Release Date: November 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- SoundHound AI Inc (SOUN, Financial) reported a significant revenue increase of 89% year over year, surpassing $25 million in a quarter for the first time.
- The company achieved a run rate of over 6 billion queries annualized, marking a 100% increase year over year.
- SoundHound AI Inc (SOUN) has expanded its AI agent customer service offerings into hundreds of more brands, indicating strong demand across all business sectors.
- The company has diversified its customer base significantly, reducing reliance on large point-in-time deals and decreasing customer concentration risk.
- SoundHound AI Inc (SOUN) is pioneering in the automotive sector with generative AI technologies, securing partnerships with major brands like Stellantis and expanding into the EV space.
Negative Points
- Gross margin decreased to 49% year over year due to the impact of recent acquisitions, although non-GAAP gross margin was 60%.
- Operating loss for Q3 was $33.8 million, indicating ongoing financial challenges despite revenue growth.
- R&D expenses increased by 53% year over year, primarily driven by acquisitions, which could impact profitability.
- Sales and marketing expenses rose by 87% year over year, reflecting increased costs associated with acquisitions and market expansion.
- The company faces challenges in integrating recent acquisitions and aligning key metrics, which may affect short-term operational efficiency.
Q & A Highlights
Q: Can you provide an update on the integration of the Amelia acquisition and any decisions on which parts of the business you will retain or discontinue?
A: We are still in the process of evaluating the Amelia acquisition. We are excited about accelerating product cross-sell and integration opportunities. We plan to retain high-margin areas like agentic integrations and voice enablement, while contemplating the future of professional services and escalation support. We aim to standardize professional services to improve margins and automate lower-margin support functions. This evaluation is ongoing, and we will provide updates in future quarters. - Nitesh Sharon, CFO
Q: How do you benchmark your foundational model, and what are the key metrics you use?
A: We have been building models for nearly two decades, using extensive data for training and evaluation. We benchmark speech recognition using metrics like word error rate and latency, consistently outperforming major tech companies. For natural language understanding, we focus on reducing hallucination in LLMs, aiming for 100% accuracy. Our proprietary technology helps us achieve this goal. - Kavo Maha, CEO
Q: What is your capacity to allocate resources between different industry verticals, such as restaurants and automotive, as you look towards 2025?
A: We see significant opportunities across all verticals. In automotive, we continue to grow with new partners, especially in the EV space. Our restaurant business is expanding rapidly, with seven of the top 20 QSRs as customers. We are also exploring opportunities in financial services and healthcare, leveraging our horizontal platform to scale across industries. - Nitesh Sharon, CFO
Q: Can you explain the rationale behind your increased financial outlook for 2024 and 2025?
A: The increased outlook is driven by both organic growth and synergies from recent acquisitions. We see strong opportunities for cross-sell and upsell across our portfolio, particularly in automotive and restaurant sectors. Our focus is on balancing growth with profitability, aiming for adjusted EBITDA profitability by the end of 2025. - Nitesh Sharon, CFO
Q: How are you addressing the challenges of deploying your solutions in large restaurant chains, especially with franchisees?
A: We are investing in franchise sales to facilitate deployment in large chains. Our team has developed innovative solutions to overcome hardware deployment challenges, allowing for faster activation and high order completion rates. We continue to strengthen partnerships with hardware vendors to streamline the process and scale our solutions effectively. - Nitesh Sharon, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
