Q4 2022 SoundHound AI Inc Earnings Call

Yeah.

Right.

Good day and welcome to the Q4 2022 earnings Conference call. At this time all participants are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask a question. During the session you will need to press star one one on your telephone you will then hear an automated mess.

Advising that your hand is right to withdraw your question Press Star. One again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your Speaker, Mr. Scott Smith head of Investor Relations. Please go ahead.

Great. Thank you Sherry hi, everyone. Good afternoon, and thank you for joining our fourth quarter and full year 2022 conference call.

Today is our CEO kayvon larger and our CFO Nick <unk>.

Again, with some short remarks before moving to Q&A.

I'd also like to remind everyone that we will be making forward looking statements on this call.

Actual results could differ materially from those suggested by our forward looking statements.

Please refer to our filings with the SEC for a detailed discussion of the risks and uncertainties that could affect our business and those 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 disclaim any obligation to update any forward looking statements, except as required by law.

Finally, this call is being audio webcast in its entirety on our Investor Relations website, an audio replay will be available shortly following todays call.

With that I'd like to turn the call over to our CEO <unk>. Please go ahead Kevin.

Thank you Scott and thank you to everyone for joining the call today.

We are happy to share with you the results and highlights of our first fiscal year as a public company.

We closed out we had a strong fourth quarter.

Our cumulative bookings backlog increased to $332 million at year end.

And our full year 2022 revenue was $31 1 million.

Both of these key values exceeded targets, we set and communicated into 2021.

Before we went public and revenue for the challenging market conditions began.

Sometimes the user queries using cloud connectivity were also a highlight growing over 85% in 2000.

22 compared to 21.

Resulting in an annual run rate of approximately $2 2 billion.

In Q4, our bookings increased 10% quarter over quarter, and our revenue was $9 5 million up 84% year over year.

Before diving back.

Want to take a moment to reflect on how we got here and share our view of the latest trends and momentum in AI.

We started Fanhouse Stanford University dorm room with the vision that conversational AI will be the next major destruction and computing.

We knew our AI behind what long term and worked for over a decade to build and own the entire technology stack that is transformative.

We'd be globalized, our technology to over 25 languages and are starting the year with $332 million in bookings from our customers.

Now, we powered tens of millions of devices and services around the world, enabling people to more seamlessly interact and exchange more accessible interconnected.

With the recent popularization opportunities and large language model, we view 2023, and an inflection points of conversational AI with a clear intersection between technology readiness and subsequent demand and adoption.

These are fiction.

And <unk> is in a unique position to create tremendous value.

We believe the impact of currency and large language model to the field conversational AI is similar to the impact of deep learning deep neural networks to machine learning.

Better quality models can be created faster and with fewer pdfs engineering requirements.

And we view the market impact of this could be transformative similar to the mobile ecosystem destruction of the last decade fast mover will create tremendous value.

Now moving fast does not mean just opening the techs are both interface to a large language model.

Plus models predicted danger of providing unpredictable stale and incorrect responses phenomenon.

<unk>.

The underlying principle the fan out technology are addressing these shortcomings by combining software engineering and machine learning.

For the first time, we are unveiling our novel approach using our proprietary technology called <unk> and <unk>.

Thailand, our conversational AI language user stop engineering to efficiently develop knowledge domains, while economy, our conversational AI network uses machine learning to augment and enhance the realm of possibilities.

Cognex can connect as time has internal Jackie AI models as well as external model as opening GPT in tax.

Others.

Ultimately chilon controls and arbitrate the results could provide the best response to the user.

Let me demonstrate.

I work at <unk>.

Okay, I will remember where you work it.

Shlomi fancy restaurants, near my work that except reservations.

There are several restaurants near downtown sorted by highest price that except reservations.

Is it appropriate to bring a bottle of wine so a fancy restaurant.

It depends on the restaurants policy regarding bringing outside alcohol, some restaurants allow customers to bring their own bottle of wine, but charter corkage fee, while others do not allowed at all you may want to check the restaurant's website, where call ahead to find out their policy. If there is a corkage fee what is the typical charge.

The court could speak and vary depending on the restaurant, but it typically ranges from $15 to $50 per bottle. Some restaurants may have different fees, depending on the size of the bundle or the type of line, especially checked with the restaurant beforehand to avoid any surprises on the bill.

So at the results by highest price and only show the ones that have more than four stars on Yelp and <unk> outdoor seating.

Here are several restaurants with more than four starts sorted by highest price then of outdoor seating.

This is the first one off parking flemings Prime Steakhouse and wine bar Dwang bar located at 2762, obviously, you drive in Santa Clara have parking.

Food doesn't have it as a wine bar, a steakhouse and seafood restaurant I have a question is it bad for you to have that kind of fluid too often consumed.

Consuming high amounts of Red meat seafood can have negative health consequences, if done on a regular basis. However, it is okay to windows and leases every once in a while as part of a balanced diet. It is important to consume a variety of foods and moderation to maintain a healthy lifestyle. How long does it take to drive from my work to their people.

We'll take approximately seven minutes to drive two three miles from downtown declining Prime Steakhouse and wine bar 2762, Augustine drive Santa Clara.

One at Sunset Tonight, and will it be rainy Tonight at seven PM near my work.

That will be at 605 PM on Sunday March five 2023, no. It is a forecast of rain on March five near downtown.

Send a message to six five below $5 five once we once we are on for dinner Tonight at seven P. M. Our book of Fancy restaurants. So you then send.

Sending your methods can.

Can you recommend some gift ideas for a 10 year anniversary dinner.

Consider creating a scrapbook of your favorite memories together you can also write a heartfelt litter expressing your love and appreciation can you write me a four line poem for a 10 year anniversary.

Sure Here's a quick one line poem and years have come and gone, but my love for you still signs on I am grateful for every moment, we shared and look forward to many more years to be herd.

That was great. Thank you it is my pleasure.

What can you just heard was a sneak preview of a new product called <unk>.

Usher in a new phase of voice enabled conversational AI that used to only exist in science fiction.

By combining the power of software engineering and machine learning AI, we can finally deliver the digital assistant experience that users have been desiring for decades. Please stay tuned for our official launch announcement there at this point.

Let's review our expected business impact of this change as it relates to our three pillar strategy.

In our pillar one Ravi power devices in cars.

More users will use their assistant more often.

Users will no longer limit their interactions to simple control commenced setting timer and playing music. They can have lengthy useful conversation with her assistance.

This increase in usage will translate to an increase in revenue and licensing fees for Samsung.

Combined with our breakthrough dynamic interaction, which I'll talk about shortly.

We'll further strengthen our position as a leader in voice interfaces by creating more interaction capabilities for users of our products.

In addition, more product creators both demand this feature and this increasing adoption will also increase.

The revenue for downtown.

In our pillar II more task can be automated and in general customer service an area of important.

Important pockets first townhome will be transformed with.

Not just cheaper documents, but also better than humans.

By incorporating the possibilities that are already proven.

Language models into customer service applications, we envision that end users ultimately prefer to speak on AI agent rather than a human representative when talking to our business.

Okay.

We expect our expansion to new customer service vertical accelerates and ultimately AI enabled customer service will be as necessary to every business at electricity.

<unk> is in a unique position to take advantage of this rare moment due to our advanced and comprehensive technologies mature product and existing customer base.

In our view these can't be done at the <unk> project. It can be achieved by simply integrating a few external API.

And creating the necessary technologies to winning conversational AI would be costly and inefficient and slow by.

By owning all the core pieces of the engine, we have a distinct competitive advantage.

Innovation has been a core part of our DNA last November we unveiled a new technology called dynamic interaction.

Somehow dynamic interaction is a multimodal full-duplex interface with real time continuous audio visual feedback and response to both audio and cash input with Norway forced the aqua or current thinking.

It ignores the off topic speech mixed Brexit suggestions to the user and intelligence to decide when to use audio or visual output.

We believe dynamic interaction is a category defining breakthrough that will raise the bar for human competing direction, just like how Apple multi touch technology leapfrog existing crushing for interfaces in 2007.

By combining dynamic interaction wheat generative, we expect to achieve our ultimate vision of making computers better than humans in language understanding and more human and the way to interact and respond.

Given our unique positioning and strength the growing demand we are seeing for our independent AI powered product and services will only get stronger as we execute on more opportunities and with more customers.

In 2022, we made great progress in forging and extending significant relationships and partnerships with a number of new brands with our vertical agnostic technology.

In the past year downtime has announced a number of key partnerships and integrations, including an agreement with Qualcomm to bring <unk> Snapdragon platform.

New deals and integrations with Vizio square toast, and Oracle and an expanded partnership with snap.

<unk> also signed a multi year agreement with Hyundai announced an expansion of the largest relationship in Europe as well as a series of collaborations and automotive space, including LG Harman PCA and TMI.

In automotive, we now work with 20 brands and impressive number given we went from zero to 20 brands in just a few years.

While we continue to add new brands in our portfolio. We're also able to expand with our existing brand globally by supporting new languages, New region, adding edge and cloud and new services.

We are also working with many world class device manufacturer ranging from smart appliances Tvs and in multiple areas within the Iot space here, we continue to expand within our existing customers and we are excited about the companies in our pipeline.

With more than 75 billion connected devices expected globally by 2025, we see a tremendous opportunity here.

<unk> voice AI powered product solutions.

Okay.

Last year, our voice AI technology was made generally available for customer service starting to compound for restaurants missing our entry into this massive rapidly evolving industry.

Since launch we have added restaurant customers across North America, and continued reporting relationships with important partners, including companies like Oracle score and with more to come.

Our Samsung for restaurant voice assistant allows restaurants to automate the OLED process at drive throughs ordering kiosks in app and over the phone, enabling the restaurants to create efficiencies in order taking at a time when many are tackling rising food costs staffing shortages of supply chain issues and other headwinds.

Voice enabled food is particularly challenging requiring specialized speech recognition and complex natural language understanding is match perfectly with our key differentiators.

We are excited as we move forward in two dozen on 23.

Because we expect to continue to our customers and partners and deliver voice AI technology to some of the most well known brand in the world, we aimed to power billions of devices and services and we already voice enabled meaningful cards Tvs mobile devices and restaurants on a global scale. Thanks to our expansive set of language.

And while we are excited about what we have built at compounds and the new opportunities. We have realized these nice to see that this success is also being recognized by the industry recently have been named a speech industry are working there and we were also named as one of the world's top 10 disruptive AI companies by AI magazine. In addition can have a restaurant has been named.

The winners of the National Restaurant Association Smart Innovation Award for Foodservice after only a short period gain market months.

There is undoubtedly momentum building behind AI, our company in our category the convergence heightened market demand for conversational AI and the technological readiness for our AI powered solutions has positioned us at a critical and very exciting inflection 0.1, we are prime to take advantage of it.

In closing these launches townhouse initial platform includes <unk> 16, we have radically development globally is to reach the 25 languages in selected by 'twenty card brand and created over 100 branded assistance across numerous brands on languages.

We continue to scale into major enterprises, including Honda Kia Genesis, Mercedes Benz Spelunker, Dodge Chrysler Harman Towson square LG Vizio snap Pandora and many others. There is tremendous opportunity in itself to expand within these existing customers, but we're also making meaningful progress in expanding our addressable.

As demonstrated depend on for restaurant and customer service.

And with recent product launches such as dynamic interaction for customer service and your.

You are confident in our ability to both grow within our existing global adjacent market and expand into new ones.

We are in a unique position to maintain our leadership in voice enabled AI technology and felt extremely difficult problems, we got breakthrough convention for our customers and partners.

Pleased to have ended the year at the high end of our guidance. Despite the macroeconomic conditions that worsened throughout the year, you remain agile and focused and our confidence to grow that business at approximately 50% interest in 'twenty three.

With that I will now turn the call over to the cash we talk about our financial performance for the quarter.

Thank you, Kevin and good afternoon, everyone.

2022 was our first fiscal year in the public markets a.

A year when the IPO market stalled higher interest rates third investors towards value and sentiment shifted away from disruptive high growth technology companies such as ourselves.

Nonetheless, we adjusted thought harder aggressively.

Aggressively took actions and set ourselves up to serve the rapidly increasing demand for our products and a much stronger financial footing.

Artificial intelligence is fundamentally about making technology more humanlike it sound down we do that by making conversations with machines more natural and seamless and the demand for that has never been stronger.

Large language models generative AI, the pervasive pervasiveness of chatbot or another thing entirely new use cases every day.

The opportunity set and adoption curves will accelerate rapidly as.

As Kevin indicated our time is now.

I'll dive deeper into expectations for 2023, shortly let me first review our 2022 results.

We continue to expand our voice enabled ecosystem had strong growth and deliver full year revenue at the high end of our guidance range.

The volatile macro backdrop, we've now outperformed our publicly stated full year outlooks for the past few years. The foundation for this consistent over achievement versus our expectations is rooted in strong customer engagement and sound execution that should only further improve from here.

Our cumulative bookings backlog establishes that foundation.

We closed the year with $332 million.

Representing a year over year growth of 59%.

The contracts underlying our bookings backlog now range from one year to more than nine years with the roughly six and a half year weighted average contract length.

During the year, we saw meaningful lengthening in customer contracts, which demonstrates the deepening strategic partnerships and validates the value we continue to create.

Our business model is grounded in the three pillar revenue framework.

Hello, Unrepresented voice enabled products, where we receive royalties.

Pillar two represented voice enabled services generally under monthly subscription contracts.

And then we bring pillar, one and two together into pillar III monetization.

As we have discussed previously the bulk of our current business and backlog is in tier one and then 2020 to be scaled into millions of new cars and devices.

This pillar we are done.

Pending our offering across new unit and adding more features to the existing ones to expand revenue per unit.

We can scale with existing customers and we are constantly adding new ones.

In automotive for example, we saw more than three X growth in EMEA or new unit production in 2022 and unit price expansion of more than 20%.

And in Q4, we added another three brands to our ever growing list.

Okay.

As we have discussed previously growing our pillar two voice enabled services is a key focus area, starting with AI enabled customer services for restaurants.

There's massive demand and one advantage here is the pace at which we can scale.

Because of the much shorter sales cycles and activation timeline.

For several months in and are qualified advanced pipeline of stores is now well into the 1000 and we are rapidly enhancing product features to extend our reach to even more brands and locations.

The recent advances with large language models only accelerates our excitement around the broader customer service opportunity in this pillar <unk>.

For packaged offerings and technologically advanced business inquiry voice AI solutions are perfectly suited to extend our reach to a multitude of business.

Businesses and industries.

There is tremendous value to unlock for customers.

Let me now get specific on our financial results for the fourth quarter and full year.

In Q4, we generated $9 5 million in revenue of 84% year over year.

For the full year, our revenue was $31 1 million and was predominantly driven by product royalties with an increasing contribution from <unk>.

Subscription services throughout the year.

Our product royalty revenue increased primarily due to strong customer momentum and a number of large edge deals, where we received multiyear minimum guarantee commitments.

Our edge solutions operate without internet connectivity or hosting requirements. So our performance obligations are fulfilled when we deliver the software.

Our long term commitments demonstrate the continued strong partnerships, we have developed and a continued share gains we are experiencing.

Foreign exchange also had an impact on our revenue our full year revenue growth rate would have been roughly two percentage points higher without this impact.

In Q4, our gross margin improved to 71% up from 67% in the prior year quarter, which was largely driven by the expanding scale of our business.

Cost of revenue for the quarter was $2 $8 million up 61% from the prior year.

The majority of our cost of revenue includes datacenter costs supporting our customer production environment.

We completed the migration of our cloud spend to Oracle in Q4 2022.

As we look forward there are some on prem activities that relate to the cloud, helping us continue to drive gross margin expansion along with the anticipated benefits of further scale.

Okay.

Moving on to operating expenses.

R&D has been the key pillar of this company as we built our voice AI platform and deep patent portfolio, well over 260 filed and pending.

In Q4, R&D was $21 5 million up 32% year over year.

We continue to invest in R&D to ensure we remain at the forefront of innovation in AI and machine learning, while also helping to develop and scale, our cloud offerings and other products and services.

In 2022, we ramped up our sales and marketing investments in both people and technology to accelerate growth, particularly in pillar two.

We have increased focus on digital marketing lead generation and customer acquisition, both direct and through channel partners.

In Q4 sales and marketing expenses were $6 7 million, a 587% year over year off a small prior year base with.

With our organizational shifts in 2023, we expect this expense item to benefit from greater focus.

G&A expenses were $7 2 million in Q4 up 41% year over year, which reflects investments across the global support functions of finance legal facilities and human resources at.

The increases were largely a result of ensuring our G&A functions delivered on the requirements of a newly public company.

Across all operating expenses noncash employee stock compensation was $9 3 million in Q4, we expect the ongoing quarterly stock comp expense to meaningfully reduce in 2023 post our recent restructuring.

Our operating loss of $28 8 million in Q4, and adjusted EBITDA, which excludes the noncash charges of stock compensation and depreciation and amortization and other non operating activities was a loss of $18 6 million.

Net loss per share in Q4 was 15 <unk> compared to a net loss of <unk> 32 in the prior year period.

Full year for the full year net loss per share was <unk> 83, compared to a net loss of $1 18 in the prior year.

Under the capital structure.

Our cash position at year end was $9 2 million.

In January we successfully raised $25 million in preferred equity our previously.

We announced committed equity line of credit also became effective giving us additional access to capital.

In addition, as we announced concurrent concurrently with our preferred rates, we are in process of refinancing our existing debt.

All in our balance sheet has strengthened meaningfully and we have a fully funded business plan through and beyond the point of are becoming profitable.

With that.

I'll move on to guidance.

Earlier this year, we announced restructuring actions that were necessary to rightsize, our cost structure impacting both people and discretionary spend.

Such decisions are never easy, but the actions have enabled us to accelerate our path to profitability without materially impacting our ability to execute our business plan effectively.

We expect these cost reductions to result in operating cost savings of approximately $60 million in 2023 as compared to 2022.

We expect revenue to grow approximately 50% in 2023, and we now expect to be adjusted EBITDA positive in Q4 of this year setting the stage for sustained long term profitable growth as we enter 2024.

Okay.

Let me double click a bit on these expectations.

First.

The $332 million of cumulative bookings backlog that I noted earlier gives us high confidence on revenue that will either automatically roll into the P&L in accordance with software revenue recognition guidance or as a result of expected customer unit volume upon which we generate royalty revenue streams.

In addition, we expect that somehow for restaurants will provide a meaningful contribution to revenue and grow at an accelerated rate as we move through the year.

Okay.

It is important to note that sound down for restaurants has had only a minimal contribution to our revenue up to this point, but the underlying customer foundation pipeline and activation of stores is building rapidly.

It's also important to note that this vertical has a very attractive financial profile with more predictable revenue streams, better scalability, leading to more favorable operating margin and the SaaS conversion of initial customer context cash flow.

We are enthusiastic about the momentum we continue to see from customers and how our team is capitalizing on this tremendous opportunity.

Therefore overall in 2023, we expect that revenue will be in the range of $43 million and $50 million.

We expect this revenue will build through the year with each quarter larger than the last due to seasonality of pillar, one businesses and the scaling of restaurants.

Our Q1 results will also be impacted by the restructuring efforts that we continue to finalize.

Last year approximately two thirds of our revenue was recognized in the second half of the year and we expect to see a similar trend for this year.

Okay.

To summarize.

We have taken the important steps to set us up for long term success.

While our progress will not always be linear we are building, a strong and sustainable business model and driving growth with a clear path to profitability.

Market momentum Israel.

Customer traction is strong and we are extremely excited about our path forward.

Thank you.

We'll now move to Q&A.

Thank you as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

One moment, while we compile the Q&A roster.

Yeah.

And today's first question will come from the line of Mike Latimore with Northland. Please go ahead.

Yeah.

Alright, great. Thank you congrats on the excellent results this year.

Thanks, Mike.

Hello.

A lot of interesting developments obviously.

I guess first on the restaurant vertical you're seeing.

Fairly positive about that vertical I guess can you just give a little more color there.

I mean, how many restaurants are you currently deployed at when you talk about pipeline.

That business, that's about to be the client or is that a business that you do.

<unk>.

We'll need to win.

And then I guess also just seems like.

This would be applicable to a very large chains are there any large restaurant chains that are rolling yourselves.

Sure Mike I can start.

So a couple of points.

Alluded to.

The pipeline in my prepared remarks, I mean generally.

We obviously, we have a lot of conversations going on and we sort of have an initial pipeline and then we kind of entered into our CRM systems. When it's in a more advanced stage. So qualified leads that we really characterizing what I was referencing are ones, where they're deep conversations going on with decision makers at the restaurants, where.

Where there's clear line of sight to to a significant opportunity whether as its small and medium enterprises.

One is a single digit level locations and the enterprise side, they could be tens hundreds plus and we definitely have a suite of.

Both small medium mid market and enterprise level customers that have hundreds of stores. We've previously mentioned <unk> as an example.

Yes.

China has over 350 stores around the nation.

We're activating and live in several of those and scaling.

I would say that.

Terms of the number I mentioned thousands of advanced stage pipeline. So those are the ones that are not yet paying us monthly feed other pipelines. So that means they are they are not yet in but those are late stage conversation.

In many cases, what happens is we kind of get.

Late stage conversation with it with us.

I would say a pizza restaurant and there are certain features that are assets that they need.

Maybe they need a customization of doing half this half that and that's a feature that we developed so and a lot of cases theres really active engagement. We may just need to add some features and functionality.

We have.

Hundreds of restaurants signed up already so beyond the pipeline stage that are operating.

And we're quickly scaling those so as I mentioned in the prepared remarks, the time from sort of initial conversation too.

Two.

<unk> cash flow or monthly recurring revenue and the case for us.

It can be very rapid and especially when you get into restaurants that have multiple stores because once you ingest that menu upfront in your customer sort of developed the capability and the voice moving to restaurant number two or three is very very fast.

Some cases, if it's more on the drive thru feature you might have some acoustic things do you have to figure out, but generally, especially for foreigner and you don't have any of those complexities of traffic or or outside noise and so it could be much more rapid.

I rambled, a little bit there, so maybe I'll pause and.

Is that kind of stuff.

Question, Yes, that's good.

Good context and then.

On the chat AI service you mentioned.

Is that both a direct to consumer.

Business enabler type of service or how are you thinking about kind of the go to market there.

Yes, it will be both.

The offer that to our existing customers and the economy and our teammates here at <unk> and so on.

And somehow.

Historically.

Direct to consumer applications and products and.

Our existing application has received.

Over 300 million downloads. So that's something that is part of our DNA are really good at it and it's a good moment to take advantage of that experience.

Great and just last one.

Can you provide a little more color on your activities with Qualcomm that something like that.

Important partner that you announced last year, maybe just a little bit more.

For how that partnership is going.

Yes. So look you had you had a really good demonstration on you had a joint <unk> Snapdragon summits.

A few months ago. So they also showcased at CES.

So they are.

Basically bundling our voice AI solution into their chipset and.

They can.

Basically be our channel partner and sell it to their customers.

Behalf.

The combination of theirs.

Chipsets, and therefore technologies support breadth and technologies and our wholesale acquisition. So it's a very meaningful partnership.

Okay.

Thank you.

Thanks, Mike.

Thank you as a reminder, if you would like to ask a question. Please press Star 111 moment, our next question.

And that will come from the line of Brett Knoblauch with Cantor Fitzgerald. Your line is open.

Hi, guys. Thanks for taking my question.

First I guess is on on the profitability got it and then I guess, taking a lot of action to kind of.

Improved profitability over last couple of months.

Assumptions do you have to get to kind of parse adjusted EBIT in the fourth quarter I guess, what should we be expecting from a gross margin front absolute opex basis. If we look at the run rate exiting the quarter should we expect that to decline.

Call it $10 million on a run rate basis, or what should we be thinking for that.

Sure Brett.

So.

First I'll start at the top so we guided.

50% growth in sort of highlighted that that is.

Going to be backend loaded.

So.

We are expecting to ramp through the year part of that is.

Is that just seasonality that comes with the pillar, one and predominantly auto business, but.

The number of people I should say auto and devices. So there is seasonality associated with like TV sales in France as well.

But then also with our pillar two and restaurants as we continue to scale gain traction and that builds on a monthly subscription basis that will compound in a positive way that that should go through the year.

So there's a bit of that seasonality.

And then with margins.

We're not really guiding margins, but I would say that just overall profile and long term, we definitely think the levels the 70% plus level that we've been delivering this year is very achievable and very scalable as you go into.

Our diversification of products from cloud to edge that we've seen this year that does have favorable elements to gross margin I mentioned in my prepared remarks.

Through the year, we were migrating cloud and we had that sort of impact a little bit of a.

Yeah.

Okay.

That are a drag in 2020 two's margin that is now kind of completed and then also there is some other actions, we're taking to drive efficiencies and margin and then also just with scale.

But with respect to cloud versus add some of the edge solutions. They tend to have favorable gross margin profile. So as you put it all together.

We expect gross margin to continue to be in the zone and positive to what it was in 2022.

And then on the Opex line I mentioned.

On a full year basis.

Yes.

60 million of savings and the first quarter will be we will have some of the restructuring cost impact in it but on an ongoing and we're still for some of our international countries. As it just takes time to kind of work through that but certainly by the end of the year.

Worked through entirely in fact in Q1 was by the time, we were down in Q1, we should be largely through all of the restructuring activity. So we should start to realize those savings in opex.

And yes, I mean as you get to the full year Q4.

Estimation I think when you look at our Opex items, R&D sales and marketing G&A, where we're taking and the actions we took were ignored.

40 plus percent reductions on.

Both head count and discretionary.

You can kind of do that.

Matt the other thing I'd say.

And I mentioned this in the prepared remarks, and passing as well around the stock comp.

Elements, although that doesn't affect adjusted EBITDA, but that also would you expect to come down so.

Yes.

The composition of what gives us confidence that we will achieve adjusted EBITDA profitability in Q4.

Got it that's helpful.

<unk>.

And then I guess on the cumulative pump bookings backlog I guess the grew 10% sequentially can you talk about what kind of specific relationships or customers really drove the kind of core.

Peter over quarter growth there.

Yes.

Okay fantastic.

Chris Rock.

One thing Thats unique about our kind of a restaurant.

Worked with single location restaurants.

There are a few players that are in this space because of the huge amount of Onboarding requirements. You can take them months to train a model for a new menu that can only go after.

Brands that have hundreds of locations for example, but we could actually worked with a restaurant that has a single location because our on boarding these automated we can ingest the menu.

Even if they have customer category under.

Menu rfps recognition automatically get trained and enhance to recognize those that may have complex.

Menu structure all of that can be automated.

So that's a very green area for us to go after the long tail and.

That's the first part is very key because they have.

They opened the door and the patent.

Restaurants for us and the partner with their sales team as well so.

We have a large number of salespeople that can sell our solution on our behalf.

Perfect that makes sense and I guess I could have one follow up the new kind of generative AI chat product.

Is this going to be more like that.

But is it going be more voice, driven and I guess, how do you plan on monetizing that solution.

And maybe the timeline for when you expect monetization to occur is this something that we should expect to contribute to revenues this year.

Yes, so the demo hardware voice voice based so there's a user we're talking to our mobile app.

Our response.

And we believe voice really unlocks the power opportunities AI.

Lightning is not us.

Accompanying on voice, because it can be faster and interact more freely.

So it will be both base there'll be it takes place.

Input as well, but of course, we think will be the prominent way.

One of our Differentiators in Britain.

ASR.

And.

I really think this is the first time.

We can deliver.

A voice assistant to the end users that they've been wanting for more than a decade. So if you remember when apple not theory more than 10 years ago. There were all these ads on TV that maybe the promise that he can go on and have opened up the conversation and become active users love the idea of a rush to it and it quickly became disappointed because.

He was able to on the hands of a few things like ask a question about whether maybe your stock prices and play music.

They can put timers, though it was still better than not having it so.

People use it and adopt it but it wasn't what we had imagined and now more than a decade later.

Your final you're able to deliver that experience.

That users have wanted to know they want it because <unk> been in this business for a long time for many years and we know thats what the users want.

And.

Very few companies can take advantage of this moment because.

Just having a voice interface with large language model is not enough because maybe you can ask them from.

One question to Roger <unk> or.

Tom Long question, but if you ask them questions about real time search queries like how is the weather or sports scores and stock prices or studying primarily cutting contact sending messages of sudden calendar navigating through restaurants or addresses they stay that dose.

So.

To really deliver this ultimate at December 31st need to have both used to have.

Large language model and we need to have.

The existing assistant domains that people demand with a voice interface on top of it and Theres only a handful of companies that can take advantage of the situation.

Amit.

Agile.

We are able to move really fast.

Stay tuned for announcements later this month with the questions. The rest of the questions. You asked we will after the nine months.

And Greg the other thing just for us the generative AI is certainly there.

The demo we shared but we also.

Talked about dynamic interaction and we previously announced.

A dynamic interaction sort of next generation for auto and there is a kind of interest there.

In this space, we think certainly voice is an important modality, but that's sort of a multimodal is is just as exciting sometimes voice input place output makes a lot of sense, sometimes its voice and touch input and.

Audio and visual output and that's sort of what our dynamic interaction capability allows us to do.

Real time.

And Thats really where the future is going is just growing very rapidly and so there is a ton of application use cases that we're very excited about and the monetization will come.

With the near term.

Perfect. Thanks, guys really appreciate it.

Okay.

Thanks, Brian .

Thank you all for participating in today's question and answer session I would now like to turn the call back over to Mr. Kayvon Malhotra for any closing remarks.

Thank you.

When we found a townhouse and we have the vision to see voice enabled voice.

<unk> time, but.

But we couldnt have fully imagine the <unk> environment AI innovation that we find ourselves in today.

Our conversational AI comes to the suites prominent across industries.

We're confident that as the only independent cross industry voice VR platform.

We're in a strong position to deliver best in class technology to even more global brands.

We continue to execute and to listen I'm 22 was a pivotal year for introducing new products and building new partnerships and you're it's kind of an adviser we are where we are and where you are looking forward to a strong suezmax 23.

With that I. Thank you for joining us on the call today and look forward to speaking with you when we report our first quarter through the equity to results. Thank you.

Thank you all for participating. This concludes today's program you may now disconnect.

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The conference will begin shortly to raise and lower Johan during Q&A you can dial one one.

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Good day and welcome to the Sound Town Q4, 2022 earnings Conference call. At this time all participants are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone you will then hear in auto.

<unk> message advising that your hand is right to withdraw your question Press Star. One again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your Speaker, Mr. Scott Smith head of Investor Relations. Please go ahead.

Great. Thank you Sherry hi, everyone. Good afternoon, and thank you for joining our fourth quarter and full year 2022 conference call.

Today is our CEO kayvon merger, and our CFO and attest Shawn Moon.

I'll begin with some short remarks before moving to Q&A.

I'd also like to remind everyone that we will be making forward looking statements on this call.

Actual results could differ materially from those suggested by our forward looking statements. Please refer to our filings with the SEC for a detailed discussion.

The risks and uncertainties that could affect our business and those 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 .

I'll also note that the forward looking statements on this call are based on information available to us as of today's date we.

We disclaim any obligation to update any forward looking statements, except as required by law.

Finally, this call is being audio webcast in its entirety on our Investor Relations website, an audio replay will be available shortly following today's call.

With that I'd like to turn the call over to our CEO Kayvon Mahatir. Please go ahead Kevin.

Thank you Scott and thank you to everyone for joining the call today.

We are happy to share with you the results and highlights of our first fiscal year as a public company.

We closed out we had a strong fourth quarter.

Our cumulative bookings backlog increased to $332 million at year end.

And our full year 2022 revenue was $31 1 million.

Both of these key values exceeded targets, we set and communicated into 2021.

Before we went public and relevant for the challenging market conditions began.

Somehow user queries using cloud connectivity were also a highlight growing over 85% in 2022 compared to 21 <unk>.

Resulting in an annual run rate of approximately $2 2 billion.

In Q4, our bookings increased 10% quarter over quarter, and our revenue was $9 5 million up 84% year over year.

Before diving back and I want to take a moment to reflect on how we got here and share our view of the latest trends and momentum in AI.

We started townhouse and Stanford University dorm room with the vision that conversational AI will be the next major destruction and computing.

We knew our AI present, what long term and worked for over a decade to build and own the entire technology stack that is this platform market.

We'd be globalized, our technology to over 25 languages and are starting the year with $332 million in bookings from our customers.

And now we power tens of millions of devices and services around the world, enabling people to more seamlessly interact and exchange more accessible interconnected world.

With the recent popularization opportunities and large language model, we view 2023, and an inflection point of conversational AI with a clear intersection between technology readiness and subsequent demand and adoption.

These restrictions are rare and compound is in a unique position to create tremendous value.

We believe the impact of currency of AI on large language model to the field conversational AI is similar to the impact of deep learning deep neural networks to machine learning.

Better quality models can be created faster and with fewer tedious engineering requirements.

And we view the market impact of this could be transformative similar to the mobile ecosystem disruption over the last decade.

First mover will create tremendous value.

Now moving faster does not mean, just opening detects our voice interface to a large language model plus.

Plus models predicted danger of providing unpredictable stand an incorrect responses phenomenon.

Listen nations.

The underlying principle the fan out technology are addressing these shortcomings by combining software engineering and machine learning.

For the first time, we are unveiling our novel approach using our proprietary technologies called Thailand and China.

Thailand, our conversational AI language user stop engineering to efficiently develop knowledge domains, while cognex or conversational AI network uses machine learning to augment and enhance the LMR capabilities.

Cognex can connect whose time has internal janssen AI models as well as external model such as opening GPT on taxes.

Others.

Ultimately chilon controls and arbitrate the results can provide the best response to the user.

Let me demonstrate.

I work at downtown.

Okay, I will remember where you work it.

Xiaomi fancy restaurants, near my work that except reservations.

There are several restaurants near downtown sorted by highest price that except reservations.

Is it appropriate to bring a bottle of wine so a fancy restaurant.

It depends on the restaurant's policy regarding bringing outside alcohol, some restaurants allow customers to bring their own bottle of wine, but charter corkage fee, while others do not allow it at all you may want to check the restaurant's website, where call ahead to find out their policy is.

There is a corkage fee what is the typical charge.

The court could speak and vary depending on the restaurant, but it typically ranges from $15 to $50 per bottle. Some restaurants may have different fees, depending on the size of a bottle or the type of line, it's best to check with the restaurant beforehand to avoid any surprises on the bill.

Okay. So if the results by highest price and only show the ones that have more than four stars on yelp and have outdoor seating.

Here are several restaurants with more than voice starts daunted by highest price than about Dorothy team.

This is the first one out parking flemings Prime Steakhouse and Lindbergh Langbein located at 2762, obviously, right and Santa Clara with parking.

Food doesn't have it as.

The wine bar, a steakhouse and seafood restaurant.

I have a question is it bad for you to have that kind of food too often.

Consuming high amounts of Red meat seafood can have negative health consequences, if done on a regular basis. However, it is okay to windows and leases every once in a while as part of a balanced diet. It is important you can see on the variety of foods and moderation to maintain a healthy lifestyle, how long does it take to drive from my work to there.

We'll take approximately seven minutes to drive two three miles from downtown declining Prime Steakhouse and wine bar 2762, Augustine drive Santa Clara.

When at Sunset Tonight, and will it be rainy Tonight at seven PM near my work.

That will be at 605 PM on Sunday March five 2023 now it is a forecast of rain on March five near downtown.

Send a message to $65 505. Once you once you were on for dinner Tonight at seven P. M. Our book of Fancy restaurant see you then.

Your methods.

Can you recommend some gift ideas for a 10 year anniversary dinner.

Consider creating a scrapbook of your favorite memories together you can also read heartfelt letter expressing your love and appreciation can you write me a four line poem for a 10 year anniversary.

Sure Here's a quick one line poem 10 years have come and gone, but my love for you still sang Don I'm Grateful for every moment, we shared and look forward to many more years to be here.

That was great. Thank you it is my pleasure.

What you just heard was a sneak preview of a new product called <unk> AI.

With Usher in a new phase of voice enabled conversational AI that used to only exist in science fiction.

By combining the power of our software engineering and machine learning degenerative AI, we can finally deliver the digital assistant experience that users have been desiring for decades. Please stay tuned for our acoustic launch announcement there at this point.

Let's review our expected business impact of this change as it relates to our three pillar strategy.

In our pillar, one Ravi power devices and cars more users will use their assistant more often.

Users will no longer limit their interactions to simple control commands cutting timer and playing music. They can have lengthy useful conversation with their assistance.

This increase in usage to translate to an increase in revenue and licensing fees for sanmina.

Combined with our breakthrough dynamic interaction, which I'll talk about shortly.

We'll further strengthen our position as a leader in voice interfaces by creating more interaction capabilities for users of our products.

In addition, more product creators both demand this feature and this increasing adoption will also increase.

The revenue profile now.

In our pillar two more task can be automated and in general customer service an area of important focus first townhome will be transformed with AIB not just cheaper documents, but also better than humans.

By incorporating the possibilities that are already proven.

<unk> language models into customer service applications, we envision that end users will ultimately prefer to speak on AI agent rather than a human representative when talking to our business.

We expect our expansion to new customer service vertical accelerates and ultimately AI enabled customer service will be as necessary to every business as electricity.

Downtown is in a unique position to take advantage of this rare moment due to our advanced and comprehensive technologies mature product and existing customer base.

In our view this can't be done at the site project. It can be achieved by simply attributing a few external API.

And creating the necessary technologies to winning conversational AI would be costly and inefficient and slow.

By owning all the core pieces of the engine, we have a distinct competitive advantage.

Innovation has been a core part of our DNA last November we unveiled a new technology called dynamic interaction.

Somehow dynamic interaction is a multimodal full-duplex interface with real time continuous audio visual feedback and response to both audio and cost input with Norway for Aqua positive or current thinking you.

<unk> ignored off topic speech mixed Brexit suggestions to the user and intelligence to decide when to use audio or visual output.

We believe dynamic interaction is a category defining breakthrough that will raise the bar for human computer interaction just like how apples multitask technology need <unk> passion for interfaces in 2007.

By combining dynamic interaction regenerative AI, we expect to achieve our ultimate vision of making computers better than human language understanding and more human and debated interact and respond.

Given our unique positioning and strength the growing demand we are seeing for our independent AI powered product and services will only get stronger as we execute on more opportunities and with more customers.

In 2022, we made great progress in forging and extending significant relationships and partnerships with a number of new brands with our vertical agnostic technology.

In the past year, <unk> has announced a number of key partnerships and integrations, including an agreement with Qualcomm to bring <unk> Snapdragon platform.

New deal and integrations with Vizio square toast, and Oracle and an expanded partnership with snap.

<unk> also signed a multi year agreement with Hyundai announced an expansion of our philosophy relationship in Europe , as well as a series of collaborations and automotive space, including with LG, Harman and PCA and PMI.

Okay.

In automotive, we now work with 20 brands and impressive number of EBIT. We went from zero to 20 grant in just a few years.

While we continue to add new brands in our portfolio. We are also able to expand with our existing brand globally are supporting new languages, newer again, adding edge and cloud and new services.

We are also working with many world class device manufacturer ranging from smart appliances, Tvs and in multiple areas within the Iot space.

We continue to expand within our existing customers and we are excited about the companies in our pipeline.

With more than 75 billion connected devices expected globally by 2025, we see a tremendous opportunity here for our voice AI powered product evolution.

Okay.

Last year, our voice AI technology was made generally available for customer service starting to compound for restaurants missing our entry into this massive rapidly evolving industry.

Since launched we have added restaurant customers across North America, and continue to forge relationships with important partners, including companies like Oracle score and with more to come.

Our family and for restaurant <unk> allows restaurants to automate the ordinary profit at drive throughs ordering kiosks in app and over the phone, enabling customer restaurants to create efficiencies in order taking at a time when many are tackling right input costs staffing shortages of supply chain issues and other headwinds.

Voice enabled food order is particularly challenging requiring specialized each recognition and complex natural language understanding is match perfectly with our key differentiators.

We are excited as we move forward in 2023.

Because we expect to continue to our customers and partners and deliver voice AI technology to some of the most well known brands in the world, we aimed to power billions of devices and services and we already voice enabled new cars Tvs mobile App Iot devices and restaurants on a global scale. Thanks of our expansive set of language.

And while we are excited about what we have built a compound and the new opportunities you have realized these nice to see that this factor is also being recognized by the industry recently have been named of each industry Award winner and we were also named as one of the world's top 10 destructive AI accompanied by AI magazine. In addition can have a restaurant has been named.

The winners of the National Restaurant Association Smart Innovation Award for Foodservice after only a short period since market launch.

There is undoubtedly momentum building behind AI, our company in our category, the convergence or heightened market demand for conversational AI and the technological readiness for our AI powered solutions has positioned us at a critical and very exciting inflection 0.1, we are prime to take advantage of it.

In closing with launches townhouse initial both AI platform in 2016, we have radically evolves. It globally is to reach 25 languages in selected by 'twenty card brand and created over 100 branded assistance across numerous brands on languages.

We continue to scale into major enterprises, including Honda Kia Genesis Mercedes Benz Spelunker Dodge Chrysler Harman total square LG Vizio snap Pandora and many others. There is tremendous opportunity in itself to expand within these existing customer, but you're also making meaningful progress in expanding our addressable.

As demonstrated depend on for restaurant and customer service.

And with recent product launches such as Panama interaction for customer service and you are confident in our ability to both grow within our existing global additive market and expand into new ones.

We are in a unique position to maintain our leadership in voice.

<unk> AI technology and felt extremely difficult problems, we got breakthrough convention for our customers and partners you.

We are pleased to have ended the year at the high end of our guidance. Despite the macroeconomic conditions that worsened throughout the year.

Remaining agile and focused and our confidence to grow the business at approximately 50% includes about 23.

With that I will now turn the call over to Nick to talk about our financial performance for the quarter.

Thank you, Kevin and good afternoon, everyone.

2022 was our first fiscal year on the public markets.

A year when the IPO market stalled higher interest rates third investors towards value and sentiment shifted away from disruptive high growth technology companies such as ourselves.

Nevertheless, we adjusted thought harder aggressively took actions and set ourselves up to serve the rapidly increasing demand for our products and on much stronger financial footing.

Artificial intelligence is fundamentally about making technology more human like it sound down we do that by making conversations with machines more natural and seamless and the demand for that has never been stronger larger.

<unk> language models generative AI the pervasive pervasiveness of Chatbot are unearthing entirely new use cases every day.

The opportunity set and adoption curves will accelerate rapidly as.

Is kayvon indicated our time is now.

I'll dive deeper into expectations for 2023, shortly let me first review our 2022 results.

We continue to expand our voice enabled ecosystem had strong growth and deliver full year revenue at the high end of our guidance range.

Despite the volatile macro backdrop, we've now outperformed our publicly stated full year outlooks for the past few years. The foundation for this consistent over achievement versus our expectations is rooted in strong customer engagement and sound execution that should only further improve from here.

Our cumulative bookings backlog establishes that foundation.

We closed the year with $332 million.

Representing a year over year growth of 59%.

The contracts underlying our bookings backlog now range from one year to more than nine years with the roughly $6 five year weighted average contract length.

During the year, we saw meaningful lengthening in customer contracts, which demonstrates the deepening strategic partnerships and validates the value we continue to create.

Our business model is grounded in the three pillar revenue framework.

Hello, one represents voice enabled products, where we receive royalties.

Pillar two represents voice enabled services generally under monthly subscription contracts.

And then we bring pillar, one and two together into pillar III monetization.

Okay.

As we have discussed previously the bulk of our current business and backlog is in tier one and in 2020 to be scaled into millions of new cars and devices.

And this pillar we are.

Sending our offering across new unit and adding more features to existing ones to expand revenue per unit.

We can scale with existing customers and we are constantly adding new ones.

In automotive for example, we saw more than three X growth in EMEA or new unit production in 2022 and unit price expansion of more than 20%.

And in Q4, we added another three brands to our ever growing list.

Okay.

As we have discussed previously growing our pillar two voice enabled services is a key focus area, starting with AI enabled customer services for restaurants.

There is massive demand and one advantage here is the pace at which we can scale.

Because of the much shorter sales cycles and activation timeline.

Just several months in and are qualified advanced pipeline of stores is now well into the thousands and we are rapidly enhancing product features to extend our reach to even more brands and locations.

The recent advances with large language models only accelerates our excitement around the broader customer service opportunity in this pillar our.

Packaged offerings and technologically advanced business inquiry voice AI solutions are perfectly suited to extend our reach to a multitude of business.

Businesses and industries.

There is tremendous value to unlock for customers.

Let me now get specific on our financial results for the fourth quarter and full year.

In Q4, we generated $9 5 million in revenue up 84% year over year.

For the full year, our revenue was $31 1 million and was predominantly driven by product royalties with an increasing contribution from.

Subscription services throughout the year.

Our product royalty revenue increased primarily due to strong customer momentum and a number of large edge deals, where we received multiyear minimum guarantee commitments.

Our edge solutions operate without internet connectivity are hosting requirements. So our performance obligations are fulfilled when we deliver the software.

Our long term commitments demonstrate the continued strong partnerships, we have developed and a continued share gains we are experiencing.

Foreign exchange also had an impact on our revenue our full year revenue growth rate would have been roughly two percentage points higher without this impact.

In Q4, our gross margin improved to 71% up from 67% in the prior year quarter, which was largely driven by the expanding scale of our business.

Cost of revenue for the quarter was $2 8 million of 61% from the prior year.

The majority of our cost of revenue includes datacenter costs supporting our customer production environment.

We completed the migration of our cloud spend to Oracle in Q4 2022.

As we look forward there are some on prem activities that relate to the cloud, helping us continue to drive gross margin expansion, along with the anticipated benefits and further scale.

Okay.

Moving on to operating expenses.

R&D has been the key pillar of this company as we built our voice AI platform and deep patent portfolio, well over 260 filed and pending.

In Q4, R&D was $21 5 million up 32% year over year.

We continue to invest in R&D to ensure we remain at the forefront of innovation in AI and machine learning, while also helping to develop and scale, our cloud offering and other products and services.

In 2022, we ramped up our sales and marketing investments in both people and technology to accelerate growth, particularly in pillar two.

We have increased focus on digital marketing lead generation and customer acquisition, both direct and through channel partners.

In Q4 sales and marketing expenses were $6 7 million, a 587% year over year off a small prior year base with.

With our organizational shifts in 2023, we expect this expense item to benefit from greater focus.

G&A expenses were $7 2 million in Q4 up 41% year over year, which reflects investments across the global support functions of finance legal facilities and human resources the.

The increases were largely a result of ensuring our G&A functions delivered on the requirements of a newly public company.

Across all operating expenses noncash employee stock compensation was $9 3 million in Q4, we expect the ongoing quarterly stock comp expense to meaningfully reduce in 2023 post our recent restructuring.

Our operating loss of $28 8 million in Q4, and adjusted EBITDA, which excludes the noncash charges of stock compensation and depreciation and amortization and other non operating activities was a loss of $18 6 million.

Net loss per share in Q4 was 15 <unk> compared to a net loss of 32 cents in the prior year period.

Full year for the full year net loss per share was <unk> 83, compared to a net loss of $1 18 in the prior year.

Under the capital structure.

Our cash position at year end was $9 2 million.

In January we successfully raised $25 million in preferred equity our previously announced committed equity line of credit also became effective giving us additional access to capital.

In addition, as we announced concurrent concurrently with our preferred rates, we are in process of refinancing our existing debt.

All in our balance sheet has strengthened meaningfully and we have a fully funded business plan through and beyond the point of becoming profitable.

With that.

I'll move on to guidance.

Okay.

Earlier this year, we announced restructuring actions that were necessary to right size, our cost structure impacting both people and discretionary spend.

Such decisions are never easy, but the actions have enabled us to accelerate our path to profitability without materially impacting our ability to execute our business plan effectively.

We expect these cost reductions to result in operating cost savings of approximately $60 million in 2023 as compared to 2022.

We expect revenue to grow approximately 50% in 2023, and we now expect to be adjusted EBITDA positive in Q4 of this year setting the stage for sustained long term profitable growth as we enter 2024.

Let me double click a bit on these expectations.

First.

The $332 million of cumulative bookings backlog that I noted earlier gives us high confidence on revenue that will either automatically roll into the P&L in accordance with software revenue recognition guidance or as a result of expected customer unit volume upon which we generate royalty revenue streams.

In addition, we expect that somehow for restaurants will provide a meaningful contribution to revenue and grow at an accelerated rate as we move through the year.

It is important to note that sound down for restaurants has had only a minimal contribution to our revenue up to this point, but the underlying customer foundation pipeline and activation of stores is building rapidly.

It's also important to note that this vertical has a very attractive financial profile with more predictable revenue streams, better scalability, leading to more favorable operating margin and a fast conversion of initial customer context cash flow.

We are enthusiastic about the momentum we continue to see from customers and how our team is capitalizing on this tremendous opportunity.

Therefore overall in 2023, we expect that revenue will be in the range of $43 million and $50 million.

We expect this revenue will build through the year with each quarter larger than the last due to seasonality of pillar, one businesses and the scaling of restaurants.

Our Q1 results will also be impacted by the restructuring efforts that we continue to finalize.

Last year approximately two thirds of our revenue was recognized in the second half of the year and we expect to see a similar trend for this year.

Okay.

To summarize.

We have taken the important steps to set us up for long term success.

While our progress will not always be linear we are building, a strong and sustainable business model and driving growth with a clear path to profitability.

Market momentum Israel customer traction is strong and we are extremely excited about our path forward.

Thank you and we will now move to Q&A.

Thank you as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

One moment, while we compile the Q&A roster.

Yeah.

And today's first question will come from the line of Mike Latimore with Northland. Please go ahead.

Yeah.

Alright, great. Thank you congrats on the excellent results this year.

Thanks, Mike.

Hello.

A lot of interesting developments obviously.

I guess first on the restaurant vertical you're seeing.

Fairly positive about that vertical I guess can you just give a little more color there.

I mean, how many restaurants are you currently deployed at when you talk about pipeline.

That business, that's about to be the client or is that business that you do.

<unk>.

We'll need to win.

And then I guess also just seems like.

This would be applicable to a very large chains are there any large restaurant chains that are rolling yourself.

Sure Mike.

<unk>.

So a couple of points.

Alluded to.

The pipeline in my prepared remarks, I mean generally.

Obviously, we have a lot of conversations going on and we sort of have an initial pipeline and then we kind of entered into our CRM systems. When it's in a more advanced stage. So qualified leads that we really characterizing what I was referencing are ones, where they're deep conversations going on with decision makers at the restaurants, where there's clear line of sight to two.

Significant opportunity, whether as its small and medium enterprises it could be one.

<unk> digit level locations and the enterprise side, they could be tens hundreds plus and we definitely have a suite of.

Small medium mid market and enterprise level customers that have hundreds of stores. We've previously mentioned light catheter as an example.

China has over 350 stores around the nation and.

We're activating and live in several of those and scaling.

I would say that.

The number I mentioned thousands of advanced stage pipeline. So they're the ones that are not yet paying us monthly feed other pipelines. So that means they are they are not yet in but those are late stage conversations.

In many cases, what happens is we kind of get a.

Late stage conversation with it with us.

I would say a pizza restaurant and there are certain features that a path that they need.

Maybe they need a customization of doing half this half that and that's a feature that we developed so and a lot of cases theres really active engagement. We may just need to add some features and functionality.

We have.

Hundreds of restaurants signed up already so beyond the pipeline stage that are operating.

And we're quickly scaling those so as I mentioned in the prepared remarks, the time from sort of initial conversation too.

Two.

<unk> cash flow or monthly recurring revenue and the case for us.

It can be very rapid and especially when you get into restaurants that have multiple stores because once you ingest that menu upfront in your customer sort of developed the capability and the voice moving to restaurant number two or three is very very fast.

Some cases, if it's more on the drive thru feature you might have some acoustic things that you have to figure out, but generally, especially performer and you don't have any of those complexities of traffic or or outside noise and so it could be much more rapid.

I rambled, a little bit there, so maybe I'll pause and.

Do you see that kind of expense.

Question, Yes, that's good.

And then.

On the chat AI service you mentioned.

Is that both a direct to consumer.

Business enabler type of service or how are you thinking about kind of the go to market there.

Yes.

The offer that to our existing customer and the car makers and our teammates here at <unk> and so on.

And somehow.

Historically.

Direct to consumer applications and products and.

Our existing applications have received.

Over 300 million downloads. So that's something that is part of our DNA are really good at it and it's a good moment because they've got a manager that experience.

Great and just last one.

Can you provide a little more color on your activities with Qualcomm that something like that.

Important partner that you announced last year, maybe just a little bit more.

Feel for how that partnership is going.

Yes. So look you had you had a really good demonstration on yet a joint demo either Snapdragon summit.

A few months ago. So they also showcased at CES.

So they are.

Basically bundling our voice AI solution into their chipsets and.

They can.

Basically the art channel partner and sell it to their customers on our behalf.

A combination there.

Chipsets and their voice technologies, supporting breath and technologies and our wholesale acquisition. So it's a very meaningful partnership.

Okay.

Thank you.

Thanks, Mike.

Thank you as a reminder, if you would like to ask a question. Please press star 111 moment for our next question.

And that will come from the line of Brett notebook with Cantor Fitzgerald. Your line is open.

Hi, guys. Thanks for taking my question.

First I guess is on on the profitability got it and then I guess, taking a lot of action to kind of.

Improved profitability over last couple of months.

Assumptions do you have to get to kind of parse adjusted EBIT in the fourth quarter I guess, what should we be expecting from a gross margin front.

Absolute opex basis, if we look at the run rate exiting the quarter should we expect that to decline.

Call it $10 million on a run rate basis, or what should we be thinking for that.

Okay.

Sure Brett.

So.

First I'll start at the top so we guided.

50% growth in sort of highlighted that that is.

Going to be backend loaded.

So.

We are expecting to ramp through the year part of that is.

Is that just seasonality that comes with the pillar, one and predominantly auto business, but.

The number of people I should say auto and devices. So there is seasonality associated with like TV sales and traffic as well.

But then also with our pillar two and restaurants as we continue to scale gain traction and that builds on a monthly subscription basis that will compound in a positive way that that should go through the year.

So there's a bit of that seasonality.

And then with margins.

We're not really guiding margins, but I would say that just overall profile and long term, we definitely think the levels the 70% plus level that we've been delivering this year is very achievable and very scalable as you go into.

Our diversification.

Occasion of products from cloud to edge that we've seen this year that does have favorable elements to gross margin I mentioned in my prepared remarks.

Well through the year, we were migrating cloud and we had that sort of impact a little bit of a.

No.

Okay.

Bit of a drag in 2020 two's margin that is now kind of completed and then also there is some other actions, we're taking to drive efficiencies and margin and then also just with scale.

But with respect to cloud versus add some of the edge solutions. They tend to have favorable gross margin profile. So as you put it all together.

We expect gross margin continued to be in the zone and positive to what it was in 2022.

And then on the Opex line I mentioned on.

On a full year basis.

Yes.

<unk> 60 million of savings and the first quarter will be we will have some of the restructuring cost impact in it but on an ongoing and we're still for some of our international countries. As it just takes time to kind of work through that but certainly by the end of the year. We will have worked through entirely in fact in Q1 by the time, we're done with Q1, we should be larger.

Do all of the restructuring activity. So we should start to realize those savings in opex.

And yes, I mean as you get to the full year Q4.

Estimation I think when you look at our Opex items, R&D sales and marketing G&A, where we're taking and the actions. We took were ignored the 40 plus percent reductions on both head count and discretionary you can kind of do the math. The other thing I'd say and I mentioned this in the prepared remarks and passing as well.

On the stock comp.

Elements, although that doesn't affect adjusted EBITDA, but that also would you expect to come down so.

So that's kind of the composition of what gives us confidence that we will achieve adjusted EBITDA profitability in Q4.

Got it no that's helpful.

And then I guess on the cumulative pump bookings backlog I guess the grew 10% sequentially can you talk about what kind of specific relationships or customers really drove the kind of quarter over quarter growth there.

Yes.

Okay.

Thanks Ross.

One thing Thats unique about our kind of a restaurant.

Worked with single location restaurants.

There are a few players that are in this space because of the huge amount of onboarding requirements you could take them.

Once to train a model for a new menu that can only go after.

Brands that have hundreds of locations for example, but we could actually worked with a restaurant that has a single location because our onboarding as automated we can ingest the menu.

Even if they have custom vocabulary under.

Menu RFP submission automatically get trained and <unk>.

Has to recognize those that may have complex menu.

Menu structure all of that can be automated.

So that's a very green area for us to go after the long tail and.

And towards the first part is very key because they have.

They opened the door to tens of thousands of.

Restaurants for us and the partner with their sales team as well so.

They have a large number of salespeople that can sell our solution on our behalf.

Okay.

Perfect that makes sense and I guess I could have one follow up the new kind of generative AI chat product.

Is this going to be more like a chat bot is going to be more voice driven and I guess, how do you plan on monetizing that solution and maybe the timeline for when you expect monetization to occur is this something that we should expect to contribute to revenues this year.

Yes.

Your hard work voice voice space. So there's a usual pattern to mobile app and the response.

And we believe voice really unlocks the power opportunities AI, so tightening is not us.

Accompanying on voice, because it can be faster and interact more freely.

So it will be both base there will be a tax play.

Input as well as on voice, we think will be the dominant way and that's one of our differentiators and bring our own.

ASR.

And.

I really think this is the first time.

We can deliver.

The voice assistant to the end users that they've been wanting for more than a decade. So if you remember when apple not theory more than 10 years ago. There were all these ads on TV.

Maybe the promise that we can go on and have opened up the conversation and become active users love the idea of a rush to it and it quickly became disappointed because he was able to only handle a few things like ask a question about whether maybe stock prices.

They can put timers, so it was still better than not having it Joe.

People use it and adopt it but it wasn't what we had imagined and now more than a decade later.

Your partner to able to deliver that experience.

That users have wanted to know they want it because <unk> been in this business for a long time for many years and we know thats what the users want.

And.

Very few companies can take advantage of this moment because Jeff.

Just having a voice interface, where large language model is not enough because maybe you can ask them one.

Question to Roger <unk> or.

Some long question, but if you ask them questions about real time search queries like how is the weather or sports scores and stock prices are steady, primarily causing contact sending messages offsetting calendar navigating through restaurants or addresses they stay that dose.

No.

To really deliver this ultimate at December 31st need to have but we used to have.

Large language model and we need to have.

The existing assistant domains that people demand with a voice interface on top of it.

Theres only a handful of companies that can take advantage of the situation and the most agile.

Because we are able to move through the hospital.

Stay tuned for announcements later this month with the question of the rest of the questions. You asked we will after it goes in R&R.

And Greg the other thing just.

For us the generative AI is certainly.

The demo we shared but we also.

You talked about dynamic interaction and we previously announced.

A dynamic interaction sort of next generation for auto and there is a kind of interest there.

In this space, we think certainly voice is an important modality, but that's sort of a multimodal is is just as exciting sometimes voice input place output makes a lot of sense, sometimes its voice and touch input and.

Audio and visual output and that's sort of what our dynamic interaction capability allows us to do real time.

And Thats really where the future is going is just growing very rapidly and so there is a ton of application use cases that we're very excited about and the monetization will come.

With those near term.

Perfect. Thanks, guys really appreciate it.

Okay.

Thanks, Brian .

Thank you all for participating in today's question and answer session I would now like to turn the call back over to Mr. Kayvon Malhotra for any closing remarks.

Thank you.

When we found a compound we have the vision to see voice enabled voice.

This time, but.

But we couldnt have fully imagine the vibrant environment AI innovation that we find ourselves in today.

Our conversational AI comes to the suites prominent across industries.

We're confident that as the only independent cross industry voice VR platform.

In a strong position to deliver best in class technology to even more global brands.

We continue to execute and two of them 22 was a pivotal year for introducing new product and building new partnerships and you're excited adviser we are where we are and where we are looking forward to a strong suezmax 23.

With that I. Thank you for joining us on the call today and look forward to speaking with you. When we report our first quarter who's been according to results. Thank you.

Thank you all for participating. This concludes today's program you may now disconnect.