Q1 net sales of SEK 15m, up 21% y-o-y

Est. changes: ’20e sales -16%, ’21e sales -7%

6x ’20e EV/sales, ’18-’22e sales CAGR of 41%

Q1 was solid all over, net sales grew 21% y-o-y
Artificial Solutions (AS) posted net sales of SEK 15.3m, up 21% y-o-y, and +13% vs. ABGSCe. While the recent agreement with AT&T contributed well in the quarter, this was primarily driven by a broad set of customers, which was encouraging. The Q1 EBIT of SEK -29m was SEK 16% above our forecast, explained by the higher sales combined with solid cost control (opex was -5% y-o-y). Order intake was SEK 19.5m (vs. ABGSCe SEK 20.0m), which we think was a good number, especially as 82% of this stemmed from partners, which in turn suggests that its partnership strategy is progressing well.

Cost savings to reduce ’20e costs by ~SEK 17m
Although the company has recently closed several new deals (e.g. an SEK 11m deal with Swisscom), and has also seen an upsurge in usage interactions, we believe that COVID-19 will take its toll on new sales and professional services sales in Q2e-Q3e. Therefore, we cut ’20e sales by 16%, but raise the corresponding EBIT forecast by 8% on the back of initiated cost saving actions. Here, the firm has implemented short-term layoffs (though it will notably not reduce its headcount), together with other cost saving actions, which we estimate will entail ’20e cost savings of SEK 17m.

COVID-19 could present interesting growth opportunities
While broad market-adoption of conversational AI solutions has not yet occurred, we think that the COVID-19 pandemic could speed up the deployment trajectory, with companies likely to increase their digital efforts. We believe that AS will be able to capitalise on this, given its broad set of customers, gradually growing (albeit back-end-loaded) order book, and well-working product Teneo. We therefore anticipate fast-tracking sales growth ahead, with sales reaching SEK 178m in ’22e.

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