Rising Voice Automation And Phone Channel Shift Will Drive Long-Term Opportunity

Catalysts

About Teneo AI

Teneo AI provides a high accuracy, hybrid conversational AI platform that automates large scale customer voice interactions for enterprise contact centers.

What are the underlying business or industry changes driving this perspective?

• Rising replacement of legacy keypad IVR with conversational voice solutions, validated by DMG Consulting and the Nuance end of life cycle, positions Teneo AI to capture structurally growing call automation budgets and accelerate recurring revenue growth.
• The industry shift back toward phone as the primary customer service channel, as chat and app support prove limited for complex and secure use cases, directly aligns with Teneo AI’s voice centric offering and should support sustained API volume growth and higher top line.
• Deepening integrations and joint go to market motions with Genesys and AWS Connect, including AppFoundry distribution and co led campaigns with over 160 target accounts, can rapidly expand deal flow with large enterprises and drive step ups in ARR.
• Growing proof points of very high automation rates on multimillion call deployments, combined with clear per call cost savings for large U.S. and European customers, strengthen Teneo AI’s ROI based sales pitch and support both new customer wins and price increases, enhancing earnings leverage.
• The move to a single, highly secure SaaS code base with Teneo 8 and bank grade compliance broadens the addressable market to regulated industries, enabling mix shift toward larger SaaS contracts and supporting structurally higher gross margins and cash generation.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Teneo AI's revenue will grow by 30.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from -50.3% today to 6.0% in 3 years time.
• Analysts expect earnings to reach SEK 15.9 million (and earnings per share of SEK 0.03) by about December 2028, up from SEK -59.5 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting SEK30.2 million in earnings, and the most bearish expecting SEK-1.9 million.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 38.5x on those 2028 earnings, up from -4.2x today. This future PE is greater than the current PE for the SE Software industry at 27.6x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.35%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Heavy reliance on a small number of very large customers and projects, including multimillion call deployments and a handful of major U.S. and European accounts, creates concentration risk such that a contract loss, downgrade or delayed expansion could materially slow API volume growth and reduce revenue and earnings growth trajectories.
• The go to market strategy is tightly coupled to a few ecosystem partners like Genesys, AWS Connect and selected implementation partners, so any deterioration in these relationships, shifts in partner product roadmaps or a competing in house solution could weaken Teneo AI's deal flow and limit recurring revenue growth.
• While the NiCE acquisition of Cognigy validates the hybrid CAI model, it also signals intensifying consolidation and competition, and larger well funded rivals in contact center AI or hyperscalers bundling their own offerings could compress pricing power and ultimately pressure net margins and earnings.
• Management's growth target to roughly double ARR to around SEK 200 million by end of Q1 depends on converting a still maturing pipeline and three to four large pilots and negotiations into full rollouts on a tight timeline, and any slippage in customer decision making or extended proof of concept phases would delay scale, dampen revenue growth and prolong negative EBITDA.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of SEK0.95 for Teneo AI based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be SEK264.7 million, earnings will come to SEK15.9 million, and it would be trading on a PE ratio of 38.5x, assuming you use a discount rate of 9.3%.
  
• Given the current share price of SEK0.5, the analyst price target of SEK0.95 is 47.3% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.