SoundHound AI, Inc. Q1 FY2025 earnings call

• SoundHound has been investing in Polaris, a multimodal, multilingual foundation model, which offers better average latency per query, sentence accuracy in noisy environments, and word error rate improvement, with nearly 30 languages in a mature state.
• Acquisitions like SYNQ3, Amelia, and Allset are driving growth. SYNQ3 has upgraded majority locations to Polaris and grown locations by over 30%, Amelia has seen outsized growth across the portfolio, and Allset is making strides in bringing AI voice commerce to the market.
• Customer wins and expansions across various industries: In restaurants, scaled with large pizza chains and added locations with existing brands; in automotive, joined forces with Tencent Intelligent Mobility and multiple OEMs are running pilots; in healthcare, three companies renewed and expanded; in retail, signed pilots with fitness chains and discussed with home services franchises; in energy, launched new AI agent and partnered with Power Connect AI; in IT, renewed with multinational conglomerates; in telecom, had a renewal; in travel and hospitality, signed new deals and expanded; in financial services, had strong tractions and renewals.
• Unveiled Amelia 7.0 platform powered by proprietary multi-process agentic framework Agentic Plus, enabling businesses to deploy fleets of AI agents for various tasks.

SoundHound had over $29 million in revenue in Q1 2025, representing a year-over-year increase of over 151%. The revenue base is meaningfully diversifying with no single customer contributing more than 10% of revenue. Customer service offerings are seeing strong year-over-year growth driven by location expansion in restaurants and scaling across the enterprise business. Automotive units faced pressure this quarter due to geopolitical dynamics, but there's a strong pipeline of new OEMs. Restaurant business saw activation of over 1,000 new live locations in Q1, with the number of active restaurants using voice AI ordering solutions nearing 13,000 locations and handling approximately 10 million interactions a quarter.

• Reaffirmed 2025 revenue guidance of $157 to $177 million. Q1 was impacted by a customer change of control 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 of ~30%, closer to 40%.
• Expect sequential improvement in adjusted EBITDA as the year progresses and aim to achieve adjusted EBITDA profitability by the end of 2025.

• Automotive space faces complex geopolitical dynamics impacting auto units.
• GAAP gross margin was down year-over-year due to business and product mix of recent acquisitions.
• Mining low-margin acquired contracts and improving or exiting them may take 18-24 months given contract length.

Q: How should we think about the levels of different verticals contributing to the business and how growth will build into the rest of the year?

A: Nitesh Sharan said there's well-balanced contribution across industries like automotive, restaurants, financial services, healthcare, etc. Auto is optimistic with voice commerce, restaurant has strong penetration and growth opportunities, and enterprise solutions with new agentic offerings are accelerating time to value.

Q: Are the agentic AI solutions that SoundHound is deploying still in the experimental stage with customers, and how mature are they given the newness of the technology?

A: Keyvan Mohajer said SoundHound has been thinking about agentic behavior for 10 years with demos showing live products, and they've been refining it, with solutions not being experimental but live in production with a lot of data and maturity.

Q: Could a challenging macro environment be a revenue catalyst given the efficiencies SoundHound brings to customers?

A: Nitesh Sharan said the AI story has resilience, with AI penetration of IT budgets not slowing down, and SoundHound's solutions having application in both upside innovation and downside efficient risk protection, with a lot of runway ahead despite macro volatility.