings release and also here in the investor calls. And it's a bit kind of aligned with, I mean, what Per also mentioned about our strategy during 2023, where we also have reduced the number of staff from 74 employees in Q4 2022, and we are now 61 when we ended Q4. So part of that has also been to grow primarily on existing accounts. And in that regard, the NRR metric is even more important, right, since we are focusing on existing accounts. And it basically measures how well we managed to grow our existing accounts. So for those that are not fully on top of these KPIs, you can basically say that the number exceeding 100% means that we are growing in this aspect. And we had an NRR of 145%. And I think if we then compare with the B2B enterprise software space, where we think we are placed, it's an amazing number. I think RedEye who is also on this call, they have a quarterly kind of SaaS universe where they measure this KPI for instance. And I think we ranked #2 in Q3 on this metric. And I do believe there was a company called [ Checking ], that was the #1. But I think we surpassed them in this quarter. So very happy about that. And it's an important metric for us since we want to grow with our existing account, and that's a great part of where we also see the growth coming in 2024 and also years ahead since we have a large potential in our customers. So a very strong development despite somewhat softer than Q3 API call volumes, basically. Next slide, please, Per. API call volumes on SaaS is a key indicator of how our business is growing. The KPI is an indicator on how our customer application and usage of them are growing. And the more applications have flash solutions, covered regions, languages, the higher the API call volumes. So it's a very important key metric for us. When we know how the development has been on this metric, we know pretty well how our revenues will pan out as well. And also, as Per mentioned, I will not go into that. I mean, we have changed to an average instead of end-of-period measurement, and that's basically to take away monthly fluctuations, but also, to some extent, seasonality as well. Q3, and in particular, July and August were very high volume months. And Per mentioned that already, the reason for that. But we can also then just say that the Q4 API called volumes were more or less in line with September. And we also can share with you that we have had a positive growth trajectory on volumes at the beginning of 2024. So we can clearly say that the volumes are back. And as Per mentioned, our customer has also switched on WhatsApp applications again. And we also see lots of positive things from our existing accounts on new regions being covered, et cetera, et cetera. So a very good and promising start of the year, I would say. And yes, next slide, Per. Briefly on ARR. And it's also averages that we use here. So that will be the thing we are showcasing going forward only. The SaaS ARR grew with 24% year-over-year, Q4 versus Q4 '22. And the total ARR for the same period grew with 31%. So overall, a very strong growth. And obviously, Q3 is a bit kind of distorting, the continuous positive trajectory that we have experienced, but we are very hopeful for Q1 to make this come back, I would say. Next slide, Per. This slide contains a lot of information, but essentially, it's the recurring revenues split on SaaS and non-SaaS and also the running numbers on that LTM-wise but also on ARR metric. And we can just say that as we already said, we had a strong growth in recurring revenues in the quarter, but also year-over-year if we look on all the metrics, LTM recurring revenues, as ARR, total ARR, et cetera. So we have already mentioned Q3, which were somewhat distorted. But overall, I think disregarding that event, I think it's key that we continue growing the valuable recurring revenue and the trend is very encouraging in that respect. And currently, we do see significant further volume potential on our existing customers. And with those customers we already have, we also see that we can grow SaaS ARR multifold with many of them, and our 145% NRR is also a clear signal on our strong organic growth with existing customers. And we also see continued strong commitment and high interest on our SaaS offering, as Per mentioned as well from our new customers that we are working on, but also then are very happy and loyal existing customers. So we expect the recurring revenues to continue growing at a high rate. Per mentioned the Gartner market outlook. And I think, if you then just compare the 38% growth rate they have envisioned until 2031 and then a bit compare also where we have set the commission plan for this year, it's even higher on existing accounts than what is in the market. So obviously, we feel quite confident in what we are offering and that we also have the -- a good situation to continue to grow in the coming years with our existing customers, but also on new ones. Next slide, please, Per. OpEx-wise, I mean, we can just say, I mean, the trend is clear here, and we have also recorded this in our earnings release. We are continuously simplifying our operations in how we work, processes, but also in terms of simplifying our corporate structures, removing foreign subsidiaries that we don't really need, et cetera, all in order to, of course, reduce cost, but also improve our efficiency in the way we are working. On top, we have also reduced the number of employees, which is also then evident in the OpEx run rate. And in Q4, we had a monthly OpEx level of approximately SEK 9 million. And we are not planning any major headcount increases, decreases for 2024. So that's, I think, the outlook we can give on OpEx. Next slide please, Per. So this slide is a bit kind of outline our cash position end of year. So basically, we had SEK 15 million in the bank. Following the beginning of the quarter, we have received additional cash. So we have received roughly SEK 5 million from the Spanish Tax Authorities. And that's something we, in the past, have received for certain R&D work that we have done. And then, we have got this paid back from the tax authority in cash. And that, we received in Q1. We also, as Per mentioned, closed the rights issue, bringing us in gross proceeds of close to SEK 26 million. And on top of that, we have also received roughly SEK 10 million from receivables that we had in the balance sheet as of end of year. So adjusting for this, we basically have SEK 55 million in the bank when we started the year in the way we look at things adjusted. So a good cash position to start the year with, basically. I guess over to you, Per.

Okay. Thank you, Fredrik. So we're going to open it up for Q&A, and I'll stop sharing so that I also can see the screen on my computer if somebody raises their hand.

So if you raise your hand, I'll unmute you. And then you can see, Mark Siostedt has already raised his hands. So let's see if I can find you on the list. I need to unmute you first. I will unmute. Allow mic. And now you need to unmute yourself as well, Mark. And this will work. Okay, it doesn't work. Try again. [Technical Difficulty] That is strange. I've enabled you, Mike, I don't know why that doesn't work. Can you try, Fredrik, just clicking on the mic? Now you just unmuted yourself, Mark. Now, it should work. So if you hit unmute, Mark. Okay. You need to hit unmute on your side now, Mark. So at the top of your -- top of the screen next to Leave and [Foreign Language] if it's in Swedish. There's a mic. Okay. Let's see if we have any other questions when Mark -- when we try to fix this for Mark. But your mic is allowed here, Mark. Any the other hands? We have a hand from Forbes. I shall allow your mic. I have allowed your mic, and now you can unmute, Forbes.

Yes. Can you hear me?

Yes.

Perfect. All right. So my first question then is on financial targets. You mentioned that you envision with the sales commission structure that existing customers could grow around 40%, at least per year. But could you give some more color on how you envision to reach the SEK 200 million ARR target? Because you will need a lot of, well, new customer growth as well. So please, if you could share your thoughts on that?

Yes. So we have a few different scenarios for that depending obviously -- it could go in many directions, but we have a few different scenarios. And the main scenario is that the majority of that growth is from existing customers. And then we're adding customers during the year to also add to that. But it's primarily the customers that we had in the beginning of the year. And of course, we're hoping, and rather I'm saying that we're going to close at least 1 new logo in Q1, and of course, that can then contribute at the end of the year. But the ones that we closed at the end of the year are not going to contribute a whole lot to that. So we -- it's primarily still coming from existing customers there, Forbes, in our scenario planning. So -- and when you look at growth in existing customers, it might be good to also see that the big trend now is to do what's called conversational commerce, so essentially selling and upselling in the channel and not just providing support or explaining your bill or things that our customers do today. And we could also then do -- start with outbound phone calls, which we're trialing in a few customers to see where that goes. That's one of the meetings I have later today in Seattle with one of our customers to discuss. Is it now from a public perception perspective, because it's allowed now there's a legal framework for it in the U.S. Is it allowed from a public perception to be called by the bot? So that's also another growth area we see in existing customers, which can increase volumes quite a lot. So essentially 2 areas both within the sales side and then, of course, there's geographies. So moving -- the solution you just saw from Microsoft moving that into Europe, for example, which is in the plans for them that increases volumes obviously quite a lot.

And just to add there, Forbes, I think, I mean -- and we also see tremendous potential in many of the customers that we already have contracted, and we know what they are -- as Per mentioned, for one of the customers, what they are planning. And that is obviously, I mean, the least expensive way to grow. And the commission plan is also set. I mean, 40%, I mean, that's the starting point for the sales guys to get commissioned. And most sales guys wants commission, right? So I think in that regard, we feel quite confident on our existing customers and what we can do with them.

Good, good. And to follow up on the financial targets. Because you have one which is to reach the API call run rate of, yes, 1 million by 2024. And that is coming up quite soon. And I mean, it's more than 3x current levels. But do you need to reach that first in order to reach the ARR target? And what is the sort of connect between the two? Because the ARR target, which is 2 years away, it looks more reasonable to reach, so to say, and the API call target in 1 year time is looking quite demanding to reach. So if you could talk about that for a second as well.

I think, that you're probably spot on there, Forbes. So what we see is that we managed to reach the other 2 targets maybe without hitting the 1 billion. And the thing that has sort of been adjusted here, so we've been adjusting our pricing as well during this, which we weren't quite looking at when we did the goals. So what we see now is that we -- our prime focus is to hit that one cash flow positive month during this year. That's our prime target. And we see that we can reach that without having that increase. And there's 2 factors there. One is we increase the price. The second is that we see that customers use more of the seats that -- so we also charge for the seats that you develop and they used more than we were expecting when we made the model from the beginning. So we have more growth there than we were expecting.

Okay. And also just a quick one on CapEx, which was SEK 9 million in the quarter and more than twice the rate you have had the previous quarters. Can you sort of explain where that is coming from and if it's a sustainable level going forward?

Yes. I think, maybe we should have been more clear on that. But I mean, now that we are also -- in the past, we have been working a bit in parallel with an on-prem offering and also this new SaaS offering. But from the product side perspective, we are driving this as a SaaS company going forward. And that also means that we will even more actively drive customers to the SaaS platform. And that also means that we have, to some extent, also change -- that we have higher capitalization on what we actually do on this cloud SaaS product. And this has been discussed with our auditors and so on. So I think going forward, I mean, what you see now in Q4 in terms of capitalization rate, and I think we also mentioned that in the report that we experienced a higher capitalization. I think it's fair to assume same rate going forward. So essentially, no cash-wise, no impact at all, right, with what we have, but it's more that we put more on the balance sheet basically.

Okay. And final question from me then, a little bit on the market. So let's see here. Yes. So if you could briefly just talk about the main factors which have been holding back your customers in 2023. And on the flip side, the main reason you expect to win new customer contracts in 2024 and the main drivers for those customers to engage with you. Just some words on that, and I'll step into the queue.

Yes. So -- and that actually ties into Mark's first question here as well. So the new customers that we're attracting, what we're positioning now is, of course, showing results, so these recordings. And then we're talking about why we can achieve that. And then we're driving the sales cycle based on that. What usually is -- so we are tied into an ecosystem of things happening here. So hardly any of our new customers are coming with an on-prem phone system or a Contact Center system. They're all either in the way -- either they are replacing or they've just replaced that into a cloud-based system, which means that, that's a big project from a -- that's a big transformation for the company. It's a big -- there's many moving parts when they do that. And we see that across our customer base as well that this takes a lot of time and effort from customers. So that usually controls the timings of these. So we're building the pipeline with the help of an external business development firm, which is building up the pipeline. And then, of course, we're pushing these -- we're juggling these customers to see which ones we can push into each quarter. But we do believe that with the current pace, we're going to be able to deliver that probably in the mid range, let's say, then, Mark. So we've said [ 4 to 8 ] here, but and we're aiming for at least 6 during this year. So that's the way we would judge the pipeline right now, to bring in customers. And maybe if I continue with Mark, that because he's connected. So one of the things is that, that's going to primarily happen through partnerships, Tech Mahindra being quite important in that pipeline, meaning that we have to have a partner with us. The benefit of somebody like Tech Mahindra is, of course, that they can also do BPO. So they can first take over those staff but also transition the staff that will no longer be needed. So that's quite strong in how they take to market this offer. Another partner is EPAM, which has a lot of interesting customers in our space. They are CX-focused, U.S. based, but also European operation company that recently took over a large PS contingent that we happen to know from before. So they have been in our market before, actually worked together also at IPSoft/Amelia. So EPAM now is putting a lot of effort into this space coming from having customers in the CX space or having relationships already with the right people at the customers. So that's why we find that EPAM is an important partner. I don't mention them in the report because really, we started that work in the beginning of this year. And the Klarna AI statement, I mentioned a bit about this. So I was hoping to get some attention from this also in the U.S. because it was picked up by The Wall Street Journal as well. But I'm not really seeing that here. There's much less focus in -- not only been here granted only for one day so far, but met with a lot of customer teams and customer. And there seems to be less focus on removing staff and more focus on augmenting staff because there's a staff shortage in our customers in the U.S. So it's a bit of a different situation than maybe what we see in Europe and maybe somewhat of a macro difference in the environment. But the Klarna AI statement, we're definitely going to try to use this going forward because our customers do not go out with how many less people are working there. But obviously, if you automate phone calls, like we listen to the one before here about that Surface computer, then you're not going to have as many people picking up that phone. And that's going to be a big saving for you. So we're going to be using that in different ways and see if we can spin on that Klarna statement as well. It's important to just differentiate here. Klarna is a fresh technology stack company. They built a very, very good product, which is all -- it's decomposed cloudified product. That's a bit technical, but essentially, it means that you can access into any point of that product. That's the main banking system, so way beyond anything that any bank has, most of them still have mainframe. But that also means that there's less integration, less performance issues, but also they've never offered a phone channel. They've always offered a chat channel. Our customers have almost exclusively offered a phone channel. Before, we have one customer going to offer a phone channel now, which is HelloFresh. But otherwise, that customers have always had phones. It's difficult to just say, now you can't call, now you're just going to chat. But the chat solution is obviously easier to do because the performance is not as sensitive, i.e., the delay between you requesting and answering. Because typically, when you chat, you do something else at the same time. So that's the thoughts on the Klarna. And the fourth question from Mark, in the report, you mentioned several renewals which, of course, is a strong sign. Is there price negotiations? Yes, we are pushing price up. We don't do the upsell necessarily in the renewal. The renewal is just the terms and conditions and then the upsell is really pushing that volume, which is what we measure the sales guys on. We don't measure them on the renewal. We measure them on that volume as it comes. So we've been pushing price up. We've been pushing in price for components, which we weren't necessarily thinking would be a big thing. But for example, we started pricing up what's called end points. So we have a very efficient endpoint where you could deploy a large portion of your volume, You wouldn't really need -- for million calls, you wouldn't need more than one end point but we saw some customers for different reasons having up to 20 end points. So now we charge for that. So that's an additional revenue stream, but it's something that we've added into these negotiations in those renewals. Also, we've lifted most customers from the initial 7,500 to the 9,200 and 10,600 a month for the base license. So that depends on which customer you are and what the base license is. But we lifted most of them from the initial price point there.

And also, I guess also, I mean, important here to stress, I mean, if you, Mark, compare us with many other SaaS companies, which are much more dependent on seats, our more than -- lease driven more by the volumes from the API costs. And I would say, that's a key component in that we can actually continue to grow in a relatively easy way as the customer also wishes. So in that sense, it's also very easy for a customer to continue to grow and add use cases as well.

Thank you, Mark. Sorry that we couldn't join you in here. I'm not sure what happened there. Are there any other questions? And in my enthusiasm while we're doing the business update, we took a bit longer than the usual. Nicolas, you have a question. Let me open up the mic for you. Allow mic. Now you can unmute.

Can you hear me?

We hear you now.

Actually not a question but -- and perhaps a little premature to say congratulations, but I would still like to take the liberty of saying a job well done as a minority shareholder and impressive determination and perseverance over the past 2 years. So just wishing you god speed on this interesting year ahead, and hope that you'll achieve your objective of cash flow sort of positive a month or even hopefully through a quarter. So thank you for the job you're doing.

Thank you very much, Nicolas. Really appreciate it.

Thank you.

Okay, Well, thank you all. I'm going to hit the sack. It's 2 O'clock here in Seattle. So I'm going to terminate the call now. And thank you all for joining. And again, thank you for the confidence in the company. And thank you, Nicolas, for the positive comments. Thanks all.

Thank you. Bye.