• Q4 Revenue: $34.5 million, up 101% year over year.
• Full Year Revenue: $85 million, an 85% increase, reaching the high end of guidance.
• GAAP Gross Margin: 40%, down year over year due to recent acquisitions.
• Non-GAAP Gross Margin: 52%, adjusted for non-cash items.
• R&D Expenses: $20.4 million, a 60% year-over-year increase.
• Sales and Marketing Expenses: $9.6 million, a 114% year-over-year increase.
• G&A Expenses: $16.4 million, a 115% year-over-year increase.
• Adjusted EBITDA: Loss of $16.8 million in Q4.
• Non-GAAP Net Loss: $19 million, with a non-GAAP net loss per share of $0.05.
• Cash and Equivalents: $198 million at year-end, with no debt on the balance sheet.
• 2025 Revenue Outlook: $157 million to $177 million, with a ramp in revenue expected through the year.

• Warning! GuruFocus has detected 3 Warning Signs with SOUN.

Release Date: February 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• SoundHound AI Inc (NASDAQ:SOUN) reported its strongest quarter on record with $35 million in revenue, marking an increase of over 100% year over year.
• The company has achieved significant growth in key metrics since going public, with revenue increasing by 8 times, queries by 7 times, and bookings by 5 times.
• SoundHound AI Inc (NASDAQ:SOUN) unveiled its third business pillar, the voice commerce ecosystem, which is expected to further increase momentum.
• The company has strong traction in the automotive sector, with multiple OEMs pursuing proof of concepts (POCs) and existing customers upgrading to new AI solutions.
• SoundHound AI Inc (NASDAQ:SOUN) has diversified its business across products and industries, reducing customer concentration and increasing recurring revenue streams.

Negative Points

• Despite strong revenue growth, SoundHound AI Inc (NASDAQ:SOUN) reported a GAAP gross margin of 40%, down year over year due to the impact of business and product mix from recent acquisitions.
• The company experienced a significant GAAP loss from operations in Q4, impacted by a $220 million charge related to the change in fair value of contingent liabilities.
• R&D expenses increased by 60% year over year, driven by acquisitions, reflecting the company's commitment to innovation but also impacting profitability.
• Sales and marketing expenses rose by 114% year over year, primarily due to acquisitions, indicating increased costs associated with growth efforts.
• SoundHound AI Inc (NASDAQ:SOUN) faces challenges in integrating acquired customer contracts and moving away from deals that do not meet long-term profit objectives, which may impact revenue in the short term.

Q & A Highlights

Q: Keyvan, with recent breakthroughs in AI model efficiency, can SoundHound leverage these advances to improve performance, particularly in the restaurant drive-thru business? A: Keyvan Mohajer, CEO: Absolutely. We anticipated these advancements and designed our architecture to integrate various LLMs, including our own and third-party models. This allows us to enhance platform accuracy and reduce costs. We demonstrated this capability at CES with a generative AI experience without cloud connection.

Q: Nitesh, the backlog has grown significantly. Can you provide more details on its duration and composition by vertical or pillar? A: Nitesh Sharan, CFO: The backlog duration is consistent at about six years. While automotive remains strong, we've seen significant growth in the restaurant sector. The diversity across industries like healthcare and financial services is increasing, and our recurring revenue composition has grown, reflecting our strategic shift.

Q: What is the typical time to revenue for POCs, especially those initiated at CES? A: Keyvan Mohajer, CEO: In automotive, POCs can be executed quickly, especially with existing market players. For new OEMs, POCs are expected in the first half of the year. While the third pillar's monetization is an upside for this year, it enhances the adoption of our platform by existing customers.

Q: Regarding the seven-figure deal in the energy sector, what is its economic impact, and how does it reflect SoundHound's expansion into new verticals? A: Nitesh Sharan, CFO: It's a multi-year deal with accelerated cash collection, indicating strong economic impact. Keyvan Mohajer, CEO: This deal exemplifies our expansion beyond restaurants into sectors like healthcare, financial services, and now energy, with repeatable offerings that enhance efficiency.

Q: On Amelia's customer engagement and IT support use cases, which is more pronounced in the pipeline? A: Keyvan Mohajer, CEO: Customer services are more pronounced and align with SoundHound's core technology. However, IT automation is strategic for cross-selling opportunities, allowing us to package and upsell both services to customers.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.