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

Good morning all. It's one of those days where Microsoft Teams is not going to share sound. I'm going to try to do that in a different way, but for some reason it won't let me. I tried before my microphone to share the sound, which I'm going to have in the presentation a bit later, but I'll try to play that from my phone. If it doesn't work, then I'll have to do it for the next time and I'll explain what it is. So can you hear me, Fredrik, while I'm speaking? Brilliant. So we're going to go ahead and kick off. I am sharing a screen over here. So this is Teneo AI. So Artificial Solutions has just changed name to Teneo AI, and this is, of course, our first presentation as Teneo AI company, and this came into effect this Tuesday -- this Monday. It's the Q2 report. You will find it also on teneo.ai/investors and you can also go to teneo.ai/about-us, and at the bottom there, you'll find the investor site, and then of course, you'll find the interim reports as well. You'll find the presentation and also, of course, the actual reports, so the PDF. It's going to be Per, I'm the CEO; and Fredrik, our CFO, presenting this morning, and I'm going to jump straight into it. So we've had a fantastic quarter, and yet another fantastic quarter is what I would say, it's continued growth, very, very strong tech innovation. I'll come back to some of what's been happening in our technology as well, and we also got a new larger shareholder, an oversubscribed share issue, right at the tail end of Q2, and very happy with that. We welcome Stockhorn to our shareholdings, and at the same time, of course, we strengthened our balance sheet, and now have a strong cash position, and also the position to focus on our growth areas, which we're going to come to as well. So the big thing then from a name perspective, which is very important, is that our ticker has also changed, and essentially this has been a metamorphosis for the last 3 years. We've been gradually moving over to using our product name, which is Teneo, use that also as our company name, and the reason for that is of course, that it's difficult to get two new names into market, and Teneo is the product name. It's also the one that our customers recognize. It's also a short name, so our ticker symbol is now TENEO, and Artificial Solutions is a name that has now been retired in full, and we've been working on this for about a year, and we also got the decision then after showing the Board and also our AGM the effects of using Teneo AI as a go-to market. It was quite a simple solution -- simple decision to make to go to Teneo.ai. So very happy with that, also it's the final step of our transformation into a pure Software-as-a-Service company, where we are now growing, of course, in the U.S., primarily where Artificial Solutions was not known at all. So very, very happy with this change and the fact that we have got through that. So a bit about Teneo for those of you who have not been with us before. So our vision is a world without queues, without keypad navigation, with instant service. What does that mean? It means that we aim to take away pretty much all the humans that have to answer the phone and answer queries that you may have on support, on billing, on buying, on returns, or whatever it might be in this world, or why not just, "I have a sprained ankle, what should I do?" So it's a way to communicate in natural language with computer systems that is through the phone primarily as a use case. We are alone in the world, so we are the only ones to have millions of such phone calls per month. And also this quarter, so in Q2, in the end of Q2, we had one of the largest scalings of this where we scaled to 10x volume in 1 single hour, which is also very strong testament to the technology here. So very good business effects from using this, and it's used across geographies and languages. But again, our prime markets at this point are U.S. and U.K., so English speaking markets with international touch. And I'll come back a bit more to what's going on in there. So let's see. The SaaS journey that we've been on, so we've got a new management team. I came in at the end of 2020, most of the people then came in at the same time, Fredrik and I pretty much at the same time, but then the rest of the management team in the beginning of 2021. And what we started doing is rebuilding the product into a SaaS product, and we divested professional services. So basically, having a multi-tenant platform so that we can manage several customers with a smaller base of operational people, so we can manage this for the customer, but also manage one code base instead of many code bases. So very important changes and continualization, which also then laid the groundwork for these volume expansions, which are flexible so that we don't need to use resources all the time. We use the resources when they're actually needed from the Azure cloud -- the Microsoft Azure cloud. Took the first customers live in 2022, started seeing what customers were using this for. The main use case that came out was the open -- what we call OpenQuestion, which was to pick up the phone and then to start to automate those phone calls. So pick up the phone, understand why someone is calling, and routing it, and then gradually also automating those. And that's what we're seeing now, large scale automation. We're talking millions of phone calls per month, which are now managed by the platform rather than managed by humans, which of course, has great effects on customer satisfaction and also on cost for our customers. And we built reference stories, published those. Also seen that we've now verticalized these reference stories quite recently on our website, all published. We have great references in the industry and very, very large and the largest implementations of such technology. We saw the growth and usage at our existing customers, and we've been very focused on that and still are very focused on that. That is a prime driver to cash flow positive. It's the one that closes the EBITDA gap, which you also saw in this quarter, of course, with a much lower EBITDA loss than we've ever had before. So very, very important to grow at our existing customers. That was our focus purely into 2023, where we also then started partnering up with all the three cloud providers: Azure, GCP and AWS. Strongest partnership there is with Azure, with Microsoft, but also AWS Connect, where we are on that platform. But with Microsoft, you can now -- since last quarter, you can buy our software off of the Azure website without contracting with us and take it as part of your committing to Microsoft. So very strong. This is called Transact, and it's a very strong way for us to gain new customers in the U.S. and in the U.K. Partnering also with partners that can actually implement, if the customer doesn't have the resources to implement: Tech Mahindra, CGI and Valcon. And then in the end of '23, we re-did our organization to focus more on new logo hunting and also, of course, moving towards cash flow positive in this year. So we also saw some new investors now in the oversubscribed rights issue, which was very important, but also the capital, because that capital we've used to invest in the U.K. and the U.S. And we now doubled our sales efforts and sales force in those two geographies, which are the main geographies, because those have the largest companies with the most amount of inbound phone calls, which is important to us. There's been a lot of talk in the industry about ROI. We're obviously an AI company. According to [indiscernible] back in May, we are the only AI company on the Swedish Stock Exchange. That might very well be true. So the question is then, is AI in the trough of disillusionment, as you see here from the Gartner's graph at the bottom left. This is called the Hype Cycle. This actually was published a year ago, and they were already saying that generative AI, or what we now call AI, was at the top of this peak of inflated expectations, and it was on its way down. And we've seen a lot of articles on that. There was a bit of a correction in the stock market a few weeks ago on the same topic. And you see there's articles in Wall Street Journal and Financial Times, the CFO Journal, et cetera, about is there really an ROI on AI. And of course, if there wasn't an ROI, then we would have a problem as well, probably both growing our existing customers and growing. But let me tell you how this works and why the media is, of course, always chasing something that is behind the curve. Here's what we are looking at. This is a use case. This is from the numbers from Microsoft. I'll go back a bit more to the Microsoft case as well. But this is Microsoft support and Microsoft e-commerce. So if you look to the left, Teneo, the platform that Microsoft has integrated into the operation, Teneo, our platform, understands what somebody is calling about, answers them and also asks questions to resolve, and then also resolves issues. It can actually resolve support issues. And 40% of the cases that come in or the phone calls that come in are automatically resolved today. This is millions of times a month. So it's big, big numbers. However, if it was a person that picked up this phone, then we would route to that person, so that's a game that you have with Teneo. We always pick up and if we cannot answer, so 60% of the time, Teneo cannot resolves this, it goes to a human agent. And that 60% of the case is right now but that's shrinking all the time, of course, more and more is being automated. But we transfer it to the right agent with the right background. But the cost of that is still $6. So an average phone call to those agents is about $6. So the combination of this is you have 100% happy customers because there's zero wait times essentially, and most of the time, you can resolve things without talking to a human. And then when you do talk to a human, you get to the right human from the beginning. But you also see at the bottom here the cost difference, $0.40 when the bot does the whole case, and $6 when the bot does not. Now, if you do this, let's say, 1 million times a month, in the case of Microsoft, it's even more than that, but let's say, 1 million times a month, that's $6 million times [ 40% times -- minus $0.40 here ] meaning 560 times 6 times 1 million times 40%, so 400,000. We're talking ROI here, which is tremendous, just month by month, hour by hour. So the ROI on using AI is absolutely fantastic. Now, we'll get to the next step in this which is also very important. So what our development team has been working on, is making it possible to use auto-translation rather than native customer cases, so native implementations by language. And why is this important? Because now you can build in English and then deploy multi-nationally without doing any development effort. And this is a big, big thing, and also why we are now focused on U.S. and U.K. U.S. and U.K., you have a strong end domestic market, but then there's several companies, of course, that have strong international markets as well. And once we'll be able to build in the U.S. English or U.K. English, it's now possible with the latest AI technology to actually auto-translate this and deploy it in other languages. So very, very, very strong. And this has to do with several other technologies that we have, some of them patented, like our Teneo markup language, but it also has to do with the fact that we can now do something called streaming, meaning that while you talk, the system is interpreting. So it doesn't need to wait for you to finish the talk. And this is very important when it comes to actually having the time also to use that translation capability. So AI is delivering big time return on investments. It's definitely not the end of AI. Now, maybe the companies that provide AI are not getting enough money, that can be debated, but definitely customers are having big ROI on these implementations. We are set in an industry which is pretty much defined by the big cloud providers. So it's very important for us to be partnered up with all of them. We have deals together with Google and Azure. So far, we don't have a actual live customer together with AWS, but we have several co-bids where we are bidding with AWS Connect, which is their contact center platform. So partnerships with all of them, very important to us. And of course, these references that we have that you see on the right, also very, very important to us. Now, this is the one where I can't share sound today due to some kind of a problem with my -- let me see, with my driver for my microphone, but I'm going to try to do it on the phone. So I'm going to need to see Fredrik. You're probably going to need to turn on video so I see you, so you can do a thumbs up if you guys hear this. If you don't hear it, I'll try to explain it. But it's a recording of such an auto-translated solution. The voice that has been chosen in this recording has been chosen to actually sound like a more of a robotized version, so it's not meant to sound purely human-like, and that's a choice that sometimes is made in these implementations. But it is a call into Microsoft, and it's Microsoft Sweden. So this has not been created by doing a native implementation like we used to do. This has been created with what's called auto-translate from the English version. So Fredrik, can you share video so I can see a thumbs up if you hear this? I'm now going to turn on the sound from my phone here onto my microphone. So you couldn't hear it? Could you hear it, Fredrik? Okay. Okay. We're not going to do that. It is essentially -- it's a phone call into Microsoft, similar to the ones I've shown before in English, this one being in Swedish, and it fully resolves an issue with the surface. Same thing, you can get a QR code and go, I think it's [indiscernible] you go to and you replace your -- if it's actually malfunctioning, hardware-wise. Very, very strong ROI from Microsoft, of course. This is now deployed in 79 languages, I believe it is. Maybe I'm incorrect there, but it's in the range of 70 to 90 languages, and obviously not full volume, but they ramp up the volume. But a very, very strong thing that has been implemented with our technology and AI during this quarter. So we're very happy with that. So what's the reason why this is working? Because you might say it's a small Swedish company, why did you manage to do the large implementations of actually picking up the phone and understanding and resolving issues? It is because of the accuracy that we have. So what we did in Q1 was we did a test together with a company called Cyara, which is the biggest testing company for natural language AI. And we tested a set of conversations, which is available on Hugging Face, it's called BANKING77. And Teneo came out with a 95% accuracy in understanding those conversations, whereas as you see, the competition did not. Amazon Lex of course is a competing product, Amazon Connect, we partner with, which is a different part of Amazon, Cognigy, et cetera, Microsoft has their own, we actually use CLU, but then we enhance it with Teneo. So you can see that there is a reason for why this is working. And this, of course, is something that we're promoting quite heavily. Also in the AI space, our market is on fire. So the competition is heating up with new entrants, which is a positive because now people are talking about the need of a platform to be able to build this. We had a bit of a -- maybe that was during the peak of -- height of inflation -- peak of inflated expectations that Gartner was talking about. But last year, we saw a lot of customers trying to build what we have here, for example, the Microsoft implementation, they were trying to build that with their own software, communicating back into the APIs of GPT, for example. But that is no longer the case. Customers now, once again, as you see on Point 4 here, their buying behavior is shifting to again, start to look at, can somebody help us have the framework to be able to use these AI services and integrate them into our platform with all the security, all the compliance, et cetera, et cetera, that is needed together with the performance. And that's of course where we excel. So really like that. We are the only ones with the large-scale references in that space. And some of the established players are under threat. And what we just saw now as well is that Microsoft has had their competitor as well in this space called Nuance that they acquired after both partnering with us and also being a customer of ours. But they are now sunsetting that. So that is a product that is going out of support. So it's no longer being supported or developed from Microsoft. So quite interesting development as well. What you see then, the numbers here is rounds that people have done in this space to be able to sort of come in and compete with us. So obviously competing against big numbers, but we again have the only big references. So very happy that the market is moving to seeing that you need more than just an API into an AI service. So operation-wise and numbers, I'm going to leave over to Fredrik soon here, but just do a bit of a high level. Our ARR is now SEK 74 million. We are of course aiming for that SEK 100 million. That's our goal to reach as the next milestone on the revenue. And we are quickly approaching that. The SaaS API calls are growing very heavily and that is of course the one where we make the most gross margin, and that impacts the EBITDA for the quarter. And we also saw a gross margin of 79%. Now I'm going to flag that, that might be coming down a bit in the near term because we're going to have higher cost of sales, because we're going to be selling more new customers as we move into more -- have more heavy focus on new customers in U.S. and the U.K. Also very, very strong net revenue retention, and we're very happy with this oversubscribed directed share issue, where we also got of course a really strong shareholder in Stockhorn that are a Stockholm-based firm that has a very strong knowledge in our space. So very happy with that. Some operation highlights again before I give over to Fredrik. Record quarter, 75% (sic) [ 74% ] year-over-year growth in SaaS API call. Total revenue growth also very, very good. So we're very happy with the SaaS ARR growth at 47%. The first time that we had this tenfold jump, very important that we can process calls. So we're basically just subscribing to more resources in Azure on a seconds basis. It's very, very fast, and that's very, very, very impressive that we can perform like that. We are already at the highest volume of anybody in this industry, and then being able to do that from that volume is fantastic. Two new logo wins, very happy for that, of course, MedHelp and Healthflexx. Both are in the healthcare industry and also building use cases that we are showing to other healthcare providers. Healthflexx is also selling to others, to healthcare insurers in the U.S., so a good pipeline developing there. And MedHelp of course doing the same thing. They're very experienced in the space, having, among other things, they've been running 1177, which is the sort of medical helpline in Sweden. So very happy with that venture into the healthcare space as well. And then of course we signed just after the quarter, Valcon. Valcon is a partner that will use a platform to provide services to several of their customers, the first one being a large consultancy company that they're providing to, but they have several as well in their pipeline. So very happy for Valcon, which is a company mostly based out of Europe, but we're also now seeing that they're doing some business together with us in the U.S. We also launched the Accuracy Booster for Contact Center Voice AI. So if you're not using our -- or if you're using, for example, Amazon Lex or one of the competitive products, you can still add this in and get the accuracy that we have. And we charge the same amount of money for that, so the same API call revenue. This is something we're pushing quite heavily in the Amazon space and hoping to see some deals coming out there in Q3, Q4 as well. So scalability and traffic, again, absolutely fantastic. Our development team are doing a stellar job, really, really well done. And of course, that directed share issue. So I'm going to hand it over now after those highlights into a bit more of a deep dive to Fredrik. Fredrik, you are muted.

Sorry about that. Thank you, Per. So continuing on growth, I would say that that's the main topic for the Q2 report. So in the second quarter, 2024, we experienced solid growth that you have seen in the numbers, particularly in recurring revenues and obviously also on the API call volume growth. And we also improved EBITDA significantly as well. So some key points from this slide that I would like to mention is that we are reporting 99% recurring revenues, which obviously manifests that we are a pure software SaaS company. And also the increase in percentage of SaaS revenues of the total recurring revenues, which now amounted to 60% of the totals, meaning SaaS is now clearly in majority in terms of our total revenues, which has been the strategy from Q1 2021 to drive an increase in SaaS revenues. So -- and also on the recurring revenues, we experienced growth from SEK 14.6 million in Q2 2023 to SEK 19.1 million in Q2 2024, so a growth of 31%. And the growth is, as Per mentioned earlier, also mainly driven by existing accounts, which also is evident in our strong NRR number of 134%. As Per also mentioned, gross margin improved to 79% in Q2 2024 and also excluding commission costs, 82%, so a very strong number in the quarter as well. EBITDA improved as well. And also with the closure -- successful closure of the directed share issue, we are also in a strong cash position where we reported close to SEK 61 million at the end of June in cash. So next slide, please, Per. Just shortly on NRR, for those of you that are listening to our calls, you're very aware of this, but for those that are not that aware of the strategy and the focus we have had, so just put it into context. So during 2023 and also beginning of 2024, our strategy has been focused on growing on existing accounts, particularly as that is the most cost efficient way to do it. And therefore, we have also introduced NRR as a new KPI. And it basically measures how well we managed to grow existing accounts. And a number exceeding 100% means that we are growing in this aspect. So a number of 134% that we had in Q2 is a very, very, very strong number in the B2B enterprise software space. And just to put some reference, we have Redeye, who is covering our stock. They also report this SaaS universe report every quarter. And in Q1 2024, Teneo.ai ranked as #1 in this regard. Hopefully, we can be #1 in Q2 as well. Let's see. So a very strong development on, in particular, I would say existing accounts. So with that, we go to the next slide, Per. On API call volumes, that's our key indicator in how our business grows. And as you can see on the trend, we are on a good trajectory, long-term-wise, but also if we look from Q4 and onwards. And the KPI is an indicator on how our customer applications and our usage of them are -- and their usage of them are growing. So the more applications, solutions, covered regions, the higher API call volumes, basically. And also, when it comes to our reporting on ARR, which is on the next slide, we also tend to see some variations month-over-month. But -- and for that reason, we are now also then reporting this on a quarterly basis as the quarterly average on API call volumes. So that could potentially mean that if we're ending a quarter at the high end, normally, that tend to continue into the next quarter as well. But sometimes there can also be deviations. But so far, I would say we have a very positive growth trajectory on this. And also, we had a growth of 74% year-over-year. And I would say that, I mean, given the development in our existing accounts, we don't really see any reasons why Q3 could not continue growing from this level as well. So we are quite optimistic on the future outlook, I would say. Next slide, please, Per. So this slide basically outlines average numbers in the quarter on ARR. And the SaaS ARR grew with 47% year-over-year Q2 versus Q2 2024 and total ARR grew with 28% for the same period. So overall, a very, very, very strong development, I would say. We can go to the next slide, Per. I think this slide with the breakdown of our recurring revenues is quite interesting. So I think conclusions from the slide could potentially be that our recurring revenues basically showcases that we have been executing on our strategy, basically focused on existing accounts up until earlier this year. So we had a total growth of recurring revenues of 31% year-over-year. Our focus on growth on existing accounts, subscription, license, et cetera, has been relatively low, still some growth in that area as well. But what we see is, obviously, a significant growth on our SaaS API call volumes, so growing from SEK 3.9 million to SEK 7 million year-over-year. So that's close to 82% growth. So that's basically showcasing our scalability in our revenue model and also that, I mean, the alignment also with the SaaS API call volumes and also now SaaS API call revenues. So there is a kind of close to 1-to-1 relationship between those 2 metrics. So they are the key KPIs for us going forward as well. And the fourth item that I want to bring up is basically that 64% of our revenues in Q2 was based on variable API call volumes. So clearly showcase the operational leverage in our business and revenue model. Next slide, Per. Per already mentioned this, we improve gross margin with increased API call volumes. And we are also showcasing this including and excluding commission costs. And the reason for that is basically that, on new customers, when we sign new enterprise customers, we will have a negative impact on the gross margin, including commission. So we will continue to report in this way. And as earlier said, we had a gross margin of 82% excluding commission costs in the quarter and 79% including commission costs. And also, as we are focusing even more on new customers, we may have a negative impact on our gross margin, including commission costs going forward. But we don't see that as a major thing, but we just want to highlight that, that could potentially have some impact on the gross margin reported. And we're also adjusting the organization to fit with the focus on new customers in the U.K. and the U.S., and that may also have some short-term impacts in terms of, yes, one-off costs more related to OpEx. But we will come into that in the OpEx slide as well. But also important to say that on existing customers, we expect gross margins to continue improving from current levels as they also continue to grow. So the impact will -- if any negative impact will come primarily then from new customers joining us. So that's important to say. Next slide, Per. OpEx-wise, I would say costs are relatively flat versus Q1 and also Q2 2023. We have reduced the annual adjusted OpEx run rate from SEK 113 million in Q2 2023 to SEK 112 million in Q2 2024, all excluding extraordinary items and cost of sales. And this is roughly, I mean, a bit more than SEK 9 million on a monthly basis. And we are continuously simplifying operations. We streamline operations and also streamline on the headcount and primarily to be fit with purpose and the strategy that we are executing on. Employees have reduced from 68 people in Q2 2023 to 58 people in Q2 2022 (sic) [ 2024 ]. But we also have increased the number of consultants somewhat, but still a kind of net decrease. And we have also done some headcount adjustments in Q3 to fit basically, as Per also explained earlier, to fit the new focus on new accounts and focus primarily then on the U.K. and the U.S. area. And this will cause some one-off costs in Q3. So -- and we will also report those costs as one-off costs, so not part of the adjusted EBITDA. So all in all, I would say, we will have a slight increase on run rate costs versus Q2 2024 going forward. Not any material increase, but there will be a slight increase in costs. And from where we are now, we are not planning any headcount increases short-term. But as said, we will have some one-off costs due to rebalancing of headcounts basically. We can go to the next slide, Per. Cash-wise, we are in a strong cash position. We had SEK 60.5 million in cash, end of June. We have also collected accounts receivable in July of SEK 8 million. So adjusted cash position would have amounted to, I mean, about SEK 68 million. So with that, I would say, I mean, we are in a very, very strong cash position. And we can, as Per already mentioned, I mean, continue to execute on the plan that we are -- that we have aligned with the Board of Directors and the larger shareholders. So looking very positively on the future. Over to you, Per.

I wasn't even showing the cash position slide there. Sorry, I missed the last change of slide. Okay, so basically, in summary, some of you have seen this before as well. So I'm just going to say absolutely stellar quarter in terms of the technology development. If you are a company that is in the U.S. and U.K., you have 40 million, you have 100 million, you have 150 million customers domestically and then you have 1 million customers in Thailand, you have 9 million customers in Latin America, et cetera, the ROI on implementing our solution now is absolutely fantastic. And we're just going to push this extremely hard into the U.K. and U.S. markets. Because that internationalization is so costly. Because what you need to do is basically staff a contact center for 2 people that might call in, in Tagalog or 2 people that might call in, in Swedish during the middle of the night to your contact center, if you are a B2C company, but also if you're, let's say, a trucking company and you have people calling in about spare parts or how to repair something, et cetera. So very, very, very, happy with that development, that technology jump that we can do with the new AI technologies like -- and in this particular case, it is GPT. So it's the Azure APIs that we're using to do that. And if you need a platform to be able to use all these AI technologies, and you are a large company with large volumes, there really is only one choice. So very happy with the quarter, very happy with where we stand from a customer perspective and from a prospective customer perspective as we move into U.K. and U.S. So with that, I'm going to open up for questions.

And let's see, right, there's this double -- I need to unmute you first, [ Herman ], allow mic. And now, Herman, if you will unmute yourself as well.

Hello, can you hear me?

Yes, we hear you.

All right, great presentation. So I wanted to ask if you could perhaps expand a bit about the new agreements with MedHelp Care and Healthflexx and also with Valcon, maybe a bit about order value and when in time revenues will start to pop up. And -- yes, just expand in general, please.

Right. So we don't disclose order value for the simple reason that the initial order is quite insignificant compared to the API growth. And the API growth is always different in different customers and different partners and so forth. So in the case of Valcon, they've implemented and started using the solution and we see some API growth. Healthflexx and MedHelp are not quite there yet, so that's going to take probably another month or two before we see real-life use cases there. So the order value very much depends on the volume, and the volume depends on how quickly they implement and run this. We, of course, don't do the implementation. The customer or the partner does the implementation, so we're not in control of that. But I don't expect any of those 3 to grow to anywhere near a Microsoft or a Swisscom or a Telefonica in size, but they're very important for us in terms of using them. For example, the customer with the biggest potential that we have is the NHS, and we really want to show them cases from Healthflexx and MedHelp, which is something we're going to prioritize now Q3 and Q4, actually, also with a new employee that has worked with the NHS for a long, long time, so a new -- very senior person in the U.K. that's going to help us with that. So don't expect the type of revenues that we see from the largest customers, but I expect them to have impact on other revenues as well.

All right. Also, another question here from my colleague, Markus.

All right. And so you've been talking about the gross margin probably coming down here as you go live and sell new clients. So what levels are we talking here? Are we talking down to 65% or what level can we expect? Can you please elaborate a little bit on that, please?

Yeah, I don't think -- I don't know, Fredrik, if we can say that. So it depends on, of course, what we sell, because it's the cost of sales which goes up. So the more we sell, the less gross margin we have the first few quarters. And then, of course, it grows again because of the API call growth. So I don't know, Fredrik, if we have a guidance on that. I don't believe we...

No, no. But I think, short-term, there should not be any dramatic difference from where we are. But I think what we want to more showcase is that, if we take 2 new enterprise deals in 1 quarter, that could have some impact, short-term, on the gross margin, right? But if we have a steady flow of that, I mean, I think it could also be that we will continue to have the same and perhaps even improving gross margins going forward as well. So it's like Per says that it all depends on when and how many enterprise deals we sign. Because that is paying off for sales directly. That's the thing. So I would not factor in any -- maybe we are overemphasizing on this matter. But I would not -- from a forecasting perspective, I would not do any major changes, I would say.

From the current levels?

Yes.

All right then. I have another question here regarding the partnerships. You've sent some co-bids with Genesys and Amazon Connect, but you've also received leads from the Microsoft marketplace, can you please elaborate a little bit on the type of customers there, for example, that the Microsoft marketplace has given you and also the co-bid RFPs?

Yes, it's actually not through the marketplace. It's through what's called the Cloud Solution Architects, the CSAs. So the CSAs then view us as a way to sell more AI services into the account. So the account manager in Microsoft typically manages the relationship and the contract. And then there are CSAs that actually position the solutions. So it's through the CSAs, and the CSAs are only engaged on the really large customers. So in the Microsoft case and the Amazon Connect case, it's only the really large customers that we work together on. So those are our target customers as well. But we don't get -- we don't so far get, and I'm not sure if we ever will get actual leads through the marketplace. Okay. All right. I'm going to unmute Fredrik here, Fredrik Nilsson, let me just see. Allow mic. And now you can unmute yourself, Fredrik.

Can you hear me?

We hear you.

Nice. I want to start with investments in marketplaces in the U.S. and the U.K. I assume it will make your cash flow target for this year a bit harder to reach perhaps, but at the same time, setting you for a stronger position to reach the ARR target for next year. I mean, is that what you aim for? Is that how you prioritize target? Or could you elaborate a bit on your discussions regarding that?

Yes. So essentially, I mean, what the Board decided was to make those investments. And then we'll revisit on the next Board meeting, which is in a couple of weeks and see if we should prioritize the top line rather than the bottom line in the short term for that, yes. I believe that it makes sense with what's happened now at -- with this auto-translate, we have something that's so unique in the market. If you are a international company, one of these, again, with millions of phone calls, it's just so unique that it makes a lot of sense to just push really hard on that. So that will definitely be my recommendation to now focus that top line and get those customers in. The salespeople we've hired are of a different type than what we've been able to hire before, primarily due to our cash position. It's also a more expensive resource, but very, very good and very senior people. So that will be my expectation. But I can't say that today we have made any decisions in that regard, because we could also, of course, delay the new customer intake, which would help the cash flow and just basically -- but I don't think that's a good idea. Anyway, I can't say today, Fredrik, there's no new guidance on that as so far. But probably as we come into Q3, we'll be able to guide on that. But we are tracking very strongly [ still ] growth in existing customers, right, which is still the high, that's the 99% plus gross margin growth.

Okay. Another question, the ARR from non-SaaS seem to be quite stable over the recent quarters. What's the potential of migrating those customers into SaaS? And is that something you're actively working with?

We are actively working and we believe that we're going to be able to do it. It's just very, very slow. So there's two banks in Italy. One of them is growing, one of them is -- so we now have two really strong bank cases where Teneo is integrated with voice into the apps. It's TIAA, which is a bank for primarily teachers in the U.S., teachers association. And then again, one of the Italian banks, BPM, which is, I would say that I would have expected them to convert already because it's not like they're saying we're not going to convert, it's just that it's quite slow to get the internal processes moving in the right direction. So we're still aiming to convert them all. So the target that our organization focus is on the existing customers, the target they have is to convert them all into SaaS. And we know there's one customer which were not going to get into SaaS, which is in that country, that is in the middle of Europe, but not part of the EU. But that's the only one we know is -- that's the only one where there's no discussion on that anymore. The others should all come. It's just that it's very slow. And now we have Forbes. I'm going to unmute you. I've allowed your mic and now you can unmute, Forbes.

So my first question is on the API SaaS growth in the quarter, which was really, really strong. And just wanted to hear if you have some more color on that, the main drivers, and also what you have seen so far into Q3, the summer months. And if you could have any comments on that, it would be great.

Yes, I'll make those comments so Fredrik doesn't need to make it into anything official. But there's two things that happened. One is auto-translate and the other one is streaming. Both of those give our customers the capability to grow APIs without development work, meaning no project. And that is, of course, why we developed it. But it's also very strong that it actually works. And the Microsoft, of course, proved that. And other customers are following suit on that. So I would definitely expect that API growth to not only continue, but probably also accelerate as we're moving into Q3. We also know, of course, that we had 1 month in Q3, which was quite strong last year with the [ WhatsApp ] frauds. We're obviously already above that since Q1, above those volumes. But I don't foresee us having any of those. I think it's just pure growth in Q3 as well. So it's very -- tracking very strongly, let's put it that way.

And I mean, with your business model and the sort of demand for your services, you don't really expect much of cyclical downturn during the summer months, do you?

No, no, it's not -- I mean, obviously, the sales pipeline develops slower in July and August, but the customers do not, right? So it's actually -- there's actually even a spike when people have vacation in several of our customers, Microsoft being one of them. When people have vacation, they take the time to actually do that, make that call and see why their service is not working or why they can't get Office to install and so forth.

Great. And then I have one question on your visibility into the customers, I mean, your existing customers' road maps. I mean, how far does this visibility stretch? And because when looking at your existing -- at your like ARR target, it's really the existing customers which are going to help you reach that, isn't it?

Yes, yes, definitely. So in terms of road map, we have -- I mean, we have an organization just focused on the existing customers and they have continuous meetings with them to influence the road map as well, right? So to say, now you need to use this new auto-translate function, the streaming functions, et cetera. And that way you can have happier customers in other countries and so forth. So of course, the purchase all the time to just increase the volume. And we do see with the road map of the existing customers that we're going to meet our target. So definitely, when we look internally and we map it out, we see that we're going to be able to reach those targets.

All right, great. And congrats on really strong results.

Thank you, Forbes. So do we have any other questions? Raise your hand, your virtual hand. Okay, then thank you all very much for attending. And thank you very much for your interest in Teneo. And see you all soon. Thank you all.