SOUNDHOUND AI, INC. Q1 FY2025 earnings call

Key Points - Investment in Polaris multimodal, multilingual foundation model: It has better latency, sentence accuracy, and word error rate, with nearly 30 languages in a mature state. - Acquisitions: SYNQ3 has upgraded majority locations to Polaris model and seen growth; Amelia acquisition shows synergies and upselling opportunities; Allset is making strides in bringing AI voice commerce to market. - Customer wins: Notable wins in restaurants (e.g., large pizza chain, Burger King UK), automotive (joint with Tencent), healthcare (renewals/expansions), retail, energy, etc. - Amelia AI platform: Launched Amelia 7.0 with proprietary multi-process agentic framework, enabling autonomous AI agents with human-like interactions. - Voice commerce solution: Unveiled at CES and NVIDIA GTC 2025, with interest from OEMs and restaurants, and potential partnerships with larger technology platforms.

SoundHound achieved over $29 million in revenue in Q1 2025, representing a year-over-year increase of over 151%. The revenue is well-diversified across various segments. The automotive segment faced pressure due to geopolitical dynamics, while the restaurant segment saw significant growth with over 1,000 new live restaurant locations activated in the quarter. Revenue contribution is balanced across industries including automotive, restaurants, financial services, healthcare, etc., with no single customer contributing more than 10% of revenue in the quarter.

- Reaffirmed 2025 revenue guidance of $157 to $177 million. - Q1 was impacted by a customer control change reducing revenue by nearly $2 million, with that revenue shifting to later in 2025. - Expect first half 2025 revenue to be greater than historical first half mix, closer to 40%. - Anticipate sequential improvement in adjusted EBITDA throughout the year and expect to achieve adjusted EBITDA profitability by the end of 2025.

- Automotive industry geopolitical dynamics impacting auto units. - Impact of business and product mix from recent acquisitions on GAAP gross margin, with non-GAAP gross margin at 51% in Q1. - Need to improve or exit low-margin acquired contracts, expected to take 18-24 months due to contract length.

Q: How should we think about the levels that the first verticals are at and which verticals are driving growth?

A: There is well-balanced contribution across industries. Auto is optimistic with voice commerce and adding new brands, restaurant is in early days of transformation with strong penetration, and enterprise solutions are accelerating time to value with new product releases.

Q: How mature are the agentic AI solutions given the newness of the technology?

A: SoundHound has been thinking about agentic behavior for over 10 years, with live production solutions and data, and has an advantage in accuracy and speed compared to others.

Q: Could a potential recession impact the restaurant business?

A: The value proposition of increased revenue and cost reduction is great regardless of the macro environment, as the ticket size from AI is bigger than non-AI.

Q: What is the M&A environment and impact of macro on revenue?

A: No embedded M&A assumption in guidance, organic opportunity is large; macro volatility doesn't slow the generational shift in conversational AI, and AI penetration of IT budgets is growing.