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Hardman & Co

Artificial Solutions Enterprise-grade artificial intelligence

Hardman & Co Report Report DownloadsArtificial Solutions (ASAI.SE) is a vendor of highly advanced artificial intelligence (AI)-based conversational solutions. Its Teneo technology platform is used by major global enterprises to automate their interactions with their own customers; these include Shell, AT&T, Vodafone, Volvo and Telenor – an enviable list and testimony to the proven technology leadership of the Teneo platform and its scalability. Strong growth rates are driven by expansion of existing customer deployments and new wins. The AI market overall is growing at ca.40% p.a., and Artificial Solutions’ management expects to substantially outperform this metric over the next few years, based on contracted order backlog and the pipeline of new opportunities. AI-centric listed businesses successfully monetising the revenue opportunity are rare, and this company is one of them.

Leading vendor of AI solutions: Amid surging global interest in all things related to AI, Artificial Solutions has emerged as a leading vendor of conversational AI solutions to the world’s largest enterprises, particularly B2C businesses, across a range of sectors. Its Teneo platform is highly scalable, functions in 35 languages and is designed for a range of applications, of which conversational AI is the first example.

Firmly positioned as leading vendor in this marketplace: A survey of 700 CIOs of large enterprises in 2018 saw Artificial Solutions being ranked third in a list of emerging technology companies to watch and being classed as leader in its segment. The major systems integrators are also seeing this, and are actively selling the Teneo platform and bringing deals to the company.

AI market growth is rapid: Industry forecasts are anticipating in excess of a 40% CAGR for global industry revenue over the next five years. Against this backdrop, Artificial Solutions expects to exceed this growth rate, based on usage-based revenue growth from existing customer deployments and new customer additions, the latter partly from proof-of-concepts converting into live deployments.

Valuation: Artificial Solutions commenced trading on the Nasdaq First North exchange in Stockholm in March 2019. A DCF analysis produces a mid-point implied fair equity value of €97m, while a detailed valuation of the company’s intellectual property (IP) assets, comprising patents and software licences, undertaken in 2016 came in at $96m. While these valuations are at a premium to the current valuation, we believe the company will need to deliver on revenue growth expectations.

Risks: Competing with some of the world’s largest technology companies brings challenges, such as keeping pace with developments, retaining talented people and creating enterprise mindshare vs. strong brands. Systems integrators are an excellent route to market but may reduce the company’s visibility into potentially lengthy sales cycles, but, to date, Artificial Solutions has proven adept on these factors.