SOUNDHOUND AI, INC. Q2 FY2024 earnings call

• Announced the acquisition of conversational AI leader Amelia, a natural extension of their strategy to accelerate voice-enabling the world with conversational intelligence.
• Q2 revenue up 54% y-o-y to $13.5 million, with cumulative subscriptions and bookings backlog doubling to $723 million.
• Pillar one (automotive): Cars in production in almost 20 markets, SoundHound Chat AI driving demand, with deals in Latin America and with US and European EV makers. Rolled out generative AI capabilities in vehicles and partnered with Perplexity for cutting-edge online LLMs.
• Pillar two (customer service): Won business with three sizeable QSRs, expanding into new verticals, and introduced Employee Assist and Dynamic Interaction solutions. Smart Answering showing rapid growth across various industries.
• Pillar three: Acquired Allset to build a voice commerce ecosystem, increasing addressable market and creating new consumer experiences.

Q2 revenue was $13.5 million, up 54% year-over-year. The restaurant business comprised roughly 25% of revenue. Cumulative subscriptions and bookings backlog roughly doubled year-over-year to $723 million, with an average duration of slightly less than seven years. Most of the expansion this quarter was in the restaurant space, although there was also traction with automotive partners, such as Stellantis adding five additional brands using SoundHound Chat AI.

• 2024 revenue expected to exceed $80 million.
• 2025 revenue expected to exceed $150 million.
• Acquisition of Amelia expected to be accretive to earnings in the second half of 2025.

• Integration challenges from acquisitions, including time and effort required to align the acquired business.
• Market uncertainties and potential impact of competitive landscape on market share.
• Risks associated with different model costs and usage models for integrated AI models.

Q: How does the acquisition of Amelia change verticals and focus in terms of pillars?

A: Keyvan Mohajer said the acquisition gives more scale in pillar two, accelerates expansion into other industries beyond restaurants, and Amelia's customers fit into pillar three vision. Nitesh Sharan added Amelia is a software business with strong customer traction that can expand upsell and cross-sell.

Q: What caused the acceleration in query volume growth?

A: Keyvan Mohajer said it was due to automotive partners upgrading to SoundHound Chat AI, where generative AI features led to increased usage, and scaling in pillar two with more customer service customers.

Q: How does the acquisition of Amelia impact margin structure and breakeven timeline?

A: Nitesh Sharan said Amelia is a software business with strong customer traction, and over the long term, they expect strong growth profile, 70%-plus gross margins, and 30%-plus EBIT margins. The acquisition is expected to be accretive to earnings in H2 2025, and they are in a phase of investing in growth opportunities while moving towards breakeven.