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SoundHound AI Reports Second Quarter Revenue Increase of 42%, Adjusted EBITDA Improves 50%, Strong Increase in Cash Position, Investment in Generative AI Foundation Model

SANTA CLARA, Calif.–(BUSINESS WIRE)–$SOUN #Q2–SoundHound AI, Inc. (Nasdaq: SOUN), a global leader in voice artificial intelligence, today reported its financial results for the second quarter of 2023.




“We mark another quarter of strong growth, with our AI powering millions of devices and services and billions of successful interactions per year. We expect our unique Generative AI integration will result in faster adoption and even greater capabilities,” said Keyvan Mohajer, CEO and Co-Founder of SoundHound. “And now, we are combining our vast amounts of experience and data to create the first of its kind, multimodal foundation model, supporting speech-to-meaning and enabling incredible new experiences.”

Financial Highlights – Second Quarter

  • Reported revenue was $8.8 million, an increase of 42% year-over-year
  • Gross margin was 79%, an improvement of approximately 1,900 basis points compared to 60% in the prior year
  • Operating loss was $16.4 million, an improvement of 43% year over year
  • Net loss was $21.9 million, an improvement of 28% year over year
  • Earnings per share was a net loss of ($0.10), compared to ($0.19) in the previous year
  • Adjusted EBITDA (non-GAAP) was a loss of ($9.9) million, a year-over-year improvement of 50%
  • Significantly strengthened balance sheet, the company has approximately $130 million in total cash as of June 30, 2023

“In the second quarter we significantly improved our liquidity position and continued our strong growth trajectory, all while making the business more efficient,” said Nitesh Sharan, CFO of SoundHound. “We are judiciously balancing between our profit objectives and the massive growth opportunities in front of us.”

Business Highlights – Second Quarter and Recent Highlights

  • Generative AI Foundation Model: training an innovative multi-modal foundation model supporting both audio and text, combining the power of Large Language Models with SoundHound’s Speech-to-Meaning® technology using over a million hours of field data and billions of conversations in tens of languages
  • Announced a significant expansion of White Castle partnership, including plans to rollout voice AI drive-thru service to over 100 lanes by the end of 2024
  • Strong customer adoption of Smart Ordering. Examples include: Beef O’Bradys, Kneaders bakeries, Hot Table, Naz’s Halal, Slim & Husky’s, Crust Pizza, Kumori Sushi, Noi Thai, Bozelli’s Italian Deli and Dialog Cafe, among many others, adding to the hundreds of others already signed up
  • Dynamic Interaction: Rolling out Dynamic Interaction with a fast growing large privately held hospitality and foodservice franchiser that operates in 30 states and has over 200 restaurants
  • Introduced SoundHound Chat AI for Automotive, giving drivers and passengers seamless access to a vast array of information domains enabled by complex conversational capabilities, generative AI, and live content domains
  • Multiple automotive brands began live pilots of SoundHound Chat AI for Automotive, with the goal of upgrading by the end of the year
  • Announced that SoundHound’s voice AI technology will be available on, and can be integrated with, Oracle MICROS Simphony Point-of-Sale for Restaurants
  • Joined with Meta on its Llama 2 announcement, partnering to support an open and responsible approach to AI innovation
  • Joined the Russell 2000 and 3000 Indexes
  • Attended National Restaurant Association conference and named by Nation’s Restaurant News as one of the most exciting companies on the show floor
  • Ranked among Technology Magazine’s top 10 companies advancing Natural Language Processing
  • Named as a finalists at Webby Awards: “Best Use of Voice Technology”

Financial Results in Detail

 

 

 

 

 

 

 

Second Quarter 2023 Financial Measures

 

Three Months Ended

(thousands, except per share data)

 

June 30, 2023

 

June 30, 2022

 

Change in %

 

Cumulative bookings backlog1

$

339,207

 

$

283,431

 

 

20

%

 

Revenues

$

8,751

 

$

6,152

 

 

42

%

Operating expenses:

 

 

 

 

 

 

Cost of revenues

$

1,830

 

$

2,488

 

 

-26

%

Sales and marketing

 

5,078

 

 

4,370

 

 

16

%

Research and development

 

11,736

 

 

18,862

 

 

-38

%

General and administrative

 

6,377

 

 

9,362

 

 

-32

%

Restructuring

 

166

 

 

 

 

N/A

 

Total operating expenses

$

25,187

 

$

35,082

 

 

-28

%

Operating loss

$

(16,436

)

$

(28,930

)

 

-43

%

Net loss

$

(21,932

)

$

(30,668

)

 

-28

%

Net loss per share

$

(0.10

)

$

(0.19

)

 

0.09

 

Adjusted EBITDA2

$

(9,926

)

$

(20,015

)

 

-50

%

1.

Cumulative bookings backlog is prior quarter end balance plus new bookings in the current quarter minus associated revenue recognized. Bookings are derived from committed customer contracts and reflect revenue expected to be realized over the life of such contracts.

2.

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

Summary of Liquidity and Cash Flows

The company’s total cash was approximately $130 million at June 30, 2023. In April, SoundHound secured $100 million of minimally dilutive debt financing. The company also raised $43 million through its committed equity facility in the second quarter.

Condensed Cash Flow Statement

 

Six Months Ended

(thousands)

June 30, 2023

 

June 30, 2022

Cash flows:

 

 

 

 

 

Net cash used in operating activities

$

(33,651

)

 

$

(46,767

)

Net cash used in investing activities

 

(293

)

 

 

(982

)

Net cash provided by financing activities

 

154,008

 

 

 

90,167

 

Net change in cash and cash equivalents

$

120,064

 

 

$

42,418

 

Business Outlook 2023

SoundHound continues to expect 2023 revenue to be in a range of $43 to $50 million. The company also 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 second quarter 2023, by August 14, 2023. For more information please see the company’s SEC filings which can be obtained on the company’s website at investors.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.

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 our expected financial performance, our ability to implement our business strategy and anticipated business and operations, including our ability to improve our Generative AI Foundation Model, expand our White Castle partnership and roll out our AI drive thru service, roll out our Dynamic Interaction, Chat AI for Automotive, and expand the number of platforms on which our voice AI technology will be available, the potential utility of and market for our products and services, our ability to achieve revenue from our bookings backlog, guidance for financial results for 2023 and our ability to timely file our quarterly 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 may differ materially from those expressed or implied by these forward-looking statements as a result of risks and uncertainties impacting SoundHound’s business including, our ability to successfully launch and commercialize new products and services and derive significant revenue, our ability to develop the bespoke products and services required under the contracts included in our bookings backlog, including, but not limited to, our ability to convert customer adoption of Smart Ordering into realized revenue, our ability to predict or measure supply chain disruptions at our customers, our market opportunity and our ability to acquire new customers and retain existing customers, the timing and impact of our growth initiatives, level of product service failures that could lead our customers to use competitors’ services, the impact of our announced restructuring, our ability to predict direct and indirect customer demand for our existing and future products, 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 Annual Report on 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 the company’s 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 the company’s 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)

 

 

 

 

 

June 30, 2023

June 30, 2022

GAAP net loss

$

(21,932

)

$

(30,668

)

 

 

 

 

 

Adjustments:

 

 

 

 

Interest and other expense, net1

$

5,079

 

$

1,349

 

Income taxes

 

417

 

 

389

 

Depreciation and amortization

 

703

 

 

1,052

 

Stock-based compensation

 

5,641

 

 

7,863

 

Restructuring

 

166

 

 

 

Adjusted EBITDA

$

(9,926

)

$

(20,015

)

 

1)

Includes other income/(expense) of $0.5 and $0.2 million for the three months ended June 30, 2023 and 2022, respectively.

SOUNDHOUND AI, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

 

 

 

 

 

 

 

June 30,
2023

 

December 31,
2022

 

 

(Unaudited)

 

 

ASSETS

 

 

 

 

 

Current assets:

 

 

Cash and cash equivalents

$

115,764

 

$

9,245

 

Accounts receivable, net

 

3,532

 

 

3,414

 

Prepaid expenses

 

2,573

 

 

2,514

 

Contract assets

 

3,701

 

 

1,671

 

Other current assets

 

1,371

 

 

859

 

Total current assets

 

126,941

 

 

17,703

 

Restricted cash equivalents, non-current

 

13,775

 

 

230

 

Right-of-use assets

 

6,502

 

 

8,119

 

Property and equipment, net

 

2,329

 

 

3,447

 

Deferred tax asset

 

55

 

 

55

 

Contract assets, non-current

 

7,091

 

 

7,041

 

Other non-current assets

 

885

 

 

1,656

 

Total assets

$

157,578

 

$

38,251

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

Current liabilities:

 

 

Accounts payable

$

1,895

 

$

2,798

 

Accrued liabilities

 

16,381

 

 

7,462

 

Operating lease liabilities

 

2,881

 

 

3,282

 

Finance lease liabilities

 

154

 

 

160

 

Income tax liability

 

1,080

 

 

1,314

 

Deferred revenue

 

4,612

 

 

5,812

 

Current portion of long-term debt

 

 

 

16,668

 

Total current liabilities

 

27,003

 

 

37,496

 

 

 

 

Operating lease liabilities, net of current portion

 

4,356

 

 

5,715

 

Finance lease liabilities, net of current portion

 

60

 

 

128

 

Deferred revenue, net of current portion

 

4,118

 

 

7,543

 

Long-term debt

 

66,428

 

 

18,299

 

Other non-current liabilities

 

16,824

 

 

4,295

 

Total liabilities

 

118,789

 

 

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 June 30, 2023 and December 31, 2022, respectively

 

24,942

 

 

 

Class A Common Stock, $0.0001 par value; 455,000,000 shares authorized; 194,336,749 and 160,297,664 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively

 

20

 

 

16

 

Class B Common Stock, $0.0001 par value; 44,000,000 shares authorized; 38,035,408 and 39,735,408 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively

 

4

 

 

4

 

Additional paid-in capital

 

564,197

 

 

466,857

 

Accumulated deficit

 

(550,403

)

 

(502,102

)

Accumulated other comprehensive income

 

29

 

 

 

Total stockholders’ equity (deficit)

 

38,789

 

 

(35,225

)

Total liabilities and stockholders’ equity (deficit)

$

157,578

 

$

38,251

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

SOUNDHOUND AI, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share data)

(Unaudited)

 

 

 

 

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Revenues

$

8,751

 

$

6,152

 

$

15,458

 

$

10,442

 

Operating expenses:

 

 

 

 

Cost of revenues

 

1,830

 

 

2,488

 

 

3,806

 

 

4,261

 

Sales and marketing

 

5,078

 

 

4,370

 

 

9,953

 

 

6,951

 

Research and development

 

11,736

 

 

18,862

 

 

25,920

 

 

35,512

 

General and administrative

 

6,377

 

 

9,362

 

 

13,502

 

 

13,365

 

Restructuring

 

166

 

 

 

 

3,751

 

 

 

Total operating expenses

 

25,187

 

 

35,082

 

 

56,932

 

 

60,089

 

Loss from operations

 

(16,436

)

 

(28,930

)

 

(41,474

)

 

(49,647

)

 

 

 

 

 

Other expense, net:

 

 

 

 

Interest expense

 

(5,572

)

 

(1,572

)

 

(6,668

)

 

(4,549

)

Other income (expense), net

 

493

 

 

223

 

 

587

 

 

(834

)

Total other expense, net

 

(5,079

)

 

(1,349

)

 

(6,081

)

 

(5,383

)

Loss before provision for income taxes

 

(21,515

)

 

(30,279

)

 

(47,555

)

 

(55,030

)

Provision for income taxes

 

417

 

 

389

 

 

746

 

 

741

 

Net loss

 

(21,932

)

 

(30,668

)

 

(48,301

)

 

(55,771

)

 

 

 

 

 

Other comprehensive income:

 

 

 

 

Unrealized gains on investments

 

29

 

 

 

 

29

 

 

 

Comprehensive loss

$

(21,903

)

$

(30,668

)

$

(48,272

)

$

(55,771

)

 

 

 

 

 

Net loss per share:

 

 

 

 

Basic and diluted

$

(0.10

)

$

(0.19

)

$

(0.23

)

$

(0.48

)

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

Basic and diluted

 

220,772,111

 

 

162,004,172

 

 

212,970,561

 

 

116,059,520

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

SOUNDHOUND AI, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

 

 

Six Months Ended
June 30,

 

 

 

2023

 

 

 

2022

 

Cash flows from operating activities:

 

 

Net loss

$

(48,301

)

$

(55,771

)

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

 

 

Depreciation and amortization

 

1,411

 

 

2,269

 

Stock-based compensation

 

13,947

 

 

10,327

 

Change in fair value of derivative and warrant liability

 

 

 

606

 

Non-cash interest expense

 

1,607

 

 

2,185

 

Non-cash lease expense

 

1,714

 

 

1,545

 

Loss on debt extinguishment

 

837

 

 

 

Other non-cash losses, net

 

82

 

 

 

Changes in operating assets and liabilities:

 

 

Accounts receivable, net

 

(118

)

 

1,045

 

Prepaid expenses

 

(59

)

 

(3,409

)

Other current assets

 

(634

)

 

(10

)

Contract assets

 

(2,080

)

 

 

Other non-current assets

 

628

 

 

110

 

Accounts payable

 

(903

)

 

1,846

 

Accrued liabilities

 

5,045

 

 

108

 

Operating lease liabilities

 

(1,910

)

 

(2,258

)

Deferred revenue

 

(4,625

)

 

(5,362

)

Other non-current liabilities

 

(292

)

 

2

 

Net cash used in operating activities

 

(33,651

)

 

(46,767

)

 

 

 

Cash flows from investing activities:

 

 

Purchases of property and equipment

 

(293

)

 

(982

)

Net cash used in investing activities

 

(293

)

 

(982

)

 

 

 

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

 

70,905

 

 

 

Proceeds from the issuance of common stock

 

8,177

 

 

2,904

 

Proceeds from Business Combination and PIPE, net of transaction costs

 

 

 

91,695

 

Proceeds from the issuance of long-term debt, net of issuance costs

 

85,087

 

 

 

Payments on notes payable

 

(35,029

)

 

(3,416

)

Payments on finance leases

 

(74

)

 

(1,016

)

Net cash provided by financing activities

 

154,008

 

 

90,167

 

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

 

120,064

 

 

42,418

 

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

 

9,475

 

 

22,822

 

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

$

129,539

 

$

65,240

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

Cash paid for interest

$

4,344

 

$

1,140

 

Cash paid for income taxes

$

1,098

 

$

33

 

 

 

 

Noncash investing and financing activities:

 

 

Accrued and unpaid debt issuance costs

$

16,461

 

$

 

Non-cash debt discount

$

4,315

 

$

 

Deferred offering costs reclassified to additional paid-in capital

$

802

 

$

 

Conversion of convertible note into common stock pursuant to Business Combination

$

 

$

20,239

 

Unpaid deferred offering costs associated with the Business Combination

$

 

$

1,006

 

Conversion of redeemable convertible preferred stock to common stock pursuant to Business Combination

$

 

$

279,503

 

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

$

 

$

650

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

Contacts

Investors:
Scott Smith

408-724-1498

IR@SoundHound.com

Media:
Fiona McEvoy

415-610-6590

PR@SoundHound.com

 

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