Artificial Solutions International AB: Quarterly Report July to September 2019

STOCKHOLM,Nov. 14,2019 --

JULY TO SEPTEMBER 2019

Order Intake was 6.1 MSEK (3.7) and Order Backlog increased to 46.9 MSEK (23.3)

Net Sales totalled 12.8 MSEK (9.6)

Gross Margin increased to 62% (52)

Adjusted EBITDA was -26.9 MSEK (-20.5)

Earnings per share -1.7 SEK

EVENTS AFTER THE QUARTER

The Company has worked to secure additional funding in advance of the earnings announcement but this will require some additional time to close. The intent is to secure a stronger capital structure,aimed at investing in support of continued growth

JANUARY TO SEPTEMBER 2019

Order Intake increased to 45.7 MSEK (31.5) and Order Backlog to 46.9 MSEK (23.3)

Net Sales totalled 38.1 MSEK (33.4)

Gross Margin increased to 58% (51)

Adjusted EBITDA -82.2 MSEK (-64.9)

Non-recurring expenses in connection with the reverse takeover in February totalling -28.5 MSEK

Earnings per share -5.8 SEK

EVENTS DURING THE QUARTER

Signed three new customers in a number of verticals including United States Government,Automotive and Recruitment

Increased and extended contractual relationships with several long-standing accounts including a number of existing customers increasing the usage element of the agreement

Recognized by industry analyst firm Gartner,in their latest Market Guide for Conversational Platforms

Artificial Solutions' patent is valued at 1,460 MSEK by Oxfirst Ltd,showing an increase of 58%

KEY FIGURES

MSEK

JUL-SEP 2019

JUL-SEP 2018

JAN-SEP 2019

JAN-SEP 2018

FULL YEAR

2018

Order Intake

6.1

3.7

45.7

31.5

55.4

Order Backlog

46.9

23.3

46.9

23.3

35.2

Net Sales

12.8

9.6

38.1

33.4

44.9

Gross Margin %

62%

52%

58%

51%

45%

Adjusted EBITDA

-26.9

-20.5

-82.2

-64.9

-100.3

Partner Revenue %

43%

38%

42%

29%

32%

Earnings per share,SEK

-1.7

n/a

-5.8

n/a

n/a

Cashflow from Operations

-27.6

-29.6

-112.2

-71.6

-122.0

CEO STATEMENT LAWRENCE FLYNN

I am pleased to report another strong quarter where many indicators continue to move in the right direction. Order Intake has grown by 65%,Revenues has increased by 33% and Gross margin is up from 52% last year to 62%. Our Order Backlog has nearly doubled since the same period last year and we are now starting to see that our existing customers increase the usage element of their orders with us. The third quarter is traditionally a difficult one,as the vacation period has a negative impact on new business. Hence,set against this challenging climate,we have continued to show significant growth in Order Intake and Revenues. All of this is substantial evidence that the company is well positioned,and on track to prove the profitability of its business model in the medium to long-term. Looking over the full nine-month period,Order Intake has grown by 45% to 45.7 MSEK,and Order Backlog more than doubled to 46.9 MSEK.

STRENGTHENING THE CAPITAL STRUCTURE

The Board and management have,after quarter end,taken further steps to ensure that the financing requirements are adequately addressed through to cash-flow positivity. This means that the company is currently working to strengthen working capital and our financial structure in order to continue to invest in future growth. We also have some loans due until mid-2020,which was reported in the Company Description provided in March. The Board had anticipated securing additional funding in advance of this report however,we now require some additional time to close. The intent is to secure a stronger capital structure,aimed at investing in support of continued growth.

STRONGER CUSTOMER PORTFOLIO

We have some of the strongest brands in the world as our customers and this quarter we added another three,giving a total of ten new customers during the last sixmonths. Naturally,it takes time for these large multinational enterprises to roll out solutions across the business. Our new customers include a global search and recruitment firm,an additional US Government department and Scania,which is a new brand added to our community of Volkswagen Group companies. We are also experiencing positive signs elsewhere in our business,where existing customers are committing themselves to longer contracts.

Every customer is different,of course,but it is important to understand the scale of the opportunities before us. As I have said,our customers are some of the largest Companies in the world and they all have many use cases to which they can apply the power of the Teneo Platform.

So,whilst initial Order Intake precedes revenue by some time,I believe that a number of these existing customers will be generating significant usage revenues as they roll out to full scale deployments. Another strong indicator is the positive development of our partnership strategy. Revenue from our Partners has increased to 43% (38),driven by recently acquired relationships in the USA,as well as more established ones in Europe.

INCREASED PATENT VALUATION

In September,we announced that the value of our patent portfolio has grown by more than 50% to 152 MUSD (1.46 BSEK) after a valuation by Oxfirst Ltd,a professional firm of patent valuers. The increase in value is driven by many factors,but I am particularly pleased at the substantial increase in the number of forward citations of Artificial Solutions' founding patents in conversational AI technology. Since 2016,many of the largest software companies in the world including Apple,Nuance,Google and IBM have cited Artificial Solutions' pioneering patents,confirming our position as a leading innovator in this field.

It's also very satisfactory to acknowledge that we were recognised in Gartner's latest Market Guide for Conversational Platforms together with some of the biggest and most influential software companies in the world.

INCREASING SPEED TO MARKET

In March,we launched Teneo Developers,which is an environment in which our customers can learn and trial the Teneo technology guided by our senior experts. We have received a growing number of opportunities as a direct result of Teneo Developers. During the third quarter,we closed one new customer as a direct result of Teneo Developers,and another customer entirely skipped the Request For Proposal process after trialling the Teneo Platform. Since the launch,we have had close to 1,000 partner and customer consultants learning how to build solutions on the Teneo Platform. Additionally,we have considerably increased the language availability of Teneo Developers,now supporting 7 of the platform's 36 languages,with an 8th,Japanese coming in Q4.

SUMMARY

In summary,I continue to be pleased with the progress of the business; we are growing Order Intake and Revenues,we have an increasing number of new and existing customers in the process of building solutions that will generate future usage revenues. We are growing the Teneo universe of knowledge and increasing the use of Teneo Developers to drive new business.

This Interim Report has been reviewed by the company'sauditors.

Artificial Solutions financial reports are available at the corporate website,https://www.artificial-solutions.com/investor-relations/as-financial-reports

For more information:

Lawrence Flynn,

CEO,Artificial Solutions

Tel: +44 (0)1635-523267

Email: lawrence.flynn@artificial-solutions.com

This information is such that Artificial Solutions International AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication,through the agency of the contact person set out below,at 7.30 a.m. CET on November 14,2019.

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).

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