Equity research Teneo AI: Growth or lack thereof, a mixed first quarter

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Teneo delivered on some important metrics in Q1. Net sales reached SEK 25.3m, growing 48% YoY, with SaaS API calls growing 185% in terms of revenues YoY. Compared to Q4 of last year, recurring call revenues were marginally lower. 

A mixed bag when it comes to financials

Net sales were ~10% lower than what we had anticipated, coming in at SEK 25m. Growth was driven by increased volumes from existing customers, with renewals of agreements with Medtronic and a global American tech company. Quarterly average SaaS API calls grew by 155% YoY, but SaaS recurring revenue from API calls did not grow sequentially from Q4 2024. NRR was reported at a solid 142%, in line with Q1 last year. Gross margin (after commissions) improved YoY by 7%-points to 86%, while our estimate was 80%. Profitability in terms of adjusted EBITDA was better than expected, coming in at negative SEK 1.4m compared to our estimate of negative SEK 5.4m. On the other hand, cash flow from operating activities came in at negative SEK 13.9m, compared to our estimate of negative SEK 9.6m.

Important events during the quarter bodes well for rest of 2025

In Q1, Teneo focused on recruitment, the development of the sales pipeline, and customer renewals. For the US markets, seven seasoned go-to-market specialists were hired, adding to the sales pipeline during the quarter. Two sales kick-off meetings were held, namely with Genesys and NWN. The former, a CX and call-centre technology company, processed over 5 billion calls during Q1, and for the period 1 November 2024 – 31 January 2025, had over USD 1.9 billion in ARR. The latter, the largest reseller of Genesys Cloud services, will resell Teneo licenses and provide integration services.

Oversubscribed directed share issue to fund realisation of sales pipeline

In January, Teneo raised SEK 55m in net proceeds from an oversubscribed directed share issue. The share issue, corresponding to a discount of 16%, was increased in size from an original target of SEK 50m to 60 as there was strong demand from institutional investors. The strong interest and outcome of the rights issue is a testament to the interest in the CAI space as well as the Teneo solution. The funds will, among other things, fund the realisation of the sales pipeline, which has reached EUR ~1.1m, as compared to EUR 461k in Q4 2024. Microsoft was cited as generating more leads.

Mixed quarter and FX-clouds on the horizon leads to lower target price

The report had some significant highlights, the sales pipeline being one, but was a mixed bag overall. Given the above, combined with FX-woes pertaining to the SEK/USD, we adjust our fair share price to SEK 1.0 (1.2), rising to SEK 1.1 (1.3) in the bull case and down to 0.5 (0.6) in the bear case. The base case valuation represents an EV/Sales NTM of 6.0x, compared to the reference group currently trading at 2.9x. The difference is motivated by stronger growth prospects compared to peers.

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