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

I think we'll just go ahead and start. So for all of you to know, this meeting is being recorded. So just from a privacy perspective, so you're aware of that. Presenters today is going to be me and Fredrik. Fredrik is our CFO. And of course, I'm the CEO of Teneo. And I think most of you have heard us talk before, so I'm not going to 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 Teneo. Obviously, one of the big things is that our investors or a few investors, but very strongly decided to support our growth in the U.S. which has also been our main focus for the quarter. So hiring has been a large portion of what we've been up to. We now have a complete organization covering the U.S. with both customers and partners. We also spent a lot of time on renegotiations. Typically, our MSAs, or master service agreements for 3 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 that 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 that 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'm in the U.S. 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 going to 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 are the ones that spent the most and might be in the lead or not in the lead, but everybody thought the LLMs were going to be the solution for customer operations in the beginning of the year, but -- sorry, beginning of '24, but that has 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 disolutionment of LLMs, we come in and we show what we can do. Here's another way to look at the TAM. This is from the [indiscernible] 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 going to 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 chat bots. 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, 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 going to take out the staff in customer care and replace them with an AI-powered chatbot based on OpenAI. Now obviously, Klarna and OpenAI have the same investors. So there's a bit of a synergy for them to talk about and raise both company profiles in doing this. But there's a company called Voiceflow, and they test these type 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 it will give you a link to look at your transactions, it will give you a link to complain about transactions, et cetera. And as you see, 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 going to be the answer, first of all, you subject yourself to the potential for hallucinations. And 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 $1 instead of charging them for them. There was a Chevrolet dealer that agreed to sell several cars for $1 because somebody managed to manipulate the prompt. So when you have a chatbot that's exposing 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 is examples of things where companies have -- or people have been able to manipulate the prompt. And in some cases, not even manipulate, 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 one that I really like the most was that somebody came in and said, I want to start a restaurant to serve human meat. And the chatbot answer, okay, you need these permits, and 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 eat and cheese, what do I do with it? Well, I just say just cut away the piece that the rodent 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 -- they're just prognosizing what the next few, let's say, sellables are going to be in the language 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 [indiscernible] is not Swedish, but it'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 3 risks that he talks about when it comes to LLM. 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 what you really want to do. You want to 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, et cetera. So how are you going to 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 going to 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, et cetera. We had a security incident in August of -- to think -- I think it was '23, but anyway, where it was then said to be Chinese state actors had got a hold 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 U.S., the U.K. 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 an example of a customer. This is a large tech company. They have today 10 million phone calls a month and 60% of those cases are resolved automatically. So that means no human is involved in that. So backing back into Klarna, did Klara fire 60% of the staff? No, they did not. Did anybody who deployed a chatbot based on LLMs actually managed to make an ARI. But we've seen lots of articles that, that did not happen. So it's McKinsey, BCG, et cetera, are all talking about the lack of ROI in these implementations. This one has real ROI. And the 60% automation, those calls cost $0.40. That includes everything. It includes the contact center and includes the SIP lines or the phone lines and also the cost of Teneo 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, $10 million, 60% automated [indiscernible] -- sorry, $5.60 per month, you see that it's over $30 million 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 now building pipeline in the U.S., U.K. primarily as those markets have very large phone consumers, so companies that have a lot of companies calling into them. This accuracy was tested by Cyara. There's 2 numbers that we use. We use a number of 99% in marketing sometimes as well. That is what has been reached by, for example, Telefonica Germany. They have gone out and said that they have 99% accuracy in intent recognition. So what is this? There's 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 stream. So this is the text that was transcribed. So as I'm speaking now, teams could make a transcription of what I'm saying. It's going to be about 95%, 94% correct. However, understanding that text is very -- is something very different. And the 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 traditional transcription-based solution. However, in Teneo, we understand what you said. So after the transcription, we then take the understanding. And that's what was tested here by Cyara, 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 the competition here. So we are going head-to-head with these large companies in our pipeline today. And we're seeing that we are doing pilots and POCs to prove this accuracy because it is a key point. And we're seeing that, that works to prove in a fairly short time frame, and that's our path now to shortening the sales cycle, which is going to be the step that we're going to 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 SEK 200 million ARR. We now need to shorten that sales cycle and get these customers in during the next few months. So who said AI has no ROI. I use this in the Swedish contact center setting 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 SEK 60. I heard numbers in the audience of SEK 200. So people are saying that Swedish companies spend SEK 200 to answer a phone call. If you have 1 million calls, that's SEK 60 million, you automate 1% at SEK 600,000. If you do 60% automation where we are unique and this can only be done with Teneo today, that's SEK 36 million in savings. So it's starting to be that we could probably at the next year, once we've now reached 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 million a month, which we saw a large tech company, this is still very big ROI numbers 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 U.S. right now calling you from Atlanta. This is where the large consumer companies are. Not necessarily Atlanta, but all over the U.S. This is where they are. So there's a second part to 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 App Foundry listing. So you can now go in and buy Teneo off of App Foundry, 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 text at the bottom there is the interesting one. So in their Q1 2025, which was June to -- so that ended in September of '24. But in their Q1 2025, which was the last time they reported the amount of calls was 5 billion calls going through Genesys. So we have less than 1% of that. We have several joint customers today, but we have less than 1% of that 5 billion. 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-Q4 when we started that journey. And we were at their sales kickoff, invited by them in Nashville this February, -- 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 U.S. are exactly related to that. So coming to business update, brilliant quarter. We had 142% 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 want to 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 the whole team really firing on all cylinders with this money going in now into building out the U.S., which I'll come back to. Great gross margin, even better than the quarter before. And of course, the revenue growth in the SaaS API costs year-over-year, 185%. So we're continuing on the doubling trend there almost. So what are we going to use that money for? We have a slight increase in cost. We're guiding that, that cost is going to go up a bit more in the report as well because we hired now a substantial team over in the U.S. So first, I want to talk about what has this given so far. Now again, this started -- most of these people started in February and March, right? So the whole team, which I'll come back to, starting 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 3 people. But this team of 7 people in the U.S. is really taking off in terms of building out the pipeline right now. So I want to talk about that pipeline number to really give an understanding of what it is. We said in Q3, we were going to start reporting on pipeline and that we did that in Q4, first time that -- so it was actually in the Q3 report, that's the October number. Q1 report is the February number and then the April number is, of course, now then. So you take an average large Teneo customer, they would pay us about EUR 10,000 per month in subscription. 12 months of that is about EUR 120,000. So what if this was a qualified opportunity, so 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 that we're talking to the right people, and we have a chance at selling, that's a qualified opportunity. So if that was in that pipeline stage, we would see EUR 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. So 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 million. We need about 4 or 5 large customers out of this pipeline. This pipeline is more than 15 qualified large customers. So it is definitely enough to hit that number. And what you see here is the development of the pipeline. So it was EUR 266 million in October, EUR 461 million in February and EUR 1.50 million in April. So double just between February and April. And of course, that's the effect of the team coming in, the kick 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 the pipeline is affected by a few things. AWS, where today, we 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 on the bottom left. We have Genesys, that's our prime -- that's where we go direct to all Genesys customers. We have all those customer list. 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 going to be NWN customers. So that's another partner that we're working with. NWN was partner of the year 2024. It's a combination of NWN and Carousel, two important partners in the Genesys contact center space, sorry. And InterVision Kenway Consulting, working with them as well and more starting now April, May in marketing. And then App Direct, a bit of a pause there right now because we put so much effort in 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 CloudHesive in the AWS Connect space. So the two most important hires over in the U.S., Michael Kenney 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 U.S. And then we have Lee Kayne, who is former Genesys Senior Vice President of Sales, has 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 U.S. So we split the U.S. into three different parts. Jon is actually a Swedish descendant. We call them Jon here, of course, Henry and Jeff and they're running this. We then also have 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 like Google Dialogflow, et cetera. So she -- when we called, she was very happy to join knowing that Teneo is the best solution in the market. Julia has also worked with Teneo and other solutions, and Howard comes from Cyara and was part of that testing that did that 95% accuracy. So very important movements in the U.S. We have a team coming into this quarter that's really going to be able to fire on all cylinders. Now I do get this question a bit, is there an impact for Teneo on what's happening in the U.S. Well, we have local U.S. delivery with source code escrows, et cetera. So a U.S. company doesn't really need to care about anything about us being in Europe. We deliver from the three regional clouds and Microsoft in Azure in the U.S. 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 and anything like that impacting us right now. What is happening in the U.S., and I can attest to that, I came in on Sunday, I had meetings yesterday and going for additional meetings today. Cost savings are definitely in focus in the U.S. 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 our revenue in dollars. That's 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 U.K. and the broader European market having some cases coming in as well. So some of the operational highlights before I give it over to Fredrik. 185% year-over-year growth in SaaS API call 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 Teneo. 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 API cost. 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 issue of SEK 60 million. That gives us this investment potential in the U.S. that is already starting to pay off, but that's going to pay off handsomely for us. I'm quite sure, especially after being here now only for 24 hours so far, but definitely going to see a big spike in the U.S. revenues during this year. So with that, I'm going to hand it over to Fredrik, who's going to go through some of the financials.

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 directed 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 Per 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 2024, which was a record quarter, we should remind us about as well. And as I 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 our 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 SEK 1.4 million minus 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 3 years, our strategy has been to grow on our existing accounts and help them grow 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 managed 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 this in the SaaS universe for listed Swedish and Nordic companies. And in Q4, we were ranked as the #1 in this respect in their universe. But we also look at external parties to benchmark ourselves versus and one is the SaaS investor, Montero, 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, yes, a very strong performance here in terms of NRR. And we can move to the next slide, Per. And 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, very strong and good numbers. We can go to the next slide, Per. Lots of numbers here, but you see in the graphs here, SaaS ARR and total ARR. And we grew SaaS ARR with 101% year-over-year Q1 '24 versus Q1 '25 and total ARR grew from -- with 51% Q1 versus Q1 '25. And also here, we can see that currency adjusted, we also experienced growth in SaaS ARR versus our record quarter in Q4 '24. So overall, very solid numbers, I would say. We can go to the next slide. We also record stable gross margin development 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 are 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%. We can go to next slide, Per. Our OpEx, we show SEK 115 million in OpEx or adjusted OpEx run rate in Q4, and we had SEK 117 million in Q1 2025. 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 marketing activities in 2025 and that we plan to increase costs with approximately 10% versus Q4 '24 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 SEK 54 million 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 million instead of SEK 54 million. 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, Per.

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 7 in the U.S., but we hired in total 9 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&A.

[Operator Instructions] I see a hand there from Fredrik. Let me see...

I want to start with the SaaS ARR that was roughly flat in the quarter. I mean the last 2 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?

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 Q4. And then there's a bit of a consolidation period as that new project it could be expansion in languages, it could be expansion in -- there's three things how usage can expand. And yes, this Q1, it was more of a consolidation period, some currency effect and yes, 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 -- it's not a shrinkage. It's a consolidation at the level of Q4 until new things come along, new projects start delivering.

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

No, that's our goal. That's not our forecast, right? It's our goal. Yes, the SEK 200 million ARR or the $20 million is probably the way to that we measure it internally now. The $20 million ARR is definitely still the target. Now it does not require SEK 30 million 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 4 to 5 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 are also coming in, in Q1 Ann and Julia. They're helping us shorten the sales cycle by doing a seeing is believing type approach where 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.

Okay. So one last question from me. I mean the pipeline increased rapidly, as you mentioned. But what share of that can we expect to be signed over the next 6 months approximately?

So 4 to 5 large customers, so customers of the size that we have today, that's the expectation we have. We might sign some smaller ones as well, but it's 4 to 5 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 -- it's counting on closing out the whole pipeline this year. Okay. Forbes, I see you have a question, so I allow you a microphone. Thank you, Fredrik.

Alight. 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?

It didn't have a big impact this quarter. But Fredrik, do we disclose the...

No, 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 '24 versus Q1 '25 in terms of SaaS API core 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 reported 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.

And 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?

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 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. So...

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 U.S. go-to-market team that you have over there versus the partner side of things, who is going to do what? And yes, who's going to bring in the deals now in the near term? That's my first one.

Right. So we go directly, but we go to the customers that are Genesys and NWN customers. And then we also go with the partner to the same customer. So we don't rely on driving it as a sort of indirect revenue. The difference -- there is one other one there, which is Cloudhesive where we only support Cloudhesive. 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 a 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 customer list that we go after, where we set meetings, we do marketing activities, et cetera. And we do, for example, a webinar here 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 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.

All right. 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?

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 of the ones with big API volumes to raise the API price. We did raise the monthly prices a bit, but that doesn't impact that much. But essentially, the monthlies, we've raised 11% list-wise, basically offsetting some kind of inflation that is what we've done in these MSA renegotiations. So it's not going to have a huge impact. It's more -- I think it's more a testament to the strength of the small supplier that we managed to do that. I think that's quite strong. Of course, everybody is 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 ones. Okay. Thank you, Forbes. I will now open up for [ Mattias ] here who raised his hand first.

Maybe I address this one to you, Fredrik, to start with. You added 6 consultants during the quarter from 5 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?

No, I think -- I mean, the way we operate is very much that some of our headcount tend to want to be their own. 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 local company entities, 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. And 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.

Okay. One more, Fredrik. If you look at the net financial items, it says the net financial items for the first quarter were impacted with SEK 14.8 million 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 great?

Yes. 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, 10, 11 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 top 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, et cetera. So...

Okay. Perfect. Just one more from my side, and I'll address this one to you, Per, then since that is not so financial. Look on 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?

I think revenue from those is more in Q3. But we do definitely believe that we're going to be able to close out some of these. We are still in negotiations with a few customers where we've had to take this approach that I spoke about where we need to do seniors believing. So we've implemented pilots and POCs plus 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.

Let's say, what we should expect is kind of the hockey stick -- into the after summer period?

Yes. In terms of ARR development, that's definitely what it's going to look like. Thank you, Mattias. Next here is Herman. Herman, I will now allow your microphone and now you will need to unmute.

I feel my question was touched upon now briefly, but Genesys and NWN, could you elaborate a bit more about how these deals -- what this look like? And for example, for NWN as a reseller, how does that work on your end in terms of how you get the revenues and in terms of ARR?

So Genesys and -- sorry, I just got a delayed notification on my flight, which really sucks. But anyway, that's what it's like in the U.S. So in terms of Genesys and NWN, so we have -- we are on the Genesys at 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 what's called Genesys Cloud, which is their contact 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. NWN is one implement the 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 NWN or InterVision or one of the other partners. So we would then work together with NWN as well and maybe not do the deal throughout Foundry, maybe do it directly to NWN. But it's not going to have any direct impact on the revenue that we see through these. It's very small percentages that go through -- that are left sort of with the reseller or what they make money on is the services or a happier customer. I don't know if that clarified that more, Herman. Okay. Then we have a question from [ Matts Nielson ], I will allow your microphone [ Matts ] and you need to unmute. [Foreign Language]