Equity research Teneo AI, Q4 2024: Teneo continues to deliver above expectations

Read the full report below:

Teneo AI delivered according to the preliminary figures which were above our expectations. Net sales landed on SEK 26.5m, and SaaS API calls growth was 294%.

Teneo is reaching several important milestones

In Q4 2024, net sales reached SEK 26.5m, growing 68% YoY and landing above our estimate of SEK 23.9m. Recurring revenue amounted to 99% of the net sales. Growth was primarily attributable to increased volumes, as the average annualised API call volume grew 105% YoY, with an NRR of 135%. The gross margin reached 80% (77%), marginally above our estimate of 79%. Adj. EBITDA came in better than expected at SEK -1.7m (-5.8), as compared to our estimate of SEK -5.0m. Performance was above consensus, and milestones were reached, including ARR above SEK 100m and annualised API calls of 1 billion.

New partnerships will lead to continued growth in key markets

Teneo entered into new partnerships with four organisations: BSL Business Systems Ltd. (UK): a contact center integrator, Kenway (USA), a Google Dialogflow expert that will aid Teneo in navigating the Google ecosystem, AppDirect (USA), a master agent providing distribution capabilities for Genesys and Amazon Connect, IntervISION (USA), a re-seller and integrator of Amazon Connect with a particular presence on the west coast of the USA, and, finally, NWN Carousel (USA), a Genesys reseller that is driving adoption of agentless contact centers. The partnerships feed into the new weighted pipeline for new customer agreements. This KPI was 461,000 EUR NTM, representing a growth of 72% from October 2024. Worth noting is that this is without factoring in API calls, which, if accounted for and realised would double the current revenue.

Oversubscribed directed share issue to fund more growth

Just after the fourth quarter, in January, Teneo raised SEK 60m in gross 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. Participants included both legacy shareholders, such as Arpeggio and Stockhorn Capital, as well as new investors, e.g., funds managed by Claesson & Anderzén. 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.

Strong growth leads to a higher target price

The report was another strong one, with SaaS ARR accounting for SEK 75.1, growing 142% YoY. With the company delivering on its goals, and then some, we adjust our fair share price to SEK 1.2 (1.0), rising to SEK 1.3 (1.3) in the bull case and down to 0.6 (0.6) in the bear case. The base case valuation represents an EV/Sales NTM of 6.4x, compared to the reference group currently trading at 3.7x. The difference is motivated by a higher expected growth than the reference group and margin expansion.

Disclaimer

Carlsquare AB. www.carlsquare.se, hereafter referred to as Carlsquare, conducts operations in Corporate Finance and Equity Research and thereby publishes information about companies, including analyses. The information has been compiled from sources that Carlsquare considers reliable. However, Carlsquare cannot guarantee the accuracy of the information. Nothing written in the analysis should be regarded as a recommendation or invitation to invest in any financial instrument, option or similar. Opinions and conclusions expressed in the analysis are intended solely for the recipient.

The content may not be copied, reproduced, or distributed to any other person without the written consent of Carlsquare. Carlsquare shall not be liable for any direct or indirect damage caused by decisions made based on information contained in this analysis. Investments in financial instruments provide opportunities for capital appreciation and profits. All such investments are also associated with risks. The risks vary between different types of financial instruments and combinations thereof. Historical returns should not be considered as an indication of future returns.

The research is not directed at U.S. Persons (as that term is defined in Regulation S of the United States Securities Act and interpreted in the United States Investment Companies Act 1940) and may not be distributed to such persons. Nor is the analysis aimed at such natural or legal persons where the distribution of the analysis to such persons would involve or entail a risk of violation of Swedish or foreign law or regulations.

The analysis is a so-called commissioned analysis where the analysed company has signed an agreement with Carlsquare for analysis coverage. The analyses are published continuously during the contract period and against customary fixed remuneration.

Carlsquare may or may not have a financial interest in the subject of this analysis. Carlsquare values ensuring objectivity and independence and has therefore established procedures for managing conflicts of interest.

The analysts Herman Kuntscher, Markus Augustsson and Christopher Solbakke do not and may not own shares in the analysed company.