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SoundHound AI Reports First Quarter Revenue Increase of 56%

Significantly Improves Cash Position and Operating Expenses; Reaffirms Full Year Guidance

SANTA CLARA, Calif.–(BUSINESS WIRE)–$SOUN #AI–SoundHound AI, Inc. (Nasdaq: SOUN), a global leader in voice artificial intelligence, today reported its financial results for the first quarter of 2023.

“The incredible surge in demand for conversational AI is giving SoundHound a unique advantage. As an established innovator with years of experience providing AI solutions to world class brands, we’re fast becoming an obvious partner for businesses looking to harness emerging capabilities,” said Keyvan Mohajer, CEO and Co-Founder of SoundHound. “Our SoundHound Chat AI platform now offers the most powerful voice assistant available today, and it’s one of many ways we’re helping new and existing customers build game-changing consumer experiences.”

Financial Highlights

  • First quarter reported revenue was $6.7 million, an increase of 56% year-over-year
  • First quarter gross margin was 71%, an improvement of approximately 1,200 basis points compared to 59% in the prior year
  • First quarter earnings per share was a net loss of ($0.13), improving both year over year and sequentially
  • First quarter adjusted EBITDA (non-GAAP) was a loss of ($14.8) million, an improvement of 21% from the prior quarter and a year-over-year improvement of 13%
  • Significantly strengthened balance sheet through multiple financings, cumulatively raising over $150 million year-to-date through April
  • Drove meaningful operating efficiencies through corporate restructuring, resulting in 40% reduction to ongoing operating expense run-rate

“In the first quarter we significantly strengthened our liquidity position while streamlining our costs. At the same time, our new innovations have driven positive customer reception that has meaningfully increased demand for our products and solutions,” said Nitesh Sharan, CFO of SoundHound. “Our top-line grew by 56% and every cost category improved sequentially, fueling steady progress towards profitability.”

Business Highlights

  • Announced that SoundHound’s voice AI technology will be available on, and can be integrated with, Oracle MICROS Simphony Point-of-Sale for Restaurants.
  • Launched SoundHound Chat AI, a powerful new voice assistant that delivers best-in-class voice AI by combining SoundHound and third-party Generative AI models, like ChatGPT.
  • Introduced SoundHound Chat AI for Automotive, which gives drivers and passengers seamless access to a vast array of information domains enabled by complex conversational capabilities, and can be integrated with the company’s publicly announced 20 automotive brands.
  • Debuted Dynamic Interaction with Generative AI, an extension of the company’s groundbreaking multimodal Dynamic Interaction interface, able to be integrated with any vehicle or smart device.
  • Joined the Toast ecosystem to provide best-in-class voice-ordering technology to restaurants using Toast’s Point-of-Sale system.
  • Qualcomm demonstrated SoundHound’s voice technology at NRF 2023.
  • Strong representation at CES with Qualcomm, Yobe, and LG.
  • Nominated for a 2023 Webby Award in the Best Use of Voice Technology category for Dynamic Interaction.

 

Financial Results in Detail

 

First Quarter 2023 Financial Measures

 

 

 

 

 

Three Months Ended

(thousands, except per share data)

 

March 31, 2023

 

 

March 31, 2022

 

 

Change in %

Cumulative bookings backlog1

$

335,967

 

 

$

229,827

 

 

 

46

%

Revenues

$

6,707

 

 

$

4,290

 

 

 

56

%

Operating expenses:

 

 

 

 

 

 

 

 

Cost of revenues

$

1,976

 

 

$

1,773

 

 

 

11

%

Sales and marketing

 

4,875

 

 

 

2,581

 

 

 

89

%

Research and development

 

14,184

 

 

 

16,650

 

 

 

-15

%

General and administrative

 

7,125

 

 

 

4,003

 

 

 

78

%

Restructuring

 

3,585

 

 

 

 

 

 

N/A

 

Total operating expenses

$

31,745

 

 

$

25,007

 

 

 

27

%

Operating loss

$

(25,038

)

 

$

(20,717

)

 

 

21

%

Net loss

$

(26,369

)

 

$

(25,103

)

 

 

5

%

Net loss per share

$

(0.13

)

 

$

(0.36

)

 

 

0.23

 

Adjusted EBITDA2

$

(14,775

)

 

$

(16,961

)

 

 

-13

%

1.

Cumulative bookings backlog is prior quarter end balance plus new bookings in the current quarter minus associated revenue recognized.

2.

Please see table below for a reconciliation from GAAP to non-GAAP.

Summary of Liquidity and Cash Flows

The company’s cash and cash equivalents was $46.3 million at March 31, 2023. In January 2023, the company successfully raised $25 million in net proceeds from preferred equity financing. In February, the company’s ELOC became effective and it has leveraged this facility for additional proceeds. Additionally, in April, SoundHound secured $100 million of minimally dilutive debt financing.

Through these financings, cumulatively the company raised over $150 million year-to-date through April, the proceeds of which were partly used to retire the company’s existing debt.

Condensed Cash Flow Statement

Three Months Ended

(thousands)

March 31, 2023

 

March 31, 2022

Cash flows:

 

 

 

 

 

Net cash used in operating activities

$

(14,467

)

 

$

(14,989

)

Net cash used in investing activities

 

(15

)

 

 

(611

)

Net cash provided by financing activities

 

51,568

 

 

 

1,955

 

Net change in cash and cash equivalents

$

37,086

 

 

$

(13,645

)

Business Outlook 2023

SoundHound continues to expect 2023 revenue to be in a range of $43 to $50 million. The company continues to expect to be adjusted EBITDA positive in the fourth quarter of 2023.

Additional Information

SoundHound expects to file its Form 10-Q for first quarter 2023, by May 15, 2023. For more information please see the company’s SEC filings which can be obtained on our website at investors.soundhound.com.

If you wish to receive company email notifications, please register at investor.soundhound.com.

Conference Call and Webcast

Keyvan Mohajer, Co-Founder and CEO, and Nitesh Sharan, CFO will host a live audio conference call and webcast today at 2:30 p.m. Pacific Time/5:30 p.m. Eastern Time. A live webcast will also be accessible at investors.soundhound.com and a replay of the webcast will be available for 90 days following the session.

About SoundHound AI

SoundHound (Nasdaq: SOUN), a global leader in conversational intelligence, offers voice AI solutions that let businesses offer incredible conversational experiences to their customers. Built on proprietary technology, SoundHound’s voice AI delivers best-in-class speed and accuracy in numerous languages to product creators across automotive, TV, and IoT, and to customer service industries via groundbreaking AI-driven products like Smart Answering, Smart Ordering, and Dynamic Interaction™, a real-time, multimodal customer service interface. Along with SoundHound Chat AI, a powerful voice assistant with integrated Generative AI, SoundHound powers millions of products and services, and processes billions of interactions each year for world class businesses. www.soundhound.com

Forward Looking Statements

This press release contains forward-looking statements, which are not historical facts, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In some cases, you can identify forward-looking statements by the use of words such as “may,” “could,” “expect,” “intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” “likely,” “will,” “would” and variations of these terms and similar expressions, or the negative of these terms or similar expressions. These forward-looking statements include, but are not limited to, statements concerning the expected financial performance of the company, the company’s ability to implement its business strategy and anticipated business and operations, including the launch of its chat AI service, the potential utility of and market for the company’s products and services, guidance for financial results for 2023 and our ability to timely file our annual report on Form 10-Q. Such forward-looking statements are necessarily based upon estimates and assumptions that, while considered reasonable by us and our management, are inherently uncertain. As a result, readers are cautioned not to place undue reliance on these forward-looking statements. Our actual results, performance or achievements may differ materially from those expressed or implied by these forward-looking statements. Actual results may differ materially from those indicated by these forward-looking statements as a result of risks and uncertainties impacting SoundHound’s business including, current uncertainties associated with the COVID-19 pandemic, our inability to predict or measure supply chain disruptions at our customers resulting from the COVID-19 pandemic and other causes, the potential future revenue associated with our AI platform products and services; our projected rate of revenue growth; the impact of our announced restructuring; our ability to predict direct and indirect customer demand for our existing and future products and to secure adequate manufacturing capacity; our ability to hire, retain and motivate employees; the effects of competition, including price competition within our industry segment; technological, regulatory and legal developments that uniquely or disproportionately impact our industry segment; developments in the economy and financial markets and those other factors described in our risk factors set forth in our filings with the Securities and Exchange Commission from time to time, including our Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. We do not intend to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

Non-GAAP Measures of Financial Performance

To supplement our financial statements, which are presented on the basis of U.S. generally accepted accounting principles (GAAP), the following non-GAAP measure of financial performance is included in this release: adjusted EBITDA. We define Adjusted EBITDA as our GAAP net loss excluding (i) interest and other expense, net, (ii) depreciation and amortization expense, (iii) income taxes, (iv) stock-based compensation, and (v) restructuring expense. A reconciliation of GAAP to this adjusted non-GAAP financial measure is included below. When analyzing the company’s operating results, investors should not consider non-GAAP measures as substitutes for the comparable financial measures prepared in accordance with GAAP.

Reconciliation of GAAP Net Loss to Non-GAAP Adjusted EBITDA

Three Months Ended

(thousands)

 

 

 

 

March 31, 2023

 

March 31, 2022

 

 

GAAP net loss

$

(26,369

)

 

$

(25,103

)

 

 

 

 

 

 

 

 

 

 

Adjustments:

 

 

 

 

 

 

 

Interest and other expense, net1

$

1,002

 

 

$

4,034

 

 

 

Income taxes

 

329

 

 

 

352

 

 

 

Depreciation and amortization

 

708

 

 

 

1,292

 

 

 

Stock-based compensation

 

5,970

 

 

 

2,464

 

 

 

Restructuring

 

3,585

 

 

 

 

 

 

Adjusted EBITDA

$

(14,775

)

 

$

(16,961

)

 

 

 
1.

Includes other (income)/expense of ($0.1) and $1.1 million for the three months ended March 31, 2023 and 2022, respectively.

SOUNDHOUND AI, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

 

March 31,
2023

December 31,
2022

 

(Unaudited)

 

ASSETS

 

 

 

 

 

Current assets:

 

 

Cash and cash equivalents

$

46,331

 

$

9,245

 

Accounts receivable, net

 

2,660

 

 

3,414

 

Prepaid expenses

 

1,651

 

 

2,514

 

Contract assets

 

1,546

 

 

1,671

 

Other current assets

 

1,069

 

 

859

 

Total current assets

 

53,257

 

 

17,703

 

Restricted cash equivalents, non-current

 

230

 

 

230

 

Right-of-use assets

 

7,393

 

 

8,119

 

Property and equipment, net

 

2,754

 

 

3,447

 

Deferred tax asset

 

55

 

 

55

 

Contract assets, non-current

 

7,040

 

 

7,041

 

Other non-current assets

 

2,074

 

 

1,656

 

Total assets

$

72,803

 

$

38,251

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

Current liabilities:

 

 

Accounts payable

$

2,542

 

$

2,798

 

Accrued liabilities

 

12,306

 

 

7,462

 

Operating lease liabilities

 

3,157

 

 

3,282

 

Finance lease liabilities

 

147

 

 

160

 

Income tax liability

 

1,213

 

 

1,314

 

Deferred revenue

 

5,319

 

 

5,812

 

Notes payable

 

16,828

 

 

16,668

 

Total current liabilities

 

41,512

 

 

37,496

 

 

 

 

Operating lease liabilities, net of current portion

 

5,045

 

 

5,715

 

Finance lease liabilities, net of current portion

 

102

 

 

128

 

Deferred revenue, net of current portion

 

5,433

 

 

7,543

 

Notes payable, net of current portion

 

14,035

 

 

18,299

 

Other non-current liabilities

 

4,294

 

 

4,295

 

Total liabilities

 

70,421

 

 

73,476

 

Commitments and contingencies (Note 6)

 

 

 

 

 

Stockholders’ equity (deficit):

 

 

Series A Preferred Stock, $0.0001 par value; 1,000,000 shares authorized; 835,011 and 0 shares issued and outstanding, aggregate liquidation preference of $25,050 and $0 as of March 31, 2023 and December 31, 2022, respectively

 

24,942

 

 

 

Class A Common Stock, $0.0001 par value; 455,000,000 shares authorized; 174,714,741 and 160,297,664 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively

 

18

 

 

16

 

Class B Common Stock, $0.0001 par value; 44,000,000 shares authorized; 39,735,408 shares issued and outstanding as of March 31, 2023 and December 31, 2022

 

4

 

 

4

 

Additional paid-in capital

 

505,889

 

 

466,857

 

Accumulated deficit

 

(528,471

)

 

(502,102

)

Total stockholders’ equity (deficit)

 

2,382

 

 

(35,225

)

Total liabilities and stockholders’ equity (deficit)

$

72,803

 

$

38,251

 

SOUNDHOUND AI, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

(Unaudited)

 

Three Months Ended
March 31,

 

2023

 

2022

Revenues

$

6,707

 

 

$

4,290

 

Operating expenses:

 

 

 

Cost of revenues

 

1,976

 

 

 

1,773

 

Sales and marketing

 

4,875

 

 

 

2,581

 

Research and development

 

14,184

 

 

 

16,650

 

General and administrative

 

7,125

 

 

 

4,003

 

Restructuring

 

3,585

 

 

 

 

Total operating expenses

 

31,745

 

 

 

25,007

 

Loss from operations

 

(25,038

)

 

 

(20,717

)

 

 

 

 

Other expense, net:

 

 

 

Interest expense

 

(1,096

)

 

 

(2,977

)

Other income (expense), net

 

94

 

 

 

(1,057

)

Total other expense, net

 

(1,002

)

 

 

(4,034

)

Loss before provision for income taxes

 

(26,040

)

 

 

(24,751

)

Provision for income taxes

 

329

 

 

 

352

 

Net loss

 

(26,369

)

 

 

(25,103

)

 

 

 

 

Net loss per share:

 

 

 

Basic and diluted

$

(0.13

)

 

$

(0.36

)

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

Basic and diluted

 

205,082,328

 

 

 

69,604,188

 

SOUNDHOUND AI, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

Three Months Ended
March 31,

 

2023

 

2022

Cash flows from operating activities:

 

 

 

Net loss

$

(26,369

)

 

$

(25,103

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

Depreciation and amortization

 

708

 

 

 

1,292

 

Stock-based compensation

 

8,249

 

 

 

2,464

 

Change in fair value of derivative and warrant liability

 

 

 

 

592

 

Amortization of debt issuance cost

 

16

 

 

 

1,742

 

Non-cash lease amortization

 

894

 

 

 

846

 

Changes in operating assets and liabilities:

 

 

 

Accounts receivable, net

 

754

 

 

 

728

 

Prepaid expenses

 

863

 

 

 

(543

)

Other current assets

 

(210

)

 

 

60

 

Contract assets

 

126

 

 

 

 

Other non-current assets

 

19

 

 

 

(1,942

)

Accounts payable

 

(256

)

 

 

3,178

 

Accrued liabilities

 

4,306

 

 

 

4,398

 

Operating lease liabilities

 

(963

)

 

 

(1,080

)

Deferred revenue

 

(2,603

)

 

 

(1,623

)

Other non-current liabilities

 

(1

)

 

 

2

 

Net cash used in operating activities

 

(14,467

)

 

 

(14,989

)

 

 

 

 

Cash flows from investing activities:

 

 

 

Purchases of property and equipment

 

(15

)

 

 

(611

)

Net cash used in investing activities

 

(15

)

 

 

(611

)

 

 

 

 

Cash flows from financing activities:

 

 

 

Proceeds from the issuance of Series A Preferred Stock, net of issuance costs

 

24,942

 

 

 

 

Proceeds from sales of common stock under the ELOC program, net of issuance costs

 

28,360

 

 

 

 

Proceeds from the issuance of common stock upon exercise of options

 

2,425

 

 

 

2,474

 

Payments on notes payable

 

(4,120

)

 

 

 

Payments on finance leases

 

(39

)

 

 

(519

)

Net cash provided by financing activities

 

51,568

 

 

 

1,955

 

Net change in cash, cash equivalents, and restricted cash equivalents

 

37,086

 

 

 

(13,645

)

Cash, cash equivalents, and restricted cash equivalents, beginning of period

 

9,475

 

 

 

22,822

 

Cash, cash equivalents, and restricted cash equivalents, end of period

$

46,561

 

 

$

9,177

 

 

 

 

 

Reconciliation to amounts on the condensed consolidated balance sheets:

 

 

 

Cash and cash equivalents

$

46,331

 

 

$

8,211

 

Current portion of restricted cash equivalents

 

 

 

 

230

 

Non-current portion of restricted cash equivalents

 

230

 

 

 

736

 

Total cash, cash equivalents, and restricted cash equivalents shown in the condensed consolidated statements of cash flows

$

46,561

 

 

$

9,177

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

Cash paid for interest

$

1,074

 

 

$

1,013

 

Cash paid for income taxes

$

550

 

 

$

32

 

 

 

 

 

Noncash investing and financing activities:

 

 

 

Unpaid issuance costs in connection with the ELOC program

$

437

 

 

$

 

Deferred offering costs reclassified to additional paid-in capital

$

323

 

 

$

 

Operating lease liabilities arising from obtaining right-of-use assets

$

 

 

$

650

 

 

Contacts

Investors:
Scott Smith

408-724-1498

IR@SoundHound.com

Media:
Fiona McEvoy

415-610-6590

PR@SoundHound.com

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