QUARTERLY REPORT APRIL TO JUNE 2021

August 10, 2021 Yoleidy Carvajal Regulatory

SEVERAL IMPORTANT CUSTOMER WINS

APRIL TO JUNE 2021

Net sales amounted to 8.2 MSEK (15.4)
Net sales adjusted* amounted to 10.7 MSEK (12.5)
Recurring revenues adjusted* amounted to 8.8 MSEK (8.9)
Rolling 12 months recurring revenues adjusted* amounted to 34.8 MSEK (31.0)
Usage revenues adjusted* amounted to 3.8 MSEK (2.7)
Gross margin decreased to 67% (69)
EBITDA adjusted amounted to -18.3 MSEK (-19.8)
Earnings per share amounted to -0.2 SEK (-0.9)

JANUARY TO JUNE 2021

Net sales amounted to 18.1 MSEK (30.7)
Net sales adjusted* amounted to 22.9 MSEK (25.6)
Recurring revenues adjusted* amounted to 17.7 MSEK (16.8)
Usage revenues adjusted* amounted to 8.1 MSEK (4.4)
Gross margin increased to 69% (65)
EBITDA adjusted amounted to -31.7 MSEK (-44.9)
Earnings per share amounted to -0.4 SEK (-1.6)

EVENTS DURING THE QUARTER

Signed three-year SaaS deal with Telefónica Deutschland / O2, a leading telecom operator, for the German market
Signed strategically important SaaS deal with large multinational US Tech company
Signed renewal agreement with a global truck manufacturer
Teneo Platform currently supports 86 official languages – most covered languages in the market
Successfully raised 120 MSEK in a directed share issue
Extension of 52 MSEK bond

EVENTS AFTER THE QUARTER

Signed a LUIS^Teneo SaaS deal together with our partner Microsoft with telecom operator A1 Bulgaria
One of our partners, a large system integrator, signed up for and deploys LUIS^Teneo for its business
Large Multinational US Tech company ordered continued expansion in US and Japan from our partner
Signed two renewal agreements with a US Government Department and Circle K
Appointment of Paloma Ramirez Diaz-Monis as Chief People Officer

KEY FIGURES (For definitions please see page 19 * for adjusted revenues clarification on pages 4-5)

MSEK	APR–JUN 2021	APR–JUN 2020	JAN-JUN 2021	JAN-JUN 2020	JAN-DEC 2020
Net sales adjusted*	10.7	12.5	22.9	25.6	47.3
Recurring revenues adjusted*	8.8	8.9	17.7	16.8	33.9
Rolling 12 months recurring revenues adjusted*	34.8	31.0	34.8	31.0	33.5
Usage revenues adjusted*	3.8	2.7	8.1	4.4	10.4
Net sales reported	8.2	15.4	18.1	30.7	53.8
Gross margin %	67%	69%	69%	65%	66%
Adjusted EBITDA	-18.3	-19.8	-31.7	-44.9	-78.3
Earnings per share, SEK	-0.2	-0.9	-0.4	-1.6	-3.2
Cash flow from Operations	-14.8	-10.9	-30.3	-29.2	-75.9

CEO STATEMENT

Dear shareholders, colleagues, customers, and partners:

New Customers

The second quarter 2021 was the quarter where our new position in the market was solidified. With two major strategic deals done at the onset of the quarter we have firmly put our stake in the ground. In addition, these two customer wins have been followed by some other highly interesting deals after the quarter end. Telefónica / O2 in Germany choosing to work with our SaaS LUIS^Teneo, is a testament to the strength of our solution. As the choice was for one large initial project as well as future projects the competitive bid had attracted competition from all the largest vendors including Google and IBM. Our solution will be implemented by Tech Mahindra with the support of us and Microsoft.

Our second win in the quarter is a customer we are not at the liberty to talk about, but it is a very important customer in the software industry. The customer is highly competent and works with our partner CSGi for implementation. CSGi managed to take the first solution live in six weeks which is a testament to the strength of LUIS^Teneo, and our joint offering with Microsoft.

Following the quarter end, we have also announced that we have signed a contract with A1 Bulgaria, part of A1 Group and controlled by América Móvil (with 400 million subscribers). This contract for the Bulgarian market has been closed together with our partner Microsoft and with the joint LUIS^Teneo offering, the customer will deploy a range of conversational applications in its customer service. The apps are initially deployed in Bulgarian, with the possibility of expanding its reach to other languages via a smart localization feature – a unique functionality provided by Artificial Solutions.

It is also very pleasing to see that our existing customers continue to show support in our new strategy and our offering. Beginning of August 2021, Circle K, part of the Global Fortune 500 retailer Alimentation Couche-Tard, among others renewed its agreement to run its Conversational AI deployments on the Teneo platform and to continue to provide support for customers and employees of its convenience retail outlets in the US and Scandinavia.

Our Customers

We have fantastic customers who are both pushing us and their organizations. With the changes we have made we have been very tight with our existing customer base ensuring that they keep growing while we are changing our delivery model and commercial model. I am happy to say that we have a very satisfied customer base. Some are choosing to move to our SaaS model this year whereas some remain on the old model for the time being. As the year closes, we will update you on where we stand in terms of customers on SaaS and variable fee contracts and on new KPIs for our new strategy.

Financials

Changing our new business and delivery model causes a decline in reported net sales for two reasons, we no longer provide Professional Services and as we sell, we recognize only the revenue for the months in the quarter, as they are consumed. Adjusting our historical numbers from our previous business to today’s revenue principles, we see that adjusted net sales in the second quarter declined from 12.5 MSEK last year to 10.7 MSEK 2021 but adjusted usage revenues increased. That decline is attributable to not selling Professional Services. We continue on our lower cost trajectory but are now adding key commercial positions to execute our new strategy, so our run-rate cost will increase slightly. Our operating run-rate costs in the first half of the year corresponds to 111 MSEK per annum. I am confident that we are executing according to the right strategy for this fantastic software asset – Teneo.

Capital Raise

Our oversubscribed directed share issue of 120 MSEK in the second quarter of 2021 was an important step in securing our continued market expansion and also gave us interesting new national and international shareholders. We appreciate and thank you for the confidence in our team and strategy.

Our Market is Moving

There is increased M&A activity in our market compared to 2020. We have seen Nordic Capital investing in Boost.ai as well as Cognigy.ai receiving a 44 MUSD financing led by Insight Partners. Boost and Cognigy are both platforms that are marketed for ease of use to non-developers and they have more customers than we do, but roughly the same Software revenue. Instead, we have customers with higher usage of our software.

At Artificial Solutions, we know that Developers are key for a successful development project and our prime development UX focus remains the Developers community and with business users as a second target group. As we are the number one platform globally today when it comes to number of sessions (as in user/customer coming to the platform and being services by it) with our 10 million sessions in June, we are convinced that long-term this approach wins. We are working to make our customers successful long-term providing the best digital channel and as we are moving to volume-based pricing with all new contracts, volumes will drive revenue long-term, and the high scalability of our platform will make profitability follow.

Diversity

There are 38% females in Artificial Solutions today. That means we are at least three times further ahead towards equality than the industry as a whole. Our software is designed to be used by people. Not a specific gender or race. We support 86 languages but also need to ensure that usability and user experience meets the bar of inclusion as well. As a first step in this direction, we will be driving diversity in our employment policies especially in the Product field.

Per Ottosson, CEO

This disclosure contains information that Artificial Solutions International AB is obliged to make public pursuant to the EU Market Abuse Regulation (EU nr 596/2014). The information was submitted for publication, through the agency of the contact person, on 10-08-2021 at 07:30 CET.

For further information:
Per Ottosson, CEO, Artificial Solutions
Email: per.ottosson@artificial-solutions.com

About Artificial Solutions

Artificial Solutions® (SSME:ASAI) is the leading specialist in Conversational AI. We enable communication with applications, websites and devices in everyday, humanlike natural language via voice, text, touch or gesture input.

Artificial Solutions’ advanced conversational AI Teneo®, allows business users and developers to create sophisticated, highly intelligent applications that run across 86 languages and dialects, multiple platforms and channels in record time. The ability to analyse and make use of the enormous quantities of conversational data is fully integrated within Teneo, delivering unprecedented levels of data insight that reveal what customers are truly thinking.

Artificial Solutions’ conversational AI technology makes it easy to implement a wide range of natural language applications such as virtual assistants, conversational bots, speech-based conversational UIs for smart devices and more. It is already used daily by millions of people across hundreds of private and public sector deployments worldwide.

Artificial Solutions International is listed on Nasdaq First North Growth Market in Stockholm with short name ASAI. Erik Penser Bank is the Company’s Certified Adviser (www.penser.se, tfn +46 (0) 8-463 83 00, e-post certifiedadviser@penser.se).

For more information, please visit www.artificial-solutions.com.