Artificial Solutions International AB: Interim Report Q1 2019

STOCKHOLM,May 14,2019 -- First quarter

Order Intake amounted to 16.8 MSEK (18.4) and order Backlog increased to 40.8 MSEK (31.7)

Net Sales amounted to 12.6 MSEK (12.4)

Adjusted EBITDA amounted to -27.7 MSEK (-20.9)

One-off expenses of -26.2 MSEK,refer to written down goodwill of 22.1 MSEK and 4.1 MSEK relate to the reverse takeover

Earnings per share was negative -2.7 SEK

Events

Increased and extended contractual relationships with several long-standing customers

Partners related revenue rose by 85% to 50% (27%)

In April,major platform release of Teneo Fusion and Teneo Developer and important release facilitating business scalability

Key Figures (for definitions,see page 18)

Jan-Mar

Jan-Dec

MSEK

2019

2018

2018

Order Intake

16.8

18.4

55.4

Order Backlog

40.8

31.7

35.2

Net Sales

12.6

12.4

44.9

Gross Margin %

50%

55%

45%

Adjusted EBITDA

-27.7

-20.9

-100.3

Partner Revenue %

50%

27%

32%

Earnings per share,SEK

-2.7

n/a

n/a

Cash flow from operations

-32.7

-28.0

-122.0

CEO STATEMENT

The new era as a publicly listed company for Artificial Solutions,brings a new status which we can take to our new and existing customers with increased confidence. With this we also gained three new members of our Board who will support us through the next stage. We are all excited by the journey ahead.

Results

The Revenue and Order Intake for the quarter are in line with expectations. This is of course unsurprising given the proximity of our listing (12th March) but there is always variability at the end of the quarter in closing specific transactions. The first quarter last year was very strong in this regard and thus we are modestly behind 2018 in terms of Order Intake but ahead in terms of revenues and backlog. We also note that as set out in the Company Description,our customers are generally major multi-national organisations and at times it is difficult to accurately predict the timing of closing particular agreements. In Q1 some negotiations were slightly delayed,thus reducing the related Order Intake for the quarter. We continue to predict that we will see increased Order Intake above 40% growth on 2018 on a full year basis. The 28% increase in Order Backlog (contracts won but not yet taken to revenue) is very encouraging.

Teneo Fusion

Since the end of the reported quarter we have announced a very significant product release of Teneo Fusion,the latest version of the Teneo Platform,including the launch of Teneo Developers,a new comprehensive resource to allow enterprise developers and partners fast access to experience the power of Teneo. I am particularly excited by this milestone release which will now fully enable us to scale without significant increase of our overheads. Already it is attracting interest from new partners looking to use Teneo to develop applications for their customers.

Customers

During the quarter we signed up with new customers in the National Government,Postal Services and Airline industries as well as successfully increasing and extending our contractual relationships with several existing customers such as AT&T,Shell,and Vodafone who have all renewed and extended their long-term commitment to the Teneo Platform with increased volumes. This is a positive endorsement of both our technology and commercial strategy.

These additional contracts were with customers where the company has a direct relationship rather than one involving a partner. In this way,the mix during the first quarter has shifted somewhat to direct order intake compared to partner revenues,which we believe will be balanced out during the year.

In the Company Description produced as part of the reverse takeover,our stated strategy is to build a partner-led model in which our partners deliver to our customers the majority of the lower-margin Professional Services,leaving Artificial Solutions to concentrate on the higher-margin licence and usage revenues. It will take some time for new customers supported by this partner-lead model to generate meaningful volumes of usage revenues,but growth will come from both new customers and from existing customers increasing volumes through our platform. I am confident that,the mix of partner to direct business will continue to reflect the growth in Partner Orders we have already seen.

Partners

Building on the theme of Partners,we have expanded our partner network during the quarter adding new partnerships with globally significant companies including Capgemini and Deloitte. We also continue to see new projects coming to us from the Partners and we know of a number of new pilots and proofs of concept underway which will be concluded in 2019.

Supporting Global Customers

I am also pleased to be able to report that we have opened a new subsidiary sales office in Singapore to cover the Asia Pacific region. We have been encouraged to establish an office in the region by customers such as Singapore Post and Shell,as well as a number of our Partners who have operations and customers in the region who will benefit from local support. We expect a positive contribution to Order Intake and Revenues from the region already in 2019.

Growing Awareness

Awareness of our technology continues to grow. The Teneo Fusion launch generated well over 200 mentions in the press including AiThority,Speech Technology,AIBusiness and even an appearance by myself on Cheddar,the online news streaming service that comes live from Nasdaq's trading floor in New York.

Our team of experts have also been addressing audiences across the globe at several major AI conferences and digital events. Judging by the response at our booths after live demonstrations of Teneo,our technology still puts our nearest competitors into the shadows.

Our Focus for 2019 remains to build on successes with existing customers to increase the volume of business from those customers by increasing the number of use cases,platforms,and languages that they use. We will focus on bringing on board a small number of strategic accounts who we believe will help bring other customers as a result of their success. Perhaps most important,we will continue to build on successes with our Partners both by signing new customers and increasing the numbers of Partners that work with the Teneo Platform.

In summary,I am pleased to be announcing an on plan set of results for our first quarter as a public company and look forward to delivering even better performance in the quarters ahead.

For more information:

Lawrence Flynn

CEO,Artificial Solutions

Tel: +44(0)1635-523267

Email: lawrence.flynn@artificial-solutions.com

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