SoundHound AI Q1 2025 Earnings Call Transcript

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Provided by Quartr
May 8, 2025
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Operator

and thank you for standing by. Welcome to the Soundhound First Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.

Operator

I would now like to hand the conference over to your speaker today, Scott Smith, Head of Investor Relations. Please go ahead.

Scott Smith
Scott Smith
Head of Investor Relations at SoundHound AI

Good afternoon, and thank you for joining our first quarter twenty twenty five conference call. With me today is our CEO, Kevan Mahajar and our CFO, Nitesh Sharan. We'll begin with some short remarks before moving to Q and A. We'd also like to remind everyone that we'll be making forward looking statements on this call. Actual results could differ materially from those suggested by our forward looking statements.

Scott Smith
Scott Smith
Head of Investor Relations at SoundHound AI

Please refer to our filings with the SEC for a detailed discussion of the risks and uncertainties that could affect our business and for discussion statements that qualify as forward looking statements. In addition, we may discuss certain non GAAP measures. Please refer to today's press release for more detailed financial results and further details on the definitions, limitations and uses of those measures and reconciliations from GAAP to non GAAP. Also note that the forward looking statements on this call are based on information available to us as of today's date. We undertake no obligation to update any forward looking statements except as required by law.

Scott Smith
Scott Smith
Head of Investor Relations at SoundHound AI

Finally, this call is being audio webcast in its entirety on our Investor Relations website. An audio replay will be available following today's call. With that, I would like to turn the call over to our CEO, Kevan Mahajar. Please go ahead, Kevan.

Keyvan Mohajer
Keyvan Mohajer
Co-Founder & CEO at SoundHound AI

Thank you, Scott, and thank you to everyone for joining the call today. Soundhound had another strong quarter in q one with over $29,000,000 in revenue, representing an increase of over a 51% year over year. Our bold moves with product investments and growth initiatives in 02/2024 are paying dividends. We've been investing in Polaris, our multimodal, multilingual foundation model, and it has proven to be a real differentiator against our closest peers. We are seeing that our average latency per query is as much as four times better.

Keyvan Mohajer
Keyvan Mohajer
Co-Founder & CEO at SoundHound AI

In noisy environments, we excel and are consistently finding that our sentence accuracy is around twice as good in those environments. Our word error rate is up to 35% better, and we have almost 30 languages in a mature state, which is not only ahead of others but significantly decreases any barriers to expand internationally, in particular with our customer service solutions. Our growth initiatives in 02/2024 are taking shape. We acquired SYNC three with the objective of introducing innovative and advanced technology to the restaurant partners and customers and driving business expansion beyond that. With Amelia, we similarly saw lots of synergies and huge opportunity.

Keyvan Mohajer
Keyvan Mohajer
Co-Founder & CEO at SoundHound AI

And within less than three quarters, we are seeing outsized growth across a portfolio that has now integrated with SoundHand Voice AI technology, generating excitement from our enterprise customers and delivering on the promise of the upsell and cross sell opportunities we identified as part of the acquisition. And then look at Allsets, where the team has been tasked with bringing AI voice commerce to the market, and they're already making great strides in building technology that is attracting interest from huge global brands. To give more precise examples of our success harvesting the synergies we achieved, our first acquisition in 02/2024, Sync '3, has already upgraded the majority of its locations to our Polaris model. We have been able to grow their locations by over 30% and upsell Sanhance products to their growing customer base. Our second acquisition, Allseth, is bringing the growing merchant locations and brands to the automotive customers that we have accumulated over the past decade to create the largest voice commerce ecosystem of its kind, allowing drivers to transact and order food while driving.

Keyvan Mohajer
Keyvan Mohajer
Co-Founder & CEO at SoundHound AI

And our latest Amelia acquisition is upgrading to Polaris, just launched a new agentic AI platform, is entering new industries, and is already upselling its solutions to our merchant customers. We cannot be more thrilled. Our strategy is working. Many environmental factors and developments in the technology landscape are also playing to our favor right now. A recent report from Stanford University highlighted a number of these trends.

Keyvan Mohajer
Keyvan Mohajer
Co-Founder & CEO at SoundHound AI

AI performance continues to improve exponentially, creating opportunities for solution builders like us. Systems are also becoming more affordable and accessible, whether that's hardware cost or improvements in energy efficiency. The cost of adoption is being driven further down. At the same time, enterprise investment is rapidly on the rise with no business wishing to be left behind the pace of change. And to meet this enthusiasm, we are seeing more use cases move from the lab to real life right across industries.

Keyvan Mohajer
Keyvan Mohajer
Co-Founder & CEO at SoundHound AI

Closer to home, we've also made a number of observations from our own specific standpoint. Selective buyers and users are driving disruptive trends, many of which are creating more strong tailwinds for SoundHound. I would like to touch on four of these key trends. First, in automotive, we are seeing a notable shift away from OEMs partnering with Big Tech platforms for their in vehicle voice offerings. Over recent months, we've been in discussions with a number of automakers who have proactively approached us looking for a partner like Soundhand to help them differentiate and innovate and replace their big tech solutions.

Keyvan Mohajer
Keyvan Mohajer
Co-Founder & CEO at SoundHound AI

Second, in restaurant and hospitality, we are seeing a similar kind of movement. Operators are looking to migrate from cumbersome legacy answering systems to AI ordering solutions in order to future proof their businesses. Third, clear momentum is growing around the idea of voice commerce. Notably, consumers are showing a strong appetite for this new convenient modality, and the technology is ready to deliver. A new ecosystem of technology providers is rising to meet that demand, and, of course, Sanhunt is already out in front with our groundbreaking voice commerce ecosystem.

Keyvan Mohajer
Keyvan Mohajer
Co-Founder & CEO at SoundHound AI

And lastly, the quality of voice AI technology is a true differentiator for customer service AI agents. While the hype around agentic AI persists, marrying sophisticated AI agents with next generation voice technology is having the net effect of upending the traditional IVR space. Now customers can speak and actually be heard. We consider ourselves the best positioned vendor to benefit from these trends. And given this context, it's unsurprising that our pipeline is the largest it's ever been, and our TAM continues to expand giving us confidence that we have a massive opportunity to significantly grow our business for years to come.

Keyvan Mohajer
Keyvan Mohajer
Co-Founder & CEO at SoundHound AI

Of course, one of the most significant waves of fresh AI driven disruption comes from agentic AI. Just this morning, we sent out a press release with the exciting details of the latest version of our Amelia AI platform, Amelia seven point o. The platform is powered by a proprietary multi process agentic framework, branded AgenTik Plus, which allows businesses to deploy fleets of AI agents capable of understanding, reasoning, and completing actions. These AI agents can orchestrate amongst each other and perform tasks entirely autonomously without the need for human intervention. As a complete AI agent platform, Amelia gives businesses access to a whole range of agents that can retrieve and provide information, complete tasks and procedures, and allow consumers and external parties to complete commercial transactions with the business.

Keyvan Mohajer
Keyvan Mohajer
Co-Founder & CEO at SoundHound AI

Our AI agents use a combination of deterministic and large language models, giving the best of both worlds with control and flexibility. The platform also allows for optional human escalation and intervention for peace of mind. It is also fully interoperable with a whole range of available integrations. Notably, we also believe this is the only agent platform to equip enterprise ready autonomous agents with world class voice AI, enabling these smart AI agents to reason and perform complex tasks with human like interactions thanks to our incredible advanced speech recognition. This means that our AI agents are not only fast, intelligent, and labor saving, they engage in a way that employees and consumers will actively prefer.

Keyvan Mohajer
Keyvan Mohajer
Co-Founder & CEO at SoundHound AI

Imagine calling your doctor, reordering your prescription of a hard to pronounce medication, paying for a recent visit, and making a new appointment. This is all done beyond agents that effortlessly understand what you're saying thanks to our advanced voice AI and orchestrating with a network of further sub agents to instantly schedule, reorder, and complete a billing transaction. While others continue to talk about the promise of agentic AI, we are walking the walk and already delivering it in the real world. This is underscored by the trust our customers put in us and our solutions. Let me now share some of the great customer wins, renewals, and expansions in q one.

Keyvan Mohajer
Keyvan Mohajer
Co-Founder & CEO at SoundHound AI

In restaurants, in q one, we scaled and reached thousands of locations with a large pizza chain that we signed just last year, providing our answering and ordering solutions to ensure no inbound customer calls goes unanswered. Further locations were also added with existing brands, including Habit Burger, Casey's, Bar House Subs, Five Guys, White Castle, and McAllister, among others. We also continue to expand across Burger King UK locations together with Acrylic, a global technology company that is reinventing the customer experience with some of the biggest brands in the world. In automotive, we joined forces with Tencent Intelligent Mobility, part of the cloud and smart industries group at the multinational conglomerate Tencent, to bring world class conversational AI to the intelligent cockpits of global auto brands. Also, multiple OEMs now are running pilots and POCs with our voice commerce solution.

Keyvan Mohajer
Keyvan Mohajer
Co-Founder & CEO at SoundHound AI

I will talk about this in more detail later on. In health care, three highly regarded companies in the health care space chose to renew and expand with us again this quarter. This included a prominent medical billing company, a health care provider that brings test results to patients at home, and a health care provider in the Midwest that owns and operates a dozen hospitals. These customer validations prove that our technology is adding value to our customers, and it also shows that our business is sustainable and recurring. Additionally, we are pleased to note that three of the new deals we won in q four have already gone live with our solutions.

Keyvan Mohajer
Keyvan Mohajer
Co-Founder & CEO at SoundHound AI

In retail, we signed to launch exciting strategic pilots with multiple top US fitness chains unlocking potential for over 15,000 locations. We are also hoping to expand market reach through new pilot agreements and ongoing discussions with leading home services franchises positioning Sanhun Smart Answering as a transformative solution for multiunit operations. In energy, we have now launched a new AI agent with the large utilities company we signed in q four last year, helping them to transform the customer experience. Furthermore, we have been forging new strategic partnerships to expand our reach into this space. Just last week, we announced that we are joining forces with PowerConnect AI, a purpose built AI platform for the energy and utility industry to launch a new era of intelligent omnichannel voice experiences designed specifically for this vertical.

Keyvan Mohajer
Keyvan Mohajer
Co-Founder & CEO at SoundHound AI

In information technology, we renewed with a large multinational conglomerate based out of Tokyo, offering a number of services in various industries and another large Tokyo based company that offers IT services, system integration, cloud computing, and information security. In telecom, we had an exciting renewal this quarter with a large British multinational telecommunications company helping to power its employee IT support desk with our best in class AI agents. In travel and hospitality, we signed a new deal with a leading resort developer in Latin America, offering concierge for inbound and outreach services, creating repeatable business across some of the largest hotel brands in the world. We also expanded with one of the largest hotel chains in the world offering full service hotels and resorts. In financial services, we have continued to have strong traction with some of the largest financial services companies in the world, including a win with one of the world's largest insurance companies in Europe and significant renewals and expansions for our employee experience solutions across four financial institutions in q one.

Keyvan Mohajer
Keyvan Mohajer
Co-Founder & CEO at SoundHound AI

As a reminder, we currently work with seven of the 10 largest global financial institutions. Together with Channel Partners, we had wins including with a well known global agriculture OEM, a global tax preparation company, and a North American travel and hospitality company focused on all inclusive vacation and resort management. Additionally, we expanded services with a large systems integrator and renewed with a Japan based multinational IT and services corporation that resell our solution to their clients and manage services offering. Now let me update you on our voice commerce solution, which opens up a brand new commercial channel for consumers and businesses and delivers on the promise of transactional voice AI that has never been executed before. Our voice commerce initiative is strategically designed to leverage our existing restaurant and merchants together with our OEM networks to unlock new revenue opportunities within our established ecosystem.

Keyvan Mohajer
Keyvan Mohajer
Co-Founder & CEO at SoundHound AI

By enabling seamless voice powered transactions, like ordering food while driving, we not only enhance the business outcomes for our partners, but also create additional revenue streams for Soundhound while providing additional convenience to the consumer. Moreover, our unique positioning is enabling us to expand voice commerce to OEMs outside of our existing network and also beyond food ordering to services like table reservations, hotel booking, and prepaid parking. This expansion fuels consumer adoption, which in turn attract more OEMs and merchants, reinforcing the flywheel effect and driving growth across our royalty and subscription businesses. We unveiled this solution at CES earlier this year and gained massive interest from OEMs and restaurants. We also continued the momentum at NVIDIA GTC two thousand and twenty five, where we once again showcased the power of voice AI commerce and its transactional capabilities.

Keyvan Mohajer
Keyvan Mohajer
Co-Founder & CEO at SoundHound AI

Last quarter, we talked about the many interested OEMs pursuing POCs with our voice commerce solution, and I'm happy to report that we are working with the innovation team within some of the largest automakers in the world to bring our vision to life. Indeed, we've never seen OEMs move so fast for a product. We also already have over 15 large restaurant chains plugged into our network. And aside from the interest from OEMs and restaurants, we also already have partners signed up for reservations and parking services. Another very promising development that could help us monetize voice commerce in the near term is the interest we are seeing from larger technology platforms that don't want to manage restaurant relationships directly themselves, but want our voice solution available to their users as a safe, convenient, hands free option when ordering food from their vehicles or devices.

Keyvan Mohajer
Keyvan Mohajer
Co-Founder & CEO at SoundHound AI

So as you can see, in just a short period of time, we have seen some very promising opportunities with Voice Commerce, and we are excited to explore more opportunities that this ecosystem is quickly creating. In closing, it's becoming increasingly clear that the trends we are starting to see play out with voice AI are creating the right conditions for our business to take advantage and thrive. Whether it's voice enabled agentic AI, our new voice commerce solution, or our Polaris multilingual foundation model, we are clearly at the forefront of this generational shift in technology. Existing enterprise brands are renewing with us at a high rate, and OEMs and restaurant brands are approaching us at an equally high pace. Our three pillar strategy is resonating with all businesses, and we are starting to see that integration of Amelia turn to amazing cross and upsell opportunities.

Keyvan Mohajer
Keyvan Mohajer
Co-Founder & CEO at SoundHound AI

With that, I'll now turn the call over to Nitesh to talk about our financial performance, key growth drivers, and business outlook.

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

Thank you, Kevan, and good afternoon, everyone. Q one revenue was $29,100,000, increasing 151% year over year. Each quarter is a passing mile marker, and our pace is increasing at every turn even when the road may get jagged. Innovation and disruption in our industry is not showing any signs of slowdown, and at Soundhound, we continue to pioneer new breakthroughs. Inference cost reductions and comprehensive model choice that we orchestrate and arbitrate enable us to build new agentic and voice AI solutions using best of breed to deliver better outcomes for our customers, and that builds even more customer interest in what we offer.

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

Our technological differentiation, breadth of coverage and capabilities, and scalable infrastructure positions us well for continued share capture. Our q one was heavy on enterprise momentum across financial services, health care, and hospitality, and we also gained substantial velocity within the restaurant business. In fact, this was the first quarter where we activated more than 1,000 new live restaurant locations in a single quarter. That pace is roughly tenfold of what we were seeing slightly more than a year ago. And we are also gaining continued traction with our new generative AI, AgenTic, and voice commerce platforms.

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

Customer traction continues to be demonstrated with our bookings metric growing sequentially and at a high double digit rate versus prior year. That said, given the quarter to quarter volatility, we plan to update this metric only at year end going forward. To give you more flavor of underlying usage momentum of our solutions, let me lay out a few details. Within our product pillar, we continue to see strong 50% plus growth in our active cloud users. And as a reminder, we also sell edge and hybrid offerings, so this only partially reflects what we are delivering for customers.

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

The number of active restaurants using our Voice AI ordering solutions is nearing 13,000 locations and now handling approximately 10,000,000 interactions a quarter, extending our market leadership position. Enterprise KPIs showed a substantial boost in q one. We added tens of millions of interactions on a monthly basis for enterprises. We handled a five x increase in ticket volume versus the prior quarter and reduced our average resolution time almost 50 fold because our automation rates increased nearly 50%. Queries into our voice AI engine overall continued to accelerate.

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

We now have over 2,000,000,000 queries in less than a quarter. Not much more than two years ago, that was an annual run rate for us. All of this simply demonstrates the continued traction and momentum. And to be clear, we know we are just scratching the surface of the massive opportunity in front of us. With that, let me now discuss the first quarter financials in more detail.

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

Q one revenue was $29,100,000, up 150% year over year. The revenue base continues to meaningfully diversify with no single customer contributing more than 10% of our revenue in the quarter. This is much improved from historical levels, provides overall risk mitigation, and reflects our expanded serviceable markets. We are seeing strong year over year growth in our customer service offerings, in particular, driven by location expansion in restaurants and scaling across the enterprise business. We continue to see an increase in auto ASPs driven by our generative AI solutions and deeper product penetration.

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

That said, we did see pressure in auto units this quarter as the automotive space navigates complex geopolitical dynamics. We have a strong pipeline of new OEMs, and they, along with the restaurants, are very excited about our voice commerce solution. It's still early days for this third pillar of our business, but we are optimistic with what we are seeing. In q one, our GAAP gross margin was 37%, down year over year primarily due to the impact of the business and product mix of recent acquisitions. Adjusted for noncash amortization of purchased intangibles and employee stock compensation, our non GAAP gross margin was 51%.

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

We are starting to realize improvements from acquisition synergies and expect much more efficiency capture ahead, and we continue to mine certain low margin acquired contracts and find ways to either improve them or exit. I expect this will likely be an eighteen to twenty four month process given the contract length, but we are constantly evaluating ways to accelerate. R and D expenses were $24,800,000 in q one, reflecting a 66% year over year increase, primarily driven by our acquisitions. We increased development spend related to growth innovation and further integrated Polaris into our solution portfolio. Part of that was related to our effectiveness in accessing the underlying GPU infrastructure necessary for us to train and deploy advanced models and systems.

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

We continue to deploy our state of the art automatic speech recognition engine, driving cost efficiencies and performance benefits for our customers. And as I mentioned earlier, significant reductions in inference costs are allowing us to deploy our AI applications more efficiently, setting the foundation for rapid scale and adoption. Sales and marketing expenses were $12,000,000 in q one, reflecting a 117% year over year increase, primarily driven by acquisitions. We increased our go to market investments, both direct and indirect sales. We also invested in brand marketing and demand and lead generation.

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

We expect the net effect will be meaningful improvements in sales attainment, retention, and overall sales effectiveness over the coming quarters, and our growing pipeline and improving close rates are early indicators of progress. G and A expenses were $18,400,000 in q one, reflecting a 79% year over year increase, primarily driven by our acquisitions. We continue to invest in improving our overall control environment and infrastructure, consolidating ERPs, and enhancing global processes as we scale and integrate our prior year acquisitions. We had noncash employee stock compensation of $17,400,000 and noncash depreciation and amortization, including the amortization of intangibles of 7,800,000 in q one, all of which are included in our GAAP results. As noted last quarter, this step up in stock based compensation in q one is the result of taking into account the full impact of the acquired employees' equity awards.

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

Our q one financials include a gain related to the change in fair value of contingent liabilities, significantly impacting our GAAP income from operations in q one by approximately $176,000,000. Just a quick reminder, this stems from the acquisitions we have completed and is a nonoperating and noncash expense. As such, this item has been excluded in our non GAAP results. Adjusted EBITDA was a loss of $22,200,000 in q one. OI and E was $2,700,000 income for the quarter.

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

GAAP net income of $130,000,000 and GAAP diluted EPS of 31¢ were favorably impacted by the change in fair value of contingent liabilities mentioned before. Non GAAP net loss was $22,300,000, and non GAAP net loss per share was 6¢ in the quarter. This adjusts for noncash depreciation and amortization, m and a transaction costs, stock based comp, and other noncash item. Our cash and equivalents at year end was $246,000,000 with no debt. Our net cash used in operations in q one improved year over year by 13% to $19,000,000.

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

With that, let me discuss our financial outlook. We are reaffirming our prior 2025 revenue guidance of 157 to $177,000,000. In q one, one of our customers went through a change of control that adversely impacted our quarterly revenue by nearly $2,000,000 versus our expectations entering the quarter, and we now see that revenue shifting to later in 2025. Aside from that unique situation, the year, with some puts and takes, has started largely as expected despite overarching macro volatility. That demonstrates the resilience of the AI momentum and our business traction.

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

Last quarter, I mentioned that we expect first half twenty twenty five revenue to be greater than the historical first half mix of roughly 30% that we have realized the last few years. In fact, we suggested it would be closer to 40%. We still believe that. With the expected ramp in revenue, we also expect to reflect sequential improvement in adjusted EBITDA as we continue to move through the year. We remain committed to our path to profitability and have activated several cost actions to ensure we remain disciplined.

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

Accordingly, we continue to expect to achieve adjusted EBITDA profitability by the end of twenty twenty five. Thank you. And now we will move to q and a.

Operator

Thank you. Our first question will come from the of Joe Luria from D. A. Davidson. Your line is open.

Gil Luria
Head of Technology Research at D.A. Davidson Companies

Thank you. Very much appreciate that the business is now across several verticals, not just auto and restaurants. But as as you look for the where we are now and into the rest of the year, how should we think about the the levels that the first verticals are at? So how much of the business these days is coming from the restaurant vertical, from the automotive vertical versus the rest of the business? And and how do you expect the growth to build into the rest of the year?

Gil Luria
Head of Technology Research at D.A. Davidson Companies

Because even if you just if you do 40% in the first half of the year, that means you're exiting the year probably closer to $50,000,000 run rate. What are the verticals that are driving us from where we are today to that exit run rate?

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

Thanks for the question, Gil. So I'll start by saying what we saw this quarter, what we've been seeing trending for the last couple quarters is well balanced contribution across industries, as you noted. So we are really well split between the contribution that is from automotive, is from restaurants, that is from financial services, that is from healthcare, that from insurance, hospitality. So we're getting contributions across a number of verticals, all with their own unique sort of dynamics and growth opportunities. So I'll unpack the two you highlighted, but I'll also hit on enterprise if that's okay.

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

So first within auto, and I noted some of this in the prepared remarks, the auto industry is going through a lot of stuff with the global supply chain dynamics. We continue to steal share and gain and grow, and our royalty business is one that we're very optimistic about because we're very underpenetrated versus the brands that we work with. We've historically talked about 20 brands that we work with that globally comprise 20% roughly of the market share of global light vehicle production annually, as an example. And we are, in terms of unit realization, just a small part of that 20%. We expect to continue to grow, and we're continuously adding new and new brands to the portfolio.

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

In fact, last year, we talked a lot about how we're seeing outpaced gains with the EV providers, and they tend to sort of operate at the speed that we're used to. Now we're getting a lot more traction also with the ICE guys. So really, we're bullish. And I would say that, especially with our voice commerce that we announced earlier this year, there's so much conversation going on because we're providing a new pathway for revenue generation. So and moving away from us just being a subcomponent of their cost structure, the bill of materials, we're actually providing revenue opportunities.

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

So while we did see, I'll call it, relative softness in the auto space this quarter, just given the macro uncertainty, we we still are very optimistic about the pathway and the contribution that the auto business will be. What we do feel good is maybe two years ago, what was 80% of our business mix is now, you know, one of several businesses that have a low double digit kind of percentage of mix. So so I I think that's a real positive on the auto side. Restaurant, I mean, we've we've been really bullish about it, and there's nothing changing. In fact, if anything, I think the opportunity of building AI integrated into the restaurant operations, particularly around ordering, but even furthermore into employee productivity and other use cases, we're seeing more and more of those journeys.

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

In fact, we're in the midst of some of the cross sell opportunity across the enterprise solutions now we could bring into restaurants. We can go deeper into employee productivity and solutions for IT stack management, etcetera. So the bigger point here is that the restaurants, we've already been really bullish in the penetration. I talked about in the prepared remarks that we're now crossing 13,000 locations. We're spanning all sorts of cuisine types, but getting a really great penetration with pizza and then drive thrus, obviously, making a lot of traction.

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

So this is a this is very, very early days, not even, you know, first out in the top of the first inning kind of, early days of the the transformation that's gonna happen in restaurants. And we believe we have a really strong competitive position, differentiation moat and running start. So we still think that's probably one of our greater outpaced shares of growth, certainly over the medium and long term, but we also expect that to continue in the near term. And then so I think that hits your question, Gil, but if I can add on the enterprise part, especially today, this morning, we announced our new AgenTic solution seven point zero. Mean, that really first of all, it it it solves many important things for many of our enterprise customers across those verticals, financial services and health care, hospitality, insurance, retail.

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

And, one of the things we're most excited about is that it is very much accelerating time to value for those customers. So the speed of us, what maybe used to take us six weeks, you know, three months to deploy a capability to increase the use cases, that's happening in weeks, days, and in some cases, hours, we're finding. So our new solutions are allowing us to create more value for the customers. And we know that's going to not only expand the interaction base, expand the use cases. It's going to make the containment and success measures much better.

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

And for, for the customer, that's value, and for us, it's more revenue. So we really see opportunity across the breadth of industries. And I think that, from our perspective, is great because maybe a couple years ago, we were sort of dependent on one deal to get across the line for a quarter. We're definitely not in that circumstance anymore.

Gil Luria
Head of Technology Research at D.A. Davidson Companies

Got it. That's very helpful. Thank you. Second one is for Kevan. And on on AgenTek technology, it's it's a source of of much controversy these days in terms of where we are in in the maturity of that technology.

Gil Luria
Head of Technology Research at D.A. Davidson Companies

The a lot of the technologies you're deploying for your customers are are are ones that that you've been working on for for twenty years and you refined over time. AgenTik AI, as far as I know, is is something that we really only started doing a year ago. Are are the solutions that we're talking about solutions that are we're still experimenting with customers? Are they part of a broader solution? How mature are these solutions given the technology is so new?

Keyvan Mohajer
Keyvan Mohajer
Co-Founder & CEO at SoundHound AI

Great question. So if you if you look at our 2,015 demos, we've been thinking this way for ten years. We had demo demonstrations that are you can look on YouTube that actually were live products that showed that agentic behavior when you have these complex compound questions and tasks, and we magically perform those tasks, and it was really fast and accurate. And the world is just catching up to the adoption of that vision, but we've been at it for more than ten years because we unveiled it about ten years ago. So the the things that make us more mature in that is that we've been doing it.

Keyvan Mohajer
Keyvan Mohajer
Co-Founder & CEO at SoundHound AI

We pioneered a lot of it. We have lot of those experiences live in production, and we have a ton of data. And we have you know, Sanhana is one of the few companies that has devoted technical founders that from Stanford's dorm room are still working on things like this, and that's you know, our our heart beats faster anytime we innovate and leapfrog others. So, I agree that it's a it's a new concept that people are talking about, but the it's not new for us. And that's why we think, we have an advantage in terms of accuracy is is an issue for a lot of people.

Keyvan Mohajer
Keyvan Mohajer
Co-Founder & CEO at SoundHound AI

Speed is another issue for a lot of people. Having control over the behavior of these systems is is important because you can this is not about having a demo that impresses people. This is about really being the AI of a business. So you can't be 70% right. If you're building a demo, you can be 70% right, and the people forgive the rest.

Keyvan Mohajer
Keyvan Mohajer
Co-Founder & CEO at SoundHound AI

But your, our audience is not forgiving, so we have to be closer to a %, and that's what you're really good at.

Gil Luria
Head of Technology Research at D.A. Davidson Companies

That's great. Thank you.

Operator

Thank you.

Keyvan Mohajer
Keyvan Mohajer
Co-Founder & CEO at SoundHound AI

Thanks, Gus.

Operator

One one moment for our next question. Our next question comes from the line of Leo Carpio from Joseph Gunnar. Your line is open.

Leo Carpio
Equity Research Analyst at Joseph Gunnar & Co.LLC

Hi. Good afternoon, gentlemen. I actually have two questions. The first question is regarding the restaurant side of business. As we're going into the year and there's uncertainty about recessions and possibly taxation situation in the economy, could that possibly impact your restaurant business, or is it more a case that potential recession is driving more customer interest in your technology at this point for efficiency gains?

Keyvan Mohajer
Keyvan Mohajer
Co-Founder & CEO at SoundHound AI

Yeah. Actually, it's a great question. We get support from both sides of it. So when when the economy is good, people invest in innovation. That brings them to us.

Keyvan Mohajer
Keyvan Mohajer
Co-Founder & CEO at SoundHound AI

When it's challenging, they wanna invest in automation and cost saving that bring them to us. And, initially, our a big part of our pitch for restaurants was cost savings and quality quality of the customer experience. But now we are actually able to show that the ticket size we generate with AI is bigger than the ticket size that non AI order takers generate. So we can also include in our value proposition increased revenue. And that's really important for restaurants.

Keyvan Mohajer
Keyvan Mohajer
Co-Founder & CEO at SoundHound AI

They wanna increase their revenue. They also wanna wanna reduce costs. And so we think their value proposition is great, regardless of the, the macro environment. And, you know, sometimes one, forces bigger than the other.

Leo Carpio
Equity Research Analyst at Joseph Gunnar & Co.LLC

Okay. And then the second question is regarding the competitive environment. Have you seen any changes in the competitive landscape, any pricing pressures, any creditor that has actually become more aggressive?

Keyvan Mohajer
Keyvan Mohajer
Co-Founder & CEO at SoundHound AI

So, definitely more players in the space. I mean, used to be, like, before GenAI, you know, Us and the big tech, mostly, and maybe some a couple of smaller providers. But now we see more, new new companies enter the market, but they don't have the the mature state that SoundHound has, you know, in terms of technology, in terms of data, in terms of know hows, and in terms of the customer base and integration. We are in a much more mature state. And a lot of the other players are creating an ecosystem that benefits us.

Keyvan Mohajer
Keyvan Mohajer
Co-Founder & CEO at SoundHound AI

You know, there are some pieces of a user experience that might be necessary to complete something, and other companies might provide that. So we are very open to partnering. For example, today, we included in our earnings announcement collaboration with Tindrop for authentication and security, and there are other examples of that.

Leo Carpio
Equity Research Analyst at Joseph Gunnar & Co.LLC

Alright. Thank you.

Operator

Thank you. One moment for our next question. Our next question will come from the line of Mike Latimore from Northland Capital Markets.

Vijay Dewar
Analyst at Northland Capital Markets

This

Vijay Dewar
Analyst at Northland Capital Markets

is Vijay Devar for Mike Latimore. So a couple of questions. One on how do we model gross margin for the second quarter and for the rest of the year? And secondly, how are the retention rates within Amelia?

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

Sure. Thanks for your question. So on the first one, we're not guiding specifically gross margin, but I think I've noted in this call and prior calls that we're still in sort of the digestion of the acquisitions, and we know the business mix and contributions, particularly with relation to the call center business that we acquired and then some of the escalation support business, including also some of the professional service activities are in the near term affecting our gross margin. And we have been looking through certain acquired contracts to make sure that they have the right profitability composition that we want and we're actively working through. So our expectation certainly, over the medium term is to revert back to those sort of pre acquisition gross margin levels that we're crossing, you know, north of 70%.

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

And certainly, in the composition of solutions that we're delivering, whether it's edge software capabilities or cloud services, cross industry verticals, like that's the profile of them. And a lot of our current contracts that are on the lower margin, and we have a journey currently we're activating with automation, so we're realizing those improvements real time. So I think as that business mix shifts, will see a steady improvement through the year. I mentioned in the prepared remarks, sequential improvement in adjusted EBITDA through the year that we expect. And I would say that's going to happen both through gross margin improvements, but also we continue to look at our overall OpEx footprint and make sure we're managing that, carefully and thoughtfully.

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

So that was your first one. Sorry. Can you repeat the second question?

Vijay Dewar
Analyst at Northland Capital Markets

Retention rates.

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

Retention rates.

Vijay Dewar
Analyst at Northland Capital Markets

How was it trending between the Amelia base?

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

Yeah.

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

Sure. Yeah. Retention rates are you know, one of the things I'll say we did post, the acquisition of Amelia was really it was a company that under prior ownership had to do all the right things from a cost structure and really, had to take a close look at a number of areas. And after we acquired them, we saw the massive opportunity in front of us. We have reinvested in a few pockets.

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

In particular, one of those was our customer success capabilities and making sure that we really understood what was working, what wasn't in their customer environments, very complicated customer environments, millions and millions of interactions and use cases and making sure we were delivering for those customers. So that team really more robustly has been up and running now for just several months. And I think they're doing a great job to kind of continue to improve retention rates. And I would say that we aren't reporting exact retention levels, but we see a real pathway to strengthen improvement in the gross retention and net retention. We are seeing a lot of, especially with new product releases and so forth, and expansion of our use cases and now with the AgenTic offering.

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

And I talked about in Gil's question earlier about time to value. We expect great expansion at all of these customers. So so we're on the journey. I think we we we wanna get certainly those, retention levels to where, you know, between that and new offerings and expansion, they're gonna be contributing at the the rest of the portfolio that's been growing 50% CAGR for several years, and we expect that. Right now, we bought a company and this was fully in the valuation that was declining, and we needed to turn that around.

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

And we've started to do that. It's kind of similar to what we did with the Sync three acquisition, and that has turned around and now is growing at a very healthy healthy level. And so we're just mid journey on that, and, retention is an important part of that. But also, our go to market motion, we're investing in both direct sales and indirect channel relationships. And all of that is going to help continue to help scale this year, but more importantly, next year and the year after.

Vijay Dewar
Analyst at Northland Capital Markets

Great. Thank you.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Scott Buck from H. C. Wainwright.

Operator

Your line is open.

Scott Buck
Managing Director & Senior Technology Analyst at H.C. Wainwright & Co., LLC

Hi. Good afternoon, guys. Thanks for taking my questions. And apologies, bouncing around on some calls this afternoon. So you may have already answered these.

Scott Buck
Managing Director & Senior Technology Analyst at H.C. Wainwright & Co., LLC

But I guess, first, I'm curious looking at the the reaffirm guide, should we be assuming or maybe you can talk to us about what the m and a environment looks like. I mean, you guys have done several deals in the past. Are you is the environment conducive to to doing a deal to get you to to the the current January to January, or are you thinking of that more as an organic goal?

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

Yeah. I'll break that question into two. Thanks, Scott. Number one, we don't need M and A to achieve the outlook we provided here. There was no embedded assumption of acquiring anything in that.

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

And I think our organic opportunity across some of the questions I gave earlier and opportunities across our verticals and product sets is quite tremendous. And the outlook for this year will be much smaller than the outlook we give for next year. And so we're really bullish on what we're driving ourselves. That said, you know, I think the the opportunity for continued acquisition is there. Like, there is a lot of, and I will say now after having done a few last year, we get a lot of active inbound inquiries, for folks looking for sort of another stage in their journey and thinking about partnerships.

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

So I'll just go back to how we frame and think about it. I believe I mentioned this in prior calls. As long as an M and A is aligned to the strategic vision of what we're trying to drive, and ultimately, this company is about, we're in the new Gen AI LLM era. We believe conversational AI, and in particular, the new way of how humans will interact with technology is just getting going. We're going to create the next major inflection in the human technology interface.

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

And voice AI will be the killer app in that world. And we have built a proprietary stack with deep patent portfolio, and we have great engineers who have been working on this for a long time. And we're building amazing products around it. And that's the vision we can build ourselves. But we also know in a couple of cases last year and as we look at the landscape, there might be other partners and acquisition targets that we may find accelerants on that strategic journey.

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

We're open to those dialogues. And we have a team dedicated to constantly mining and looking at that. So if it's on strategy, something we'll look at. It's something we can operationalize and integrate, into the acquisitions we did last year, we got real complementary assets and people and teams that we've now integrated, and it's helping us work better and smarter and maybe professionalizing things that have used maturity for us, prior to the acquisition. So so as long as we we have it on strategy, we can operationalize it, and, ultimately, and most importantly, you know, is it the right price?

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

You know, a lot of the deals we do, we do shared economics. So even for people looking for exits, you know, we we kinda go, hey. If you have if you can bring this to bear, if you believe in in what your company can do and together what we can build, let's ride the upside together. And I think that's a unique proposition for companies looking for exits right now where, they could kinda say, hey. Tired.

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

I'm done with it, and let's move on. Or a lot of times, people just for circumstances, organizations coming together is a real accelerant. And that's that's kind of the partnership frame that we looked at, look at when we're thinking of m and a opportunities. So, you know, we're we're openly looking. Nothing's on the immediate horizon.

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

Nothing's needed for this year's outlook. But I believe over the next five years, we will continue to look and grow. And I think the industry that is quite early stage will naturally over time consolidate. And I think that's just natural part of any healthy, burgeoning new industry and will be, hopefully, a major player in that.

Scott Buck
Managing Director & Senior Technology Analyst at H.C. Wainwright & Co., LLC

Great. I appreciate that added color. And second, I'm I'm curious. Should should investors be thinking about a more challenging economic macro environment as potentially being a, you know, a a revenue catalyst given the efficiencies that you bring to the customers? Just, you know, given the macro seems the perception of the macro seems to change every six hours, you know, trying to think about how you guys think about, you know, potential slowdown in, in the economy.

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

Yeah. I mean, I could jump. Personal view a little bit is that macro kinda ebbs and flows and goes through, you know, cyclical well, it goes it goes through cycles that maybe people measure in months or quarters. I mean, we're really talking about a generational shift in how humans are interacting with technology. We believe the next fifteen years are gonna massively inflect.

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

And, again, it's gonna be conversational AI led with voice capabilities. It's gonna, you know, underpin it's gonna be underpinned by generative AI and large language models and the the sort of the architectures that we can orchestrate and arbitrate between. And those are the solutions we're bringing. And so as Kevan mentioned to an earlier question, we actually think the AI story has resilience on either upside innovation that's required to help companies scale or on the downside efficient, you know, risk protection part. And, honestly, the the the solution with different customers, they have, different needs.

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

But I do think what we've seen even during these last, last quarter or two quarters of volatility, the AI penetration of the wallet or the IT budgets is not slowing down at all. In fact, it's growing. Again, don't think that doesn't show signs of abating. And I think what people are more curious about are and if I take a three year view of what's been going on in AI, we were first like, okay. Everybody needs to get the hardware pieces and the GPUs, and then everybody needs a cloud service provider.

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

We're now clearly in the zone of applications. And how do I get outcomes that really help my customers, my end customers? That's the conversations we're having every day with our customers. And I think that has a lot of resilience. So I don't know relative to where investors' expectations, because certainly there is volatility, but we think we've got a lot of runway ahead.

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

And we're not certainly immune to macro volatility. I don't mean to suggest that, but I think we've still got a ton of opportunity to go after.

Scott Buck
Managing Director & Senior Technology Analyst at H.C. Wainwright & Co., LLC

I appreciate that and think that makes a ton of sense. That that's all I had, guys. I appreciate it. Thank you.

Nitesh Sharan
Nitesh Sharan
Chief Financial Officer at SoundHound AI

Thank you.

Operator

Thank you. And with that, this concludes the question and answer session. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Operator

Everyone, have a great day.

Executives
Analysts
    • Gil Luria
      Head of Technology Research at D.A. Davidson Companies
    • Leo Carpio
      Equity Research Analyst at Joseph Gunnar & Co.LLC
    • Vijay Dewar
      Analyst at Northland Capital Markets
    • Scott Buck
      Managing Director & Senior Technology Analyst at H.C. Wainwright & Co., LLC
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Key Takeaways

  • SoundHound reported Q1 revenue of $29.1 million, representing a year-over-year increase of over 50%, and reaffirmed its full‐year 2025 guidance of $157–$177 million.
  • The Polaris foundation model delivers up to four times lower latency, 35% better word error rates in noisy environments, and supports nearly 30 mature languages, creating a significant competitive advantage.
  • Acquisitions of SYNC 3, Amelia, and Allset have been integrated with SoundHound Voice AI, driving over 30% location growth, unlocking cross-sell upsell opportunities, and expanding into new industry verticals.
  • The Amelia 7.0 AgenTic Plus platform enables fully autonomous AI agents to understand, reason, and complete complex, voice-based tasks with optional human escalation and enterprise-grade integrations.
  • SoundHound’s voice commerce solution is attracting interest from major OEMs, restaurant chains, and technology platforms to enable hands-free transactions—such as in-car food ordering—and create new revenue streams.
AI Generated. May Contain Errors.
Earnings Conference Call
SoundHound AI Q1 2025
00:00 / 00:00

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