Highly scalable AI-oriented software company

Provides an independent & proven product platform

Fast-tracking growth potential, though high funding risk

Addresses a market set to show rapid growth
Artificial Solutions (AS) is a market-leading full-stack platform provider within artificial intelligence. More specifically, its niche is in the so-called Conversational AI, an area allowing for conversations between humans and machines, e.g., through an AI-driven chatbot. The segment is expected to grow revenue from USD 136m in ’16 to USD 5.4bn in ’25e (50% CAGR), according to Tractica, or at 39%, according to Research and Markets. With its patented solution, Teneo, AS offers a customised platform for large companies while charging them on a licence and usage fee basis. This, as well as being an independent actor, differentiates AS from competitors that offer widespread products without customisation.

We forecast 38% ’18-’22 sales CAGR, but negative earnings
The platform is used in millions of natural language conversations annually, deployed in multi-fold organisations, and supports 35 different languages for major global companies like Shell and AT&T. We think this creates a good starting point for AS to take a fair portion of this rapidly growing market. AS is currently shifting from direct selling to a greater use of partners. This reduces AS’s initial service fees, but results in expanded margins since services is a low-margin business. Due to this shift, sales have stagnated recently, but we forecast fast-tracking growth to SEK 164m in ’22 (38% CAGR from ’18). We estimate negative EBIT in this period, but a scalable business model bodes well for high margins.

High risk/reward
The company is currently cash-flow negative. To maintain its present business and competitive position, we project it will raise SEK 350m in equity in the next two years. Thus, we see financial risk in terms of gaining sufficient funding. Even so, using three DCF scenarios with various growth and margi
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