Q2 2024 SoundHound AI Inc Earnings Call

Hello, and thank you for spending by this time I would like to welcome you to the Sound House Q2, 2024 earnings Conference call.

Speaker Change: All lines have been placed on mute to prevent any background noise.

Speaker Change: After the Speakers' remarks, there will be a question and answer session.

Speaker Change: He would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.

If you would like to withdraw your question Press Star one again.

Speaker Change: I would now like to turn the conference over to Scott Smith head of Investor Relations. Please go ahead.

Scott Smith: Good afternoon, and thank you for joining our second quarter 2020 for a conference call with me today is our CEO came on the Azure and our CFO and a test Sharon we will begin with some short remarks before moving to Q&A.

Scott Smith: We would also like to remind everyone that we'll be making forward looking statements on this call.

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

Scott Smith: Please refer to our filings with the SEC for a detailed discussion of the risks and uncertainties that could affect our business and.

Scott Smith: And for a discussion statements that qualify as forward looking statements.

Scott Smith: In addition, we may discuss certain non-GAAP measures.

Scott Smith: Please refer to today's press release for a more detailed financial results.

Scott Smith: And further details of the definitions limitations and uses of those measures and reconciliations from GAAP to non-GAAP.

Scott Smith: Also note that the forward looking statements on this call are based on information available to us as of today's date.

Scott Smith: We undertake no obligation to update any forward looking statements, except as required by law.

Scott Smith: Finally, this call is being audio webcast in its entirety on our Investor Relations website.

Scott Smith: An audio replay will be available following today's call.

kayvon: With that I would like to turn the call over to our CEO came on <unk>. Please go ahead kayvon.

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

kayvon: Before getting into the quarter I wanted to talk about the announcement, we made this morning to acquire it conversational AI leader Amelia.

Speaker Change: This transaction is a natural extension of our strategy and we saw a great opportunity to partner with a company that we believe will accelerate our mission on voice, enabling the world with conversational intelligence.

Speaker Change: Our vision has always been to create a conversational AI platform that exceeds human capabilities delivers value and delight end users create an ecosystem with billions of products and enables innovation and monetization opportunities for our product creators.

Speaker Change: Today's announcement is a continuation of that path and now is the time for such a bold move.

Speaker Change: <unk> is a leader in voice AI and we have built a platform that we can perfect deleverage to expand into new markets.

Speaker Change: Coming together with familiar is an important step along the way in this journey.

Speaker Change: And we are excited for a number of reasons.

Speaker Change: Most importantly, this significantly expands our penetration in conversational AI across new verticals and deep into hundreds of enterprise brands.

Speaker Change: We are doing this in end markets that are expected to grow massively over the coming years with enterprise spending on generative AI projected to grow 15 fold over the next three years to nearly $250 billion.

Speaker Change: Together, we combine decades of experience in conversational AI, we had a highly complementary suite of products and we believe if we can offer best in class scalable customer service support to a vast spectrum of businesses.

Operator: Hello and thank you for standing by.

Operator: The side would like to welcome you to the SoundHound Q2, 2024 earnings conference call. All lines has been placed on the youth preventative background noise.

Speaker Change: <unk> today marks a significant and strategic expansion of townhouse existing customer service pillar.

Operator: After speakers, remarks, there will be a question in the next session. If you would like to ask a question during this time, seem to press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again.

Speaker Change: We are adding even more breadth and depth to these offerings that have already seen substantial growth and meet the accelerated adoption of voice and conversation and alternative AI solutions.

Speaker Change: The test will provide some more insights into this deal and our overall M&A philosophy later on.

Scott Smith: I would down like to turn the conference over to Scott Smith, head of investor relations. Please go ahead.

Speaker Change: Now onto the quarter.

Speaker Change: Once again, we are reporting strong growth.

Scott Smith: Good afternoon and thank you for joining our second quarter 2024 conference call. With me today is our CEO, Kevan Mohajer and our CFO Nitesh Sharan. We will begin with some short remarks before moving to Q&A. We would 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 for discussion statements that qualify as forward-looking statements.

Speaker Change: Second quarter revenue was up 54% and cumulative subscription and bookings backlog roughly doubled year over year to $723 million.

Speaker Change: We also saw a steep increase in engagement with our technology, our annual run rate of queries is now over $5 billion.

Speaker Change: We continue to see strong demand for our products, including townhouse chat AI in pillar, one and our AI customer service solutions in pillar II.

Speaker Change: Our value propositions are resonating with the industry customers choose us because they believe our innovation cycles are at a high level and results in powerful AI technology.

Scott Smith: 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 reconciliation 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. Finally, this call is being audio webcasts in its entirety on our Investor Relations website.

Speaker Change: They also know that we help them protect their brand users and data.

Speaker Change: We have accumulated 20 years of intellectual property.

Speaker Change: And technical innovation remains in our core DNA.

Speaker Change: Last year, we announced Polaris, our multimodal multilingual Foundation model.

Speaker Change: Polaris now beats numerous benchmarks against state of the art models in the industry.

Speaker Change: A growing number of our customers are switching to Polaris.

Speaker Change: The result is higher accuracy better user experience lower internal cost and faster response times.

Speaker Change: We can also deliver Q&A on customization much faster. These customizations have historically required long and expensive machine learning training cycles.

Operator: An audio replay will be available following today's call.

Scott Smith: With that, I would like to turn the call over to our CEO, Kebun Mahajir. Please go ahead, Kebun.

Speaker Change: With Polaris, we can achieve them, we just steamboat configuration changes.

Keyvan Mohajer: Thank you, Scott, and thank you to everyone for joining the call today. Before getting into the quarter, I wanted to talk about the announcement we made this morning to acquire a conversational AI leader, Amelia. This transaction is a natural extension of our strategy, and we saw a great opportunity to partner with a company that we believe will accelerate our mission of voice-enabling the world with conversational intelligence.

Speaker Change: Now, let me discuss some business updates in the second quarter.

Speaker Change: In pillar one we now have cars in production in almost 20 markets and support dozens of languages.

Speaker Change: Townhouse chat AI, our voice assistant regenerative AI is driving this high demand.

Speaker Change: Yes automobiles became the first brand to quickly turn a trial run to live production.

Speaker Change: This was the first in vehicle. It is tend to be generative AI capabilities to go into production anywhere in the world.

Keyvan Mohajer: Our vision has always been to create a conversational AI platform that exceeds human capabilities. Delivers value and delights end users create an ecosystem with billions of products and enables innovation and monetization opportunities for product creators. Today's announcement is a continuation of that path, and now is the time for such a bold move. SoundHound is a leader in voice AI, and we have built a platform that we can perfectly leverage to expand into new markets.

Speaker Change: And the results have been so well received that Atlantis has continued to integrate <unk> technology into a large number of models across multiple brands.

Speaker Change: In total you are now live on the road with the Atlantis brands, Hey, Joe Boxer, Opal, Citron and Alfa Romeo and of course the automobiles.

Speaker Change: Dan and Chad AI combines the power of large language models with our AI assistant, making it more capable and powerful.

Keyvan Mohajer: Coming together with Amelia is an important step along the way in this journey, and we are excited for a number of reasons. Most importantly, this significantly expands our penetration in conversational AI across new verticals, and these in 200 of enterprise brands. We are doing this in end markets that are expected to grow massively over the coming years, with enterprise spending on alternative AI projected to grow 15 fold over the next three years to nearly 250 billion Scholars. Together, we combine decades of experience in conversational AI. We have a highly complimentary suite of products, and we believe we can offer best-in-class scalable customer service support to a vast spectrum of businesses.

Speaker Change: This is an upsell feature that will increase royalties from existing customers and our bookings this quarter increased as a result.

Speaker Change: This is important to emphasize what historically they have been constant pressure from auto Oems to lower their costs for the first time, you are seeing their appetite to pay more.

Speaker Change: Want to upgrade to sound on chat AI to deliver a much better user experience to their customers and they are willing to pay the additional royalties to do so.

Speaker Change: Therefore, we expect our revenue per unit in pillar, one will increase over time as more customers adopt degenerative AI innovation in townhouse Chap AI.

Speaker Change: Last quarter, we talked about the first company to roll out this technology integrated in vehicles in Japan.

Keyvan Mohajer: The announcement today marks a significant and strategic expansion of SoundHound existing customer service pillar. We are adding even more breadth and depth to this offering that have already seen substantial growth and meet the accelerated adoption of voice and conversational agenda AI solutions. Nitesh will provide some more insight into this deal and our overall M&A philosophy later on.

Speaker Change: And now this quarter. We're also pleased to have signed a new contract to be the first company to rollout chat GPT style capabilities to in vehicle voice assistance in Latin America initial.

Speaker Change: Initially this will be with three brands and go into production in Brazil, Argentina and Chile.

Speaker Change: We also continue to gain interest and make progress with EV manufacturers.

Keyvan Mohajer: Now on to the quarter. Once again, we are reporting strong growth. Second quarter revenue was 54% and cumulative subscriptions and bookings backlog roughly doubled year over year to $723 million. We also saw a steep increase in engagement with our technology. Our annual run rate of queries is now over $5 billion. We continue to see strong demands for our products, including SoundHound Chat AI in pillar 1 and our AI customer service solutions in pillar 2.

Speaker Change: Earlier this year, we won a deal with a prominent U S based EV maker, which will go live imminently.

Speaker Change: <unk> AI will be integrated across its full fleet of market leading vehicles.

Speaker Change: This will mark the first U S based Oems to integrate an assistant regenerative AI capabilities.

Speaker Change: Additionally, we have expanded with an existing customer a fast growing EV manufacturer in Europe to add townhouse that AI to their digital assistant.

Speaker Change: Last quarter, we also announced the partnership with perplexity to bring cutting edge online llm's to Shanghai chat AI.

Keyvan Mohajer: Our value of propositions are resonating with the industry. Customers choose us because they believe our innovation cycles are at a high level and results in powerful AI technology. They also know that we help them protect their brand, users and data. We have accumulated 20 years of intellectual property and technical innovations remain in our core DNA.

Speaker Change: This has allowed us to offer a truly multi faceted next generation voice assistant to phones cars and Iot devices.

Speaker Change: <unk> helps townhomes that AI provide accurate up to date responses to web based queries that static offline llm's cannot currently for sale.

Speaker Change: Expanding the type and complexity of the questions. The assistant is able to answer.

Keyvan Mohajer: Last year, we announced Polaris, our multimodal multilingual foundation model. Polaris now beats numerous benchmarks against data of the art models in the industry. A growing number of our customers are switching to Polaris. The result is higher accuracy, better user experience, lower internal cost and faster response times. We can also deliver Q&A on customizations much faster. These customizations have historically required long and expensive machine learning training cycles. With Polaris, we can achieve them with just single configuration changes.

Speaker Change: They move May 10, handset AI, the most advanced voice assistant available on the market today and we are currently in progress conversations with Oems about having this capability go live.

Speaker Change: Moving on to pillar two.

Speaker Change: This quarter, we won the business of <unk>.

Speaker Change: This means that in total we have now won deals with five of the top 15 <unk> based on the number of locations one off the queue with ours. We engage in Q2 was a large well known pizza restaurants with thousands of locations throughout the U S.

Keyvan Mohajer: Now let me discuss some business updates in the second quarter. In pillar 1, we now have cars in production in almost 20 markets and support dozens of languages. Townhound Chat AI, our voice assistant with GERF AI, is driving this high demand.

Speaker Change: This means that panel is now working with two of the biggest pizza chains out there.

Speaker Change: Each of these key with our brands represents a sizable opportunity to deploy our technology across thousands of locations.

Speaker Change: It's an exciting time.

Keyvan Mohajer: DS automobiles became their first brand to quickly turn a trial run to live production. This was the first in-t vehicle assistant with GERF AI capabilities to go into production anywhere in the world. And the results have been so well received that Stellantis has continued to integrate Townhound technology into a large number of models across multiple brands. In total, you are now live on the road with six Stellantis brands, Peugeot, Boxel, Opel, Citron, and Alpha Romeo and of course DS automobiles.

Speaker Change: In a very fortunate position so how we execute the business at this time will be critical to our performance in this space going forward and we are mindful of this.

Speaker Change: Our customer service product portfolio is resonating with businesses of all sizes. So we are winning in large enterprises as well as small chains.

Speaker Change: Become clear to us that very few companies can offer businesses of all sizes and affordable fast and easy to implement solution that addresses their growing needs.

Speaker Change: We own our tech we have data from real interactions and nearly 20 years of experience. We believe we are winning because of the data science and machine learning behind our proprietary software.

Keyvan Mohajer: Townhound Chat AI combines the power of large language models with our AI assistant making it more capable and powerful. This is an upsell feature that will increase royalties from existing customers and are booking this quarter increased as a result.

Speaker Change: Last year, we introduced a product called employee assessed which uses our conversational voice AI technology to support employees like a copilot across a variety of tasks the other headset or a tablet.

Keyvan Mohajer: This is important to emphasize. While historically, there have been constant pressure from auto OEMs to lower the for the first time we are seeing their appetite to pay more. They want to upgrade to SoundHound Chat AI to deliver a much better user experience to their customers and they're willing to pay the additional royalties to do so. Therefore, we expect a revenue per unit in pillar 1 will increase over time as more customers adopt the generative AI innovation in SoundHound Chat AI.

Speaker Change: We already have several customers benefiting from this new service.

Speaker Change: Those include some large SKU with our brands and I'm proud to announce two prominent coffee chains have also sign up this quarter.

Speaker Change: We are finding that many customers are choosing to sign up for employee assessed in combination with our drive thru solution dynamic interaction.

Speaker Change: They work together in tandem to handle and improve the customer experience while supporting their employees.

Keyvan Mohajer: Last quarter we talked about the first company to roll out this technology integrated in vehicles in Japan and now this quarter we are also pleased to have signed a new contract to be the first company to roll out chat GPT style capabilities to in vehicle voice assistance in Latin America. Initially this will be with three brands and go into production in Brazil, Argentina and Chile. We also continue to gain interest and make progress with EV manufacturers.

Speaker Change: Roundhouse dynamic interaction delivers what we believe to be the next generation of all voice AI interfaces. It.

Speaker Change: It is full duplex its multimodal it does not require a constant use of wake upwards and turned taking and can be seamlessly multilingual.

Speaker Change: We believe its impact on voice AI and conversational interfaces will be as meaningful as multi touch technology on touch interfaces.

Speaker Change: Our AI solutions save cost for our customers improve the experience of their users and also includes revenue by increasing throughput and proactively offering ourselves.

Keyvan Mohajer: Earlier this year we wanted to deal with a prominent US-based EV maker which will go live immediately. SoundHound Chat AI will be integrated across its full fleet of market leading vehicles. This will mark the first US-based OEM to integrate an assistant with generative AI capabilities. Additionally, we have expanded with an existing customer a fast-growing EV manufacturer in Europe to add SoundHound Chat AI to their digital assistant.

Speaker Change: Our phone ordering solution are continuing to ramp up with existing customers like Jersey Mikes.

Speaker Change: And as mentioned earlier, we are penetrating into thousands of pizza chains locations across the U S.

Speaker Change: We announced before Brady's wherever you are already live in all corporate locations and plan to rollout to 20 states very soon.

Keyvan Mohajer: Last quarter we also announced a partnership with perplexity to bring cutting edge online elements to SoundHound Chat AI. This has allowed us to offer a truly multifaceted next-generation voice assistant to phones, cars and IoT devices. Perplexity helps SoundHound Chat AI provide accurate up-to-date responses to web-based queries that static offline elements cannot currently fulfill. Expanding the type and complexity of the questions the assistant is able to answer. The move made SoundHound Chat AI, the most advanced voice assistant available on the market today and we are currently in progress conversations with OEMs about having this capability go live.

Speaker Change: Going beyond restaurants compound smart answering is showing rapid growth within pillar II.

Speaker Change: We already have hundreds of locations live from single location small businesses to brand with multiple locations.

Speaker Change: Last quarter, we talked about planet fitness and we have already gone live and continue to rollout more you are seeing great traction in franchise retail businesses and across a number of industries. These include personal care professional services home and local services automotive services among others.

Speaker Change: We are excited about smart answer ink, because the number of industry really caters to opens a massive market for us to address with millions of businesses in the United States alone.

Speaker Change: The seamless implementation capabilities allow us to scale fast and the use cases for companies of all sizes are obvious.

Keyvan Mohajer: Moving on to pillar 2. This quarter we won the business of three sizable QSRs. This means that in total we have now won deals with five of the top 15 QSRs based on the number of locations.

Speaker Change: Whether it's handling multiple calls at once 24, seven conveniently filtering out spam calls, providing verbal and SMS responses, taking configure about actions capturing leads with intelligent messaging and answering questions about policies hours products services pricing and more.

Keyvan Mohajer: One of the QSRs we engage in Q2 was a large well-known piece of restaurant with thousands of locations throughout the US. This means that SoundHound is now working with two of the biggest pizza chains out there. Each of these QSR brands represents a sizable opportunity to deploy our technology across thousands of locations. It's an exciting time.

Speaker Change: We have built a competitive moat with a proprietary technology that is creating massive opportunity in customer service.

Speaker Change: On to pillar III, where we are making great progress and accelerate that path this quarter with the acquisition of offsets.

Keyvan Mohajer: We are in a very fortunate position so how we execute the business at this time will be critical to our performance in this space going forward and you're mindful of this. Our customer service product portfolio is resonating with businesses of all sizes so we are winning in large enterprises as well as small chains. It's become clear to us that very few companies can offer businesses of all sizes and affordable fast and easy to implement solutions that addresses their growing needs.

Speaker Change: The ordering platform, we acquired through outfit enables us to build a voice commerce ecosystem.

Speaker Change: The acquisition will ultimately enable consumers to use cutting edge voice AI to order food from their vehicles phones and smart devices.

Speaker Change: Additionally, they also team brings a wealth of marketplace experience and knowledge that will make a voice commerce ecosystem a reality.

Keyvan Mohajer: We own our tech. We have data from real interactions and nearly 20 years of experience. We believe we are winning because of the data science and machine learning behind our proprietary software. Last year, we introduced a product called Employee Assist, which uses our conversational voice AI technology to support employees like a co-pilot across a variety of tasks, the other headset or tablet. We already have several customers benefiting from this new service.

Speaker Change: We are creating a new category and together, we plan to provide dynamic and convenient ways for people to order food and complete a range of other transactions just by speaking naturally.

Speaker Change: And as we increase the notable names that we sign every quarter in pillar, one and two it also helps us get once the closer to mobilizing this strategy.

Speaker Change: With this strategic move we have significantly increased our addressable market, while creating new more convenient and accessible consumer experiences.

Keyvan Mohajer: Those include some large QSR brands, and I'm proud to announce two prominent coffee chains have also signed up this quarter. We are finding that many customers are choosing to sign up for Employee Assist in combination with our drive-through solution dynamic interaction. They work together in tandem to handle and improve the customer experience while supporting their employees. SoundHound dynamic interaction delivers what we believe to be the next generation of all voice AI interfaces.

Speaker Change: Our customer engagement with this vision has always been well received with existing and prospective customers getting even more interest that over time as our portfolio of customers using voice enabled services growth.

Speaker Change: We always talk to you about the flywheel effect with this vision and we are starting to see that takes shape.

Keyvan Mohajer: It is full duplex, it's multimodal, it does not require a constant use of wake-up words and turn-taking, and can be seen in the multilingual. We believe its impact on voice AI and conversational interfaces will be as meaningful as multi-touch technology and touch interfaces. Our AI solutions save costs for our customers, improve the experience of their users, and also includes revenue by increasing throughput and proactively offering ourselves. Our phone ordering solution are continuing to ramp up with existing customers like Jersey Mike's, and as mentioned earlier, we are penetrating into thousands of pizza chains locations across the US. We announced B4 Brady's, where we are already live in all corporate locations and plan to roll out to 20 states very soon.

Speaker Change: In closing, we have consistently grown at a rate of 50% or more and continue to fortify our financial position.

Speaker Change: <unk> was gaining market share and attracting new enterprise customers and creating some of the most innovative voice AI technology in the world. We are proud of the best in class experiences, we are creating for our customers and their customers, but our ambition is to keep aiming higher and push the boundaries continue to grow as an example of that ambition today we are.

Speaker Change: Acquired Amelia.

Speaker Change: Amelia is an innovative company that shares our passion for AI fueled conversations.

Speaker Change: We are looking forward to leveraging our shared capabilities to offer the best AI customer support solutions available anywhere.

Speaker Change: We are also pleased to welcome the team from ammonia to <unk> and are excited about what we can do together.

Speaker Change: We believe the disruption in the market for AI. We are seeing today is building towards our exact vision when we create a townhouse almost 20 years ago.

Keyvan Mohajer: Going beyond restaurants, ComHound Smart Answering is showing rapid growth within Pilar 2. We already have hundreds of locations live from single location small businesses to brand with multiple locations. Last quarter, we talked about planet fitness, and we have already gone live and continue to roll out more. We are seeing great traction in franchise retail businesses and across the number of industries. These include personal care, professional services, home and local services, automotive services, among others.

Speaker Change: A lot of our predictions are now becoming a reality.

Speaker Change: Another strong quarter, where we beat market expectations for revenue, we couldnt be more pleased with the momentum we are seeing and the demand for our products and solutions.

Speaker Change: We look forward to continued engagements with our stakeholders as we create value.

Speaker Change: We are grateful to our amazing team that makes this all possible with their shared vision.

twenty Tesh: With that I'll now turn the call over 'twenty Tesh to talk about our financial performance key growth drivers and outlook for the remainder of the year.

Keyvan Mohajer: We are excited about Smart Answering because the number of industries it caters to opens up a massive market for us to address millions of businesses in the United States alone. The seamless implementation capabilities allow us to scale fast and the use cases for companies of all sizes are obvious. Whether it's handling multiple calls at once 24-7, conveniently filtering out spam calls, providing verbal and SMS responses, taking configurable actions, capturing leads with intelligent messaging, and answering questions about policies, hours, products, services, pricing and more.

Tesh: Thank you, Kevin and good afternoon, everyone.

Tesh: Q2 revenue increased 54% year over year.

Tesh: The results are another positive mile marker on a growth journey, where we achieved $13 $5 million in revenue.

Speaker Change: This marks our fourth consecutive quarter exceeding $10 million in revenue.

Speaker Change: We meaningfully improved our balance sheet in the quarter by paying down our debt and completing the conversion of outstanding preferred equity and <unk>.

Speaker Change: Mentioned before that our capital position is a source of strength.

Keyvan Mohajer: We have built a competitive mode with our proprietary technology that is creating massive opportunity in customer service.

twenty Tesh: Want to maintain that strength because it affords us the opportunity to go on the attack when it makes sense for us.

Keyvan Mohajer: On to Pilar 3, where we are making great progress and accelerated that path this quarter with the acquisition of all sets. The ordering platform we acquire through all sets enables us to build a voice commerce ecosystem. The acquisition will ultimately enable consumers to use cutting-edge voice AI to order foods from their vehicles, phones and smart devices. Additionally, the all set team brings a wealth of marketplace experience and knowledge that will make a voice commerce ecosystem a reality.

twenty Tesh: We do that through organic investments to fuel disruption partnerships to help scale aggressively and acquisitions to accelerate our pace.

twenty Tesh: One of the measures we use to gauge customer traction as backlog.

twenty Tesh: In Q2, our cumulative subscription and bookings backlog roughly doubled year over year to $723 million.

twenty Tesh: With an average duration of slightly less than seven years.

twenty Tesh: Most of the expansion this quarter was in the restaurant space, Although we continue to gain traction with automotive partners for.

Speaker Change: For example, with <unk>, adding five additional brands going into production with townhome chat AI today.

Keyvan Mohajer: We are creating a new category and together we plan to provide dynamic and convenient ways for people to order food and complete a range of other transactions just by speaking naturally. And as we increase the notable names that we sign every quarter in pillar 1 and 2, it also helps us get one step closer to mobilizing this strategy. With this strategic move, we have significantly increased our addressable market while creating new, more convenient and accessible consumer experiences.

twenty Tesh: Today, we announced an Kayvon noted earlier, our acquisition of conversational AI leader Amelia.

Speaker Change: Let me spend a minute explaining how we think about M&A.

Speaker Change: First.

twenty Tesh: We believe having a programmatic M&A approach can be value generating.

Speaker Change: Our acquisition philosophy stems from our overall strategy and vision, which is to voice enabled the world with conversational intelligence and transform the next wave of how humans will interact with technology increasingly with voice and natural conversations.

Keyvan Mohajer: Our customer engagement with this vision has always been well received. With existing and prospective customers getting even more interested over time as our portfolio of customers using voice enabled services grows. We always talk about what the slide will affect with this vision and we are starting to see that take shape.

twenty Tesh: We know the requisite underpinning technology to enable this vision is here now in fact, we built a lot of it ourselves and.

twenty Tesh: And we continue to see the customer demand and adoption, but these capability is growing.

Speaker Change: When we acquired <unk> earlier this year it was an accelerant for our restaurant business.

Keyvan Mohajer: In closing, we have consistently grown at a rate of 50% or more and continue to fortify our financial position all while gaining market share attracting new enterprise customers and creating some of the most innovative voice AI technology in the world. We are proud of the best in class experiences we are creating for our customers and their customers.

twenty Tesh: Last quarter, when we announced the <unk> acquisition it was to catalyze our monetization pillar to connect voice enabled services and products seamlessly together.

twenty Tesh: Today's acquisition of Emilia is about accelerating more broadly in pillar two customer service and significantly expanding our industry reach the primary filters, we have been using to select appropriate acquisition targets have been one does it fit within our long term strategy.

Keyvan Mohajer: But our ambitions to keep aiming higher and push the boundaries continue to grow. As an example of that ambition, today we acquired Emilia. Emilia is an innovative company that shares our passion for AI field conversations. We are looking forward to leveraging our shared capabilities to offer the best AI customer support solutions available anywhere. We are also pleased to welcome the team from Emilia to SoundHound and are excited about what we can do together.

twenty Tesh: <unk> will amplify or accelerate our pathway to realize that strategy three can we effectively operationalize it and drive meaningful synergies and for can we buy it at the right price appreciating the risks that inherently come from such transactions.

Amelia: Amelia check those boxes for us.

Keyvan Mohajer: We believe the disruption in the market for AI we are seeing today is building towards our exact vision when we created SoundHound almost 20 years ago. A lot of our predictions are now becoming a reality with another strong quarter where we beat market expectations for revenue. We couldn't be more pleased with the momentum we are seeing and the demand for our products and solutions. We look forward to continued engagement with our stakeholders as we create value.

twenty Tesh: While it would be a meaningful acquisition with a lot of complementarity, we don't take the integration effort lately and know it will take some time to get it right.

twenty Tesh: But the price together was too attractive to bypass in our opinion, especially with the enterprise traction and demand we have been seeing in the marketplace.

Amelia: We just announced this today so it's still quite early and we know there will be questions. So please note that we plan to share more and dive much deeper on the opportunity we see stay tuned for more details.

Keyvan Mohajer: We are grateful to our amazing team that makes this all possible with their shared vision.

Speaker Change: With that let me now focus on and discuss the second quarter financials in more detail Q2 revenue was $13 $5 million up 54% year over year.

Nitesh Sharan: With that, I will now turn the call over to Nitesh to talk about our financial performance, key growth drivers and outlook for the remainder of the year. Thank you, Kavan.

Speaker Change: We continued to see growing automotive unit growth of healthy double digits. In addition to unit price expansion driven by our regenerative AI solutions and overall product expansion the quarter benefited from a minimum guarantee edge solution purchased by <unk>.

Nitesh Sharan: Good afternoon everyone. Q2 revenue increased 54% year over year. The results are another positive mile marker on our growth journey where we achieve $13.5 million in revenue. This marks our fourth consecutive quarter exceeding $10 million in revenue. We meaningfully improved our balance sheet in the quarter by paying down our debt and completing the conversion of outstanding preferred equity. I mentioned before that our capital position is a source of strength. We want to maintain that strength because it affords us the opportunity to go on the attack when it makes sense for us.

Amelia: And also from a year over year basis, the contribution from <unk> III.

Amelia: Within restaurants, we continue to scale with customers signed meaningful new logos and further diversified product offerings.

Amelia: The quarter had nice balance across our pillars, where our restaurant business comprise roughly 25% of revenue.

Speaker Change: In Q2, our gross margins were 63% down year over year, largely resulting from the acquisition, including the mix of lower margin call Center agent business adjusting for acquisition impacts, notably the noncash amortization of purchased intangibles gross margins would've been 67%.

Nitesh Sharan: We do that through organic investments to fuel disruption, partnerships to help scale aggressively and acquisitions to accelerate our pace. One of the measures we use to gauge customer traction is backlog. In Q2, our cumulative subscriptions and bookings backlog roughly double- 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 we continue to gain traction with automotive partners. For example, with Stellantis adding five additional brands going into production with SoundHound chat AI.

Amelia: While the acquired call Center business does weigh on our margins in the near term there is value in what this business can do for broader opportunities to come and what the data can bring to our models that said our goal overtime is to automate and modernize.

Amelia: R&D expenses were $15 7 million in Q2, an increase of 34% year over year.

Amelia: We are prioritizing investments in disruptive innovation like our Polaris initiative to expand our suite of products to address a wider array of customer needs and we continue fine tuning the way we leverage large language models to provide even more value to customers at less cost.

Nitesh Sharan: Today we announced, and Keyvan noted earlier, our acquisition of Conversational AI Leader Amelia. Let me spend a minute explaining how we think about M&A. First, we believe having a programmatic M&A approach can be value-generating. Our acquisition philosophy stems from our overall strategy and vision, which is to voice enable the world with conversational intelligence and transform the next wave of how humans will interact with technology, increasingly with voice and natural conversations. We know the requisite underpinning technology to enable this vision is here now.

Amelia: For example, we will continue to be thoughtful and opportunistic about which models, we work with versus using our own and always keep the customers needs are top of mind.

Amelia: In the end our ability to arbitrate between models is a differentiator that we will continue to expand upon.

Speaker Change: Sales and marketing expenses were $5 7 million in Q2, an increase of 11% year over year, we continue to thoughtfully invest in go to market and customer engagement to capture the strong momentum in heightened demand we are expanding reach through brand and industry marketing demand generation and high ROI lead Gen strategies.

Nitesh Sharan: In fact, we've built a lot of it ourselves, and we continue to see the customer demand and adoption for these capabilities growing. When we acquired Sync3 earlier this year, it was an accelerant for our restaurant business. Last quarter, when we announced the offset acquisition, it was to catalyze our monetization pillar to connect voice enabled services and products seamlessly together. Today's acquisition of Amelia is about accelerating more broadly in pillar two, customer service, and significantly expanding our industry reach.

Amelia: G&A expenses were $9 $5 million in Q2, an increase of 48% year over year. The increase in G&A reflects two main elements that we talked about the past few quarters, our year over year comparison continues to be impacted by investments in financial and non financial processes and internal controls to support requirements under Sox 404, B as we became a large accelerated filer last year.

Amelia: Our G&A was also negatively impacted by acquisition related costs in the quarter.

Nitesh Sharan: The primary filters we have been using to select appropriate acquisition targets have been one, does it fit within our long-term strategy? Two, will it amplify or accelerate our pathway to realize that strategy? Three, can we effectively operationalize it and drive meaningful synergies? And four, can we buy it at the right price, appreciating the risks that inherently come from such transactions? Amelia checked those boxes for us. While it would be a meaningful acquisition, with a lot of complementarity, we don't take the integration effort lightly and know it will take some time to get it right.

Amelia: All operating expense line items were impacted by the <unk> acquisition noncash employee stock compensation was $7 3 million in Q2.

Amelia: As a result, our operating loss for Q2 was $22 million.

Amelia: This includes noncash acquisition impacts related to the fair value accounting that will likely introduce volatility into this line for the foreseeable future.

Amelia: <unk> was $14 7 million of net expense for the quarter.

Amelia: Paired to previous quarters, the increase in <unk> was mainly due to the one time early repayment of our debt and associated extinguishment costs.

Nitesh Sharan: But the price together was too attractive to bypass in our opinion, especially with the enterprise traction and demand we have been seeing in the marketplace. We just announced this today, so it's still quite early, and we know there will be questions, so please note that we plan to share more and dive much deeper on the opportunity we see. Stay tuned for more details.

Amelia: We announced earlier in the quarter that we were able to repay the existing debt on favorable prepayment terms, allowing us to avoid sizable interest payments over the coming years.

Amelia: And the net loss was $37 $3 million in the quarter.

Amelia: This led to a GAAP net loss per share in Q2 of 11.

Amelia: Adjusting for noncash acquisition related amortization of purchase intangibles fair value adjustments M&A transaction costs stock based comp and other noncash items such as the gain on bargain purchase our non-GAAP EPS loss was <unk> <unk> in the quarter.

Nitesh Sharan: With that, let me now focus on and discuss the second quarter financials in more detail. Q2 revenue was $13.5 million dollars, up 54% year over year. We continue to see growing automotive unit growth of healthy double digits, in addition to unit price expansion, driven by your generative AI solutions, and overall product expansion. The quarter benefited from a minimum guarantee edge solution purchased by Solentus, and also from a year over year basis the contribution from Sync 3.

Amelia: Adjusted EBITDA was a loss of $13 8 million in Q2, improving sequentially by 10%.

Amelia: Year over year increase was driven primarily by acquisition impact and growth investments, we've been making in the business our cash position at quarter end was $201 million.

Nitesh Sharan: Within restaurants, we continue to scale with customers by meaningful new logos and further diversified product offerings. The quarter had nice balance across our pillars, where a restaurant business comprises roughly 25% of revenue. In Q2, our growth margins were 63% down year over year, largely resulting from the acquisition, including the mix of lower margins, and Call Center Agent Business. Adjusting for acquisition impact, notably the non-cash amortization of purchase and tangible growth margins would have been 67%.

Amelia: And no outstanding debt.

Amelia: We see a market that is moving fast and believe having a strong financial profile and times like these is crucial to success.

Amelia: We are in a position of strength and focus on creating long term sustainable growth and profitability.

Speaker Change: With that.

Speaker Change: Let me discuss our outlook for the remainder of 2024 and our prospects for 2025.

Amelia: We've made great progress the core business is growing our technology is permeating across and resonating with an increasing roster of amazing customers. We expect the.

Nitesh Sharan: While the acquired Call Center business does weigh on our margins in the near term, there is value in what this business can do for broader opportunities to come and what the data can bring to our models. That said, our goal over time is to automate and modernize. R&D expenses were $15.7 million in Q2, an increase of 34% year-over-year. We are prioritizing investments in disruptive innovation like our Polaris Initiative to expand our suite of products to address a wider array of customer needs and we continue fine-tuning the way we leverage large language models to provide even more value to customers at less cost.

Amelia: The acquisition of Amelia to improve our financial profile.

Amelia: There are top line synergies and we also expect to be able to extract a lot of value from the combined companies.

Amelia: It's a little early in the process to be too precise. So let me buildup, how we see the rest of this year and entry into next year.

Amelia: We are cognizant that a significant acquisition like this will require heavy integration and will take time to fully align across the enterprise.

Amelia: We are baking this into our go forward assumptions as we noted in our press release. This morning, we expect this acquisition to be accretive to earnings in the second half of 2025.

Amelia: And we now see 2020 for revenue to exceed $80 million.

Nitesh Sharan: For example, we will continue to be thoughtful and opportunistic about which models we work with versus using our own and always keep the customers' needs at top of mind. In the end, our ability to arbitrate between models is a differentiator that we will continue to expand upon. Sales and marketing expenses were $5.7 million in Q2, an increase of 11% year-over-year. We continue to thoughtfully invest and go to market and customer engagement to capture the strong momentum in heightened demand.

Amelia: In 2025 revenue to exceed $150 million.

Amelia: There's much more potential here, but at this stage, it's appropriate for us to stay measured and calibrated on setting expectations.

Amelia: Amelia brings a diverse business with strong recurring revenue and also some other businesses that we are calibrating on to identify how best to fit them into our portfolio.

Amelia: In full transparency, there are lower growth and margin businesses, where we want to assess the lifecycle value of each contract to determine the best go forward approach.

Nitesh Sharan: We are expanding reach through brand and industry marketing, demand generation, and high ROI lead-gen strategies. GNA expenses were $9.5 million in Q2 and increase of 48% year-over-year. The increase in GNA reflects two main elements that we talked about the past few quarters. Our year-over-year comparison continues to be impacted by investments in financial and non-financial processes and internal controls to support requirements under SOX 404B as we became a large accelerated filing last year.

Amelia: These decisions may affect the pace of our growth or our trajectory on margins. So we need some time to finalize the plan.

Amelia: Ultimately, though we see a combined growth profile that is even more attractive than we were standalone with greater profitability.

Amelia: And we see tremendous value to share with customers employees and partners over the coming years.

Amelia: In conclusion.

Nitesh Sharan: Our GNA was also negatively impacted by acquisition-related costs in the quarter. All operating expense line items were impacted by the SYNC-3 acquisition, non-cash employees stock competition with $7.3 million in Q2. As a result, our operating loss per Q2 was $22 million. This includes non-cash acquisition impacts related to the fair value accounting that will likely introduce volatility into this line for the foreseeable future. OINE was $14.7 million of net expense for the quarter.

Amelia: We are happy with where we are we are aggressively moving forward.

Amelia: We know the path forward won't be linear we have a clear vision that we are accelerating towards.

Speaker Change: We will now move to Q&A.

Amelia: Okay.

Speaker Change: Thank you the floor is now open for your questions. So to ask a question. This time, Please press star one.

Speaker Change: We've got a plus for just a moment to compile the Q&A roster.

Nitesh Sharan: Compared to previous quarters, the increase in OINE was mainly due to the one-time early repayment of our debt and associated extinguishment costs. We announced earlier in the quarter that we were able to repay the existing debt on favorable prepayment terms, allowing us to avoid sizable interest payments over the coming years. And the net loss was $37.3 million in the quarter. This led to a gap net loss per share in Q2 of 11 cents.

Speaker Change: Our first question comes from Gil Luria from da Davidson.

Gil Luria: Hi, good afternoon.

Gil Luria: One for Keith one trying to test both on the acquisition. This is a transformative acquisition. So wanted to up until now a lot of the strategy has been around.

Speaker Change: Autos and restaurants pillars, one two and three there was a very good alignment in the strategy between those end markets in that.

Nitesh Sharan: Adjusting for non-cash acquisition-related amortization of purchase intangibles for value adjustments, M&A transaction costs, stock based comp and other non-cash items, such as the gain on bargain purchase, our non-gap UPS loss was $4.00 in the quarter. Adjusted EBITDA was the loss of $13.8 million in Q2, improving sequentially by 10%. The year-over-year increase was driven primarily by acquisition impact and growth investments we have been making in the business. Her cash position at quarter-end was $201 million and no outstanding debt. We see a market that is moving fast and believe having a strong financial profile in times like these is crucial to success.

Amelia: Pillar.

Amelia: Framework.

Speaker Change: How do you see that changing now that you are bringing that youll bring amelia into the fold in terms of what verticals, you're going to have and what your focus is going to be in terms of pillars.

Speaker Change: Thanks for the question and then transform it it is the right word thank you for mentioning that.

Amelia: So that strategy just gets stronger.

Amelia: I mean, the acquisition makes us.

Amelia: There's a lot more scale in pillar two.

Amelia: We always knew we were going to expand beyond restaurants.

Nitesh Sharan: We are in a position of strength and focus- on creating long-term sustainable growth and profitability.

Speaker Change: Strong to us or like what we'll expect to Amazon. They started with books now they sell everything.

Amelia: <unk> always wanted to expand.

Nitesh Sharan: With that, let me discuss our outlook for the remainder of 2024 and our prospects for 2025. We have made great progress. The core business is growing, our technology is permeating across and resonating with an increasing roster of amazing customers. We expect the acquisition of Amelia to improve our financial profile. There are top line synergies and we also expect to be able to extract a lot of value from the combined companies. It's a little early in the process to be too precise, so let me build up how we see the rest of this year and entry into next year.

Amelia: In AI customer service to other industries and.

Amelia: When we looked at.

Amelia: We have an amazing tech that we can deliver to these brands but.

Amelia: It takes time too.

Amelia: The customer base and understand their needs and even integrated infrastructure, especially for <unk>.

Amelia: <unk> enterprise customers.

Speaker Change: <unk> has accumulated 26 years.

Speaker Change: Customers any integrations. They also have great complementary products and technologies.

Speaker Change: It just accelerates that vision it gives us a much bigger scale in pillar two and a lot of their customers also fit into our fleet they've worked with retail.

Nitesh Sharan: We are cognizant that a significant acquisition like this will require heavy integration and will take time to fully align across the enterprise. We are baking this into our go-forward assumptions. As we noted in our press release this morning, we expect this acquisition to be accreted to earnings in the second half of 2025. And we now see 2024 revenue to exceed $80 million and 2025 revenue to exceed $150 million. There's much more potential here, but at this stage, it's appropriate for us to stay measured and calibrated on setting expectations.

Speaker Change: Take our companies.

Amelia: Insurance.

Amelia: Financial services retail and hospitality and a lot of those actually have a very nice fit into the pillar three vision.

Speaker Change: Got it thank you and the cash I know you're asking your prepared remarks for a little more time, but.

Speaker Change: Wanted to talk.

Speaker Change: You talk about managing a company that next year is going to have a $150 million.

Nitesh Sharan: Amelia brings a diverse business with strong recurring revenue and also some other businesses that we are calibrating on to identify how best to fit them into our portfolio. In full transparency, there are lower growth and margin businesses where we want to assess the life cycle value of each contract to determine the best go-forward approach. These decisions may affect the pace of our growth or our trajectory on margins, so we need some time to finalize the plan. Ultimately though, we see a combined growth profile that is even more attractive than we were standalone with greater profitability. And we see tremendous value to share with customers, employees, and partners over the coming years.

Speaker Change: Youre, saying that accretive second half 2025, Thats strictly speaking that just means the earnings would be higher than they would've been otherwise in terms of the overall margin structure and where that could put you when you're managing a company that big does it bring closer youre breakeven in terms of Europe.

Amelia: To drive cash flow.

Speaker Change: Adjusted operating margins and then even GAAP operating margins what does it do to the timeline of hitting those milestones.

Amelia: Okay.

Speaker Change: Sure. Thanks Gil.

Speaker Change: So yeah ill put the caveat upfront more detailed is certainly to come we just announced this today that there will be filings and certainly a lot of details for us to talk to but let me give you the high level construct and the way we see this in the way we see us moving forward certainly the near term, but more importantly, maybe over the medium and long term.

Nitesh Sharan: In conclusion, we are happy with where we are. We are aggressively moving forward. And while we know the path forward won't be linear, we have a clear vision that we are accelerating towards.

Nitesh Sharan: Thank you.

Operator: We will now move to Q&A. Thank you.

Speaker Change: So what we're really excited about here is the Emilia is a software business.

Speaker Change: Strong customer traction deep and generally really robust relationships that permeate over time, and where you have <unk>.

Operator: The floor is now helping for your questions.

Operator: So to ask a question this time, please press tower one. We are going to pause for just a moment to compile the Q&A roster.

Amelia: Can expand in.

Speaker Change: And.

Amelia: And.

Amelia: Ed.

Speaker Change: Upsell cross sell.

Gil Luria: Our first question comes from Gil Gloria from the D.A. Davison.

Amelia: <unk> services products and expand margins.

Speaker Change: They do have a multi components to their business and we will integrate that with our profile, but I've said before sort of previous acquisition over the long term we should have.

Gil Luria: Good afternoon. One for Kvon, one for Natasha, both on the acquisition.

Gil Luria: This is a transformative acquisition. So I wanted Kvon up until now. A lot of strategy has been around. Autos and restaurants, pillars one, two, and three. There's a very good alignment in the strategy between those end markets and that pillar framework.

Speaker Change: Strong growth profile very healthy software margin 70, plus percent gross margins and at scale EBIT margins that are 30% plus and I don't think that changes at all with the acquisition.

Speaker Change: I said also that you got to think of us in phases.

Keyvan Mohajer: How do you see that changing now that you're bringing, that you'll bring a million to the fold in terms of what verticals you're going to have and what your focus is going to be in terms of pillars?

Speaker Change: Migrating to breakeven phase after sort of call it.

Speaker Change: I'll call it cash utilization phase and Thats. The next horizon for us going into next year and beyond I think you should think of us as investing in these tremendous growth opportunities because we do think of these as generational shift.

Keyvan Mohajer: Thank you for the question. And transformative is the right word. Thank you for mentioning that. So the strategy just gets stronger. The Amid the acquisition makes us give us a lot more scale in pillar two.

Speaker Change: And how humans interact with technology increasingly through natural conversations and increasingly through voice and so we're going to be in sort of I'll call. It that breakeven zone for a bit and we will be bundling incremental dollars into our our growth opportunities because we there are tremendous growth opportunities.

Keyvan Mohajer: We always knew we were going to expand beyond restaurants. We said that restaurants to us are like what books were to Amazon. They started with books now. They said everything. We've always wanted to expand AI customer service to other industries. And when we looked at, you know, we have an amazing tech that we can deliver to these brands. But it takes time to penetrate the customer base and understand their needs and even integrate with their infrastructure, especially for, you know, bigger enterprise customers.

Speaker Change: And so I think from an EBIT margin and even what I mentioned about sort of accretive in the second half to your point that's earnings related but even our profile is generally capital light and so there.

Speaker Change: Translates very seamlessly into cash flow as well.

Speaker Change: So maybe to synthesize all of that is the combination.

Speaker Change: We'll have to integrate there will be synergy opportunities there are cost opportunities as well as we look across both firms that we'll be working through but as you get into next year, certainly we see earnings accretion we see cash.

Keyvan Mohajer: And Amelia has accumulated 26 years of customers and integrations. They also have great complimentary products and technologies. So this just accelerates that vision. It gives us a much bigger scale in pillar two. And a lot of their customers also feed into our pillar three. They work with retail, the ticket companies, insurance, financial services, retail, hospitality. And a lot of those actually have a very nice fit into the pillar three.

Gil Luria: Thank you.

Speaker Change: And cash flow benefit.

Speaker Change: And I think as you start to think into 2025% into 2026, youre going to see a much more scaled still strong growth company very healthy gross margins software like and and EBIT margins that are not at our full potential because we're going to be investing those incremental dollars in our growth opportunities, but certainly shortly thereafter, I think you can think of us as that.

Speaker Change: That 30 plus percent EBIT margin profile business.

Nitesh Sharan: And Nitesh, I know you're asking your prepared remarks for a little more time, but I want to talk as you talk about managing a company that next year's going to have $150 million, you're saying that a creative second out to 2025 that's strictly speaking that just means your earnings would be higher than they would have been otherwise, in terms of the overall margin structure and where that could put you when you're managing a company that big, does it bring closer your your break even in terms of your ability to drink cash flow, adjusted operating margins, and then even gap operating margins.

Speaker Change: Alright, thank you.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Ben <unk>.

Ben: From Wedbush Securities.

Speaker Change: And great quarter.

Ben <unk>: Can you just talk about how conversations with prospective customers have changed let's say over the last three six months.

Speaker Change: There was even a year ago.

Speaker Change: Can you just maybe anecdotally talk about that just given where everything going on from a technology perspective.

Henry: Verticals and I think the view of sound Henry's obviously changing dramatically in the market. Thanks.

Nitesh Sharan: What does it do to the timeline of hitting those milestones? Sure. Thanks, Gil. So yeah, I'll put the caveat up front. More details are certainly to come. You know, we just announced this today that there will be filings and certainly a lot of details for us to talk through, but let me give you the high level construct and the way we see this and the way we see us moving forward over certainly the near term, but more importantly, maybe over the medium and long term.

Speaker Change: Yes so.

Speaker Change: In pillar, one way repower automotive and devices.

Speaker Change: The big change is that there.

Henry: Willing to pay more for generative AI.

Henry: Whereas.

Speaker Change: We have 20 years of history here and there is always pressure to constant pressure to lower.

Henry: Scott.

Speaker Change: We see it supported first time youre seeing that that when we say hey, if you want to upgrade to the finance.

Nitesh Sharan: So what we're really excited about here is Amelia is a software business has, you know, strong customer traction, deep and generally really robust relationships that permeate over time, and where you have, you can expand and, you know, and, you know, add upsell, cross sell, expand services, products, and expand margins. They do have multi components to their business, and we will integrate that with our profile, but I've said before, sort of pre this acquisition over the long term, we should have, you know, strong growth profile, very healthy software margins, 70 plus percent gross margins, and at scale, even margins that are 30 plus.

Henry: Bring AI.

Henry: The royalties that you have to pay and they're willing to pay.

Speaker Change: Anecdotal answer to one question.

Henry: In pillar two.

Henry: Sure.

Henry: The big changes that are for AI customer service.

Henry: <unk> are coming to us we.

Henry: We used to go to then be used to knock on their door I'm used to getting a meeting to pitch our value proposition with a big win.

Henry: But now we actually have to calibrate how to handle all the incoming inbound demand.

Speaker Change: I want to move faster they all want to be first.

Henry: Want to go from pilot to production they want to make.

Henry: Sure we can scale with them.

Henry: And that's a much better challenge for us to deal with compared to.

Nitesh Sharan: And I don't think that changes at all with the acquisition. I've said also that you got to think of us in phases. You know, we are migrating to break even phase after sort of call it a call it cash utilization phase. And that's the next horizon for us going into next year and beyond. I think you should think of us as investing in these tremendous growth opportunities, because we do think of these as generational shifts in how humans interacting with technology increasingly through natural conversations and increasingly through voice.

Speaker Change: Just getting getting meetings Thunder.

Henry: Yeah.

Speaker Change: Great and then just a follow up I mean kind of like Gil asked but.

Henry: But even.

Speaker Change: Does it really feel like this.

Speaker Change: Given the momentum Youre seeing now is the time you would deal with this.

Speaker Change: Yes, I'll take that one.

Speaker Change: It's a great time to do a deal.

Henry: I think first of all.

Nitesh Sharan: And so we're going to be in sort of call it that break even zone for a bit, and we'll be funneling incremental dollars into our growth opportunities, because we dare our tremendous growth opportunities. And so I think from an even margin, and even what I mentioned about sort of a creative in the second half, to your point, that's earnings related, but even our profile is generally capital light. And so that translates very seamlessly into cash flow as well.

Speaker Change: We're seeing our technology can permeate into different ecosystems, and we built the core proprietary tech.

Speaker Change: Over many many years and we're seeing it live in action and getting a lot of traction across when we extended from autos into restaurants, and really now bringing in Amelia into the fold does it a few different things some of which we highlighted in our.

Henry: Press release, but there's really a lot more here, it's the diversification of industry.

Nitesh Sharan: So maybe to synthesize all of that is the combination. We will have to integrate. There will be synergy opportunities. There are cost opportunities as well as we look across both firms that we'll be working through. But as you get into next year, certainly we see earnings accretion, we see cash benefits and cash flow benefits. And I think as you start to think through end of 2025 into 2026, you're going to see a much more scaled, still strong growth company, very healthy growth margins, software like, and even margins that are not at our full potential, because we're going to be investing those incremental dollars in our growth opportunities. But certainly shortly thereafter, I think you could think of us as that that 30 plus percent even margin type profile.

Henry: It's really scales that integration.

Henry: They have a great ecosystem of channel partners by the way, which we can leverage across other avenues of our work and there is a great intersection of products synthesis. So when you look at other products that we've been deploying around our smart answering our employer says there is a.

Nitesh Sharan: Thank you.

Henry: Great synergy that we can bring into their ecosystem as well. So when we look at things again, I kind of laid out in the prepared remarks, the framework when we think of inorganic versus organic opportunities.

Henry: When we when we see the market momentum ultimately to your first question, what our customers seem to really thirsting for solutions not just buys out there. It's like how do you utilize this technology to help their customers and to help them grow and it's not only productivity, it's actually about generating new revenue, we see that with the restaurants for example.

Dan Ives: Our next question comes from Dan Ives from Wet Bush Securities. And great quarter, can you just talk about how conversations with prospective customers have changed? You know, with the last three, six months compared to even a year ago, can you just maybe anecdotally talk about that? Just give them where everything's going from the technology perspective, new verticals and studying the view of SoundHound rise, obviously changing dramatically in the market. Thanks. Yeah, so in pillar one, where we power like automotive and devices, the big change is that they are willing to pay more for generative AI, whereas, you know, we have 20 years of history here and there's always pressure to cost and pressure to lower their cost.

Henry: Not only about productivity, obviously, they have workers in store that are overworked and strained and free up their resources is one thing, but we see consistent improvements in upsell and automation never shied away from asking for that large drink or they have extra French fries and those types of things are actually revenue and really meaningful ticket items for our customers. So.

Speaker Change: I think we're seeing those demands we think yes totally cognizant of as I mentioned in prepared remarks that anything meaningful there is integration effort and so forth, but I really I think the way we look at is.

Henry: Over the long term.

Dan Ives: But we see it support the first time you are seeing that when we say, hey, if you want to upgrade to the SoundHound chat AI, we bring generative AI, there's additional royals that you have to pay and they're willing to pay it. So that's the anecdotal answer to the pillar one question. In pillar two, the big changes that are for AI customer service brand are coming to us. We used to go to them, we used to knock on their door, and we used to, you know, getting a meeting to pitch our value proposition was a big win.

Henry: When we when we look at the.

Henry: So the calibration of risks and opportunities. This is the time to be aggressive and this is the time to be thoughtful but definitely to be ingo mode. Because we are hearing it directly from the customers. So I think I.

Henry: I think we've combination with Amelia is something we're very excited about.

Henry: Great. Thanks.

Dan: Thanks, Dan.

Speaker Change: Our next question comes from Mike Latimore from Northland Capital markets.

Mike Latimore: Thanks, guys. Congrats on all the developments here looks great.

Mike Latimore: Yes.

Speaker Change: The query volume growth was 90% in the last quarter, it was 60% year over year.

Speaker Change: Part of that acceleration.

Speaker Change: Yes. It is.

Speaker Change: Automotive partners that upgraded to kind of launch as AI, we did.

Dan Ives: But now we actually have to calibrate how to handle all the incoming inbound demands. And they all want to move faster, they all want to be first, they want to go from pilot to production, they want to make sure we can scale with them. And that's a much better challenge for us to deal with compared to just getting meetings from them. And then just follow up, I mean, kind of like Gil asked, but even to take that, does it really feel like just given the momentum you're seeing.

Speaker Change: You mentioned that when you operate such as AI.

Henry: Because of the journey of AI feature.

Henry: The usage went up so consumers are actually interacting with.

Speaker Change: A lot more.

Speaker Change: Some pilot.

Speaker Change: Order of magnitude.

Henry: So that's one.

Henry: Yeah.

Speaker Change: Also just scaling in pillar, two having more customer service customers.

Speaker Change: Okay great.

Henry: And then on Amelia.

Speaker Change: Can you talk a little bit about the core technology here.

Dan Ives: Now is the time to do a deal like this. Yeah, I'll take that one. Yeah, we think it's a great time to do a deal. I mean, I think first of all, you know, we're seeing our technology can permeate into different ecosystems. We've built the core proprietary tech, you know, over many, many years. And we're seeing it live in action and getting a lot of traction across, you know, when we spend it from autos and to restaurants.

Speaker Change: Is it that they have a kind of a platform that can handle orchestration integration and data security.

Speaker Change: 12 agents on that when we can bring and eurotech or maybe just talk a little bit about kind of what the core elements of their platforms.

Speaker Change: Yes.

Speaker Change: Product.

Speaker Change: Customer service.

Speaker Change: Somewhat omnichannel.

Henry: The first text and voice phone chatbot.

Dan Ives: And really now bringing in a million of the fold does a few different things, some of which we've highlighted in our press release, but there's really a lot more here. It's a diversification of industry. It's really skilled at integration. They have a great ecosystem of channel partners, by the way, which we can leverage across other avenues of our work. And there's a great intersection of product synthesis. So when you look at other products that we've been deploying around our smart answering or employee assist, there's a great synergy that we could bring into their ecosystem as well.

Henry: For both.

Henry: User facing an employee facing.

Henry: And.

Henry: There is a lot of synergies on using our test to power that.

Henry: For example for speech recognition.

Henry: They are using third party API is you would replace that with ours.

Henry: Opportunity for improving accuracy and also.

Henry: Cost savings.

Henry: There was a cloud migration to <unk>.

Henry: Their cloud to Arclight, another cost saving opportunity.

Dan Ives: So when we look at things, again, I kind of laid out in the prepared remarks, the framework when we think of inorganic versus organic opportunities. You know, when we see the market momentum, ultimately to your first question, what are customers seeing the really thirsting for solutions? It's not just buzz out there. It's like, how do you utilize this technology to help their customers and to help them grow? And it's not only productivity, it's actually about generating new revenue.

Henry: <unk>.

Henry: Just the way it works, we think we can.

Henry: Prove a lot after user experiences but.

Speaker Change: It's not just a complete replacement. They also have a lot of innovation over 26 years. So there is an opportunity to take the best of both we saw that also we think three when we bought them. We thought let's go on and look at the best of both and.

Dan Ives: We see that with the restaurants, for example. It's not only about productivity, obviously, they have workers in store that are overworked and strained and freeing up their resources one thing, but we see consistent improvements in upsell. And automation never shies away from asking for that large drinker that's extra french fries. And those types of things are actually revenue and really meaningful ticket items for customers. So, you know, I think we're seeing those demands.

Speaker Change: And create something better and we've done exactly that.

Henry: Yes.

Speaker Change: Excellent great best of luck.

Mike Latimore: Thank you thanks, Mike.

Speaker Change: Our next question comes from Scott Buck.

Speaker Change: From a cheaper right.

Scott Buck: Hi, Good afternoon, guys. Thanks for taking my questions first just curious with the closing of Emilia do you now have all the tools in the toolbox necessary to.

Dan Ives: We think, yes, totally cognizant of, as I mentioned in prepared remarks, that anything meaningful, there's integration, effort, and so forth. But I really think the way we look at it is. Over the long term, you know, when we look at the calibration of risks and opportunities, this is the time to be aggressive and this is the time to be thoughtful, but definitely to be in go mode because we're hearing directly from the customer.

Speaker Change: The three pillar strategy and do it successfully.

Speaker Change: Okay.

Speaker Change: While we've had we've had the tools, we just needed to scale and B.

Speaker Change: We reached a point, where we constantly have that scale earlier. This year, we are now millions of cars.

Speaker Change: Double digit thousand.

Speaker Change: And locations for in pillar, two so just connecting them together.

Keyvan Mohajer: So I think, you know, I think we've combination with Amelia has something we're very excited about. Great.

Speaker Change: It seemed like at the right time, you also have national coverage of certain brands like Chipotle for example.

Keyvan Mohajer: Thanks.

Keyvan Mohajer: Thanks, Sam.

Mike Latimore: Our next question comes from Mike Latimore, from Northern Capital Markets. Thanks, Sam. Congrats on all the development there. Looks great. Yeah, the query volume growth was 90% and last quarter it was 60% year over year. What was that acceleration? Yeah, as I said, it's automatic partners that upgraded to SoundHound chat AI. We did mention that when you operate the chat AI because of the generated AI feature, the usage went up. So consumers are actually interacting with the system a lot more in some pilots. It was an order of magnitudes. So that's one. And also just scaling in Pilar to having more customer service customers.

Speaker Change: And the acquisition of.

Speaker Change: I'll set earlier.

Speaker Change: He is going to accelerate the integration now we just need to do the integration of bringing those pillar two customers into pillar one products.

Speaker Change: And.

Speaker Change: With Amelia.

Speaker Change: Just massively increased our scale in pillar two so going from double digit thousand locations, mostly in restaurants now we are in.

Speaker Change: Almost 200 large.

Speaker Change: Enterprise brands in new vertical for us. So we are in retail now heavier in hospitality.

Speaker Change: Financial services insurance and healthcare.

Speaker Change: Okay. So there are no hold in tech that you still need to fill it is now.

Speaker Change: Accelerating as grilli, absolutely absolutely yes.

Speaker Change: Okay perfect. That's helpful. And then you've had some nice wins and then obviously some big opportunities out in front of you I am curious from an implementation capacity standpoint, whether.

Mike Latimore: And then on Amelia, can you talk a little bit about the core technology here? Is it that they have a kind of a platform that can handle orchestration integration of data security? You know, develop agents on that and then they can bring in your tech or maybe just talk a little bit about kind of what the core elements of their platform is. Yeah, so they have productized customer service on the channel.

Speaker Change: Whether or not you need to.

Speaker Change: Go through a process of significant hiring or.

Speaker Change: Tween.

Speaker Change: Your own team and the team youre, bringing on through Amelia you have the.

Speaker Change: I guess the hands on deck to to.

Speaker Change: To meet that.

Speaker Change: To meet that demand.

Speaker Change: Sure.

Speaker Change: Alright.

Speaker Change: Yes.

Speaker Change: Yes, I think we're in a good spot we have been steadily hiring in pockets, where we've needed it to accelerate.

Mike Latimore: So they support text and voice phone and chatbots for both user-facing and employee-facing. And there is a lot of synergies on using our tech to power that. For example, for speech recognition, they are using third party APIs. We would replace that with ours. This opportunity for improving accuracy and also cost savings. There was a cloud migration for them to bring their cloud to our cloud and other cost savings opportunity. And just the way AI works, we think we can improve a lot of the user experiences.

Speaker Change: Overall, we've been in a good spot where attrition has been low and we have our talent and he's really passionate about what they are driving and sometimes they do need additional resources that are scaling with customers.

Speaker Change: So there has been measured measured hiring.

Speaker Change: I think.

Speaker Change: We know in pockets, where if we see an opportunity to go faster we don't.

Speaker Change: I think we've talked about this maybe a quarter or two ago like we don't want a customer waiting for six months.

Speaker Change: So we really wanted to get the resources to be able to start to.

Speaker Change: Activate.

Speaker Change: But I'd say generally no major holes, but because there is growth there is going to be some hiring to support that and then I would also add that again across the companies Theres. There are synergy opportunities bolt on revenue upsell and cross sell and leveraging that omnichannel opportunity, where they bring to the table to amplify our voice capabilities.

Mike Latimore: But it's not just a complete replacement. They also have done a lot of innovation over 26 years. So there's an opportunity to take the best of both. We saw that also we think three when we bought them. We thought that's going to look at the best of both and create something better and we've done exactly that. Excellent. Great. That's a lot. Thanks.

Mike Latimore: Thanks, Mike.

Speaker Change: And I think Theres, just some overhead things that naturally there is going to be cost synergies. So that's the work that we're taking off really honestly.

Speaker Change: But yes to your point on or maybe just like from a tech stack no major holes from a product capabilities no major holes from a resourcing no major holes, but when youre growing youre constantly expanding and you're kind of adding to as you go in and that's kind of what we're always mindful of to make sure that we have what we need to grow.

Scott Buck: Our next question comes from Scott from H.E.B.W.R.

Scott Buck: Hi, good afternoon, guys. Thanks for taking my questions.

Keyvan Mohajer: First, I'll just curious with the closing of Amelia, do you now have all the tools in the toolbox necessary to complete the three-pillar strategy and do it successfully? Well, we've had the tools. We just needed the scale. And we reached the point where we thought we had that scale earlier this year. We are now in millions of cars and you know, double digit thousand locations for in pillar two. So just connecting them together seemed like at the right time.

Speaker Change: Yes, that's helpful guys I appreciate the added color that's it for me.

Speaker Change: Thank you great. Thank you.

Speaker Change: Our next question comes from Brett Knoblauch.

Brett Knoblauch: From Cantor Fitzgerald.

Brett Knoblauch: Hey, guys. Thanks for taking my question and congrats on the acquisition I guess, just kind of thinking a bit deeper there I think in your prepared remarks, you guys talked about there being some slower growth lower margin businesses and probably in the flip side, some higher growth higher margin businesses.

Speaker Change: Maybe you can provide a framework for what that business is growing at an.

Keyvan Mohajer: You also have national coverage of certain brands like Chipotle, for example. And the acquisition of all sets earlier is going to accelerate the integration. Now we just need to do the integration of bringing those pillar two customers into pillar one product. And with Emilia, we just massively increased our scale in pillar two. So going from double digit thousand locations mostly in restaurants. Now we are in almost 200 large enterprise brands in new verticals for us. So we are in retail now. We are in hospitality. We are in financial services insurance and healthcare.

Speaker Change: Additionally, walk us through why they sold for $80 million with expectations to do $45 million of revenue. It seems like a phenomenal purchase price for you guys, but I guess why the seller has agreed to that I guess.

Speaker Change: That has not had an interim anymore. I guess can you just talk about how that process happen as well.

Speaker Change: Yeah, Thanks, Matt I'll say, a couple of things first again more details to come.

Speaker Change: See a lot more.

Speaker Change: <unk>.

Speaker Change: The breakout in the details of the.

Speaker Change: The financial profile of the 8-K that we filed this morning on the transaction actually walk through the the deal economics, and maybe I'll just start there so theyre actually where multiple components. So there was sort of an upfront piece.

Speaker Change: Some cash some stock and there is also a part of assumption of debt and we paid back part of that debt that was announced concurrently and then like we've done in prior acquisitions, we like to share in the economics over time with delivery against our milestones and expectations that we're setting in concurrence with the target.

Keyvan Mohajer: Okay, so there are no holes in tech that you still need to fill. It's now just about accelerating. Absolutely.

Keyvan Mohajer: Okay, perfect. That's helpful.

Keyvan Mohajer: And then you know, you've had some nice wins and then obviously some big opportunities out in front of you. I'm curious from an implementation capacity standpoint, whether or not you need to go through a process of significant hiring or between your own team and the team, you are bringing on to Emilia. You have the, I guess the hands on deck to meet that demand. Yeah, I'll jump. Yeah, I think we are in a good spot.

Speaker Change: And so all of those parts of their I think 80 is probably just a partial view just to be clear. So there is again, some debt components and other things and some earn out.

Speaker Change: But we do I think maybe the essence of what's your question is is value and certainly both parties need to say there is alignment of value for any deal to make sense and we've been going through that with them and parse part of it is when you do stock transactions there needs to be an attribution to future value of that stock and there is a real belief both sides of what we can become and what we're starting to become.

Keyvan Mohajer: We have been steadily hiring in pockets where we've needed it to accelerate. I think overall we've been in a good spot where the insurance has been low. And we have our talent who is really passionate about what they are driving. And sometimes they do need additional resources that are scaling with customers. And so there has been measured, measured hiring. And we, I think we know in pockets where if we see an opportunity to go faster, we don't, I think we talked about this maybe a quarter or two ago, like we don't want a customer waiting for six months.

Speaker Change: When you unpack all of that from deal economics.

Speaker Change: That's why this transaction was successful why we got it to this place.

Speaker Change: Then the other question was sort of unpacking of the various pieces of the business. So we did articulated in the press release about the $45 million of they are they do have a strong recurring business that has been over time shifting from a licensing model and so that transition has happened and so that's a really that's what we valued really it was growing.

Speaker Change: Our business across those industries, we talked about earlier really rich set of customers.

Keyvan Mohajer: So we really want to get the resources to be able to start to activate. But you know, I'd say generally no major hold, but because there's growth, there's going to be some hiring to support that. And then I also add that again across the companies, there's there's there's synergy opportunities both on revenue upsell and cross sell and you know leveraging that omnichannel opportunity where they bring to the table to amplify our voice capabilities. And and I think there's just some overhead things that naturally there, there's going to be cost energy. So that's the work that we're picking off really earnestly.

Speaker Change: Too big to fail banks and those types of people that will take us a long time to really.

Speaker Change: Develop a system that support and so we're very very excited about that but they do have other pieces and professional services a lot of.

Speaker Change: <unk> had a complicated there is implementation customization services.

Speaker Change: And those can be very valuable they tend to be a little lower margin and so that's a little bit of a deal we were alluding to and then they also have this.

Speaker Change: The piece of the business that's more call center like think of it maybe in.

Speaker Change: Sure.

Speaker Change: Escalation support type capabilities and those are.

Keyvan Mohajer: But you know, to your point on, or maybe as prior, like from a tech stack, no major holes from a product capabilities, no major holes from a resourcing, no major holes. But when you're growing, you're constantly expanding and you're, you're kind of adding to as you go. And and that's kind of what we're always mindful of to make sure that we have what we need to, to grow. Yeah, that's helpful, guys. I appreciate the added color.

Speaker Change: Partners that we work with and revenue that they generate is lower margin business and we do openly need to dive in and understand contract by contract what makes sense and.

Gil Luria: Gil question earlier, I talked about what's the profile of the business we're building.

Speaker Change: We're really happy as a AI centric in our next generation technology software provider that from my seat goes like Hey, 70, plus percent gross margin, 30% EBIT margins at scale.

Scott Buck: That's it for me. Thank you.

Brett Knoblauch: Our next question comes from Brett Knoblauch from Canter Fitzgerald. Hey guys, thanks for taking my question and congrats on the acquisition. I guess just kind of taking a bit deeper there. I think you're prepared to march. You guys talked about there being from slower growth, lower margin businesses and probably in the flip side. We've had some higher growth, higher margin businesses.

Speaker Change: Bits and bytes, they can transition and scale very quickly.

Speaker Change: But when we need to provide services to support integration environments, we'll provide that when there are like we had with sync three some call center capabilities that are additive and by the way appropriately measured with the customer where there is data that we can utilize to enhance the model.

Brett Knoblauch: Maybe you provide a framework for what that business is growing at and additionally walk us through why they sold for $80 million with expectations to do $45 million of revenue. It seems like a phenomenal purchase price for you guys, but I guess why the sellers agreed to that? I guess that it's not having any more. I guess you just talked about how that process happened as well.

Speaker Change: Enhance the technology will leverage that.

Speaker Change: So yes, there are different pieces of our business the different growth rates.

Speaker Change: And we're going to calibrate and we're just we're just getting going so again more details to come so stay tuned.

Speaker Change: Perfect.

Speaker Change: So.

Speaker Change: I think you guys also talked about how you like having the optionality to kind of.

Speaker Change: Go back and forth between different.

Speaker Change: Models that youre integrated with whether it be perplexity or chat GTT I was just wondering from the cost side on from your point of view I guess how are they building you is that a usage model is it a onetime setup fee I guess, how should we think of.

Brett Knoblauch: Yeah, thanks Brett. I'll say a couple of things. First again, more details to come. We'll see a lot more around the breakout and the details of the financial profile. The 8K that we filed this morning on the transaction actually walked through the deal economics. Maybe I'll just start there. There were actually multiple components. There was sort of an upfront piece, some cash, some stock. There's also a part of the assumption of debt and we paid back part of that debt that was announced concurrently.

Speaker Change: About that dynamic.

Speaker Change: Yes so.

Speaker Change: Something we predicted before they vary by multiple models, but that is more than a year ago.

Speaker Change: There will be multiple models.

Speaker Change: There will be good at different things.

Speaker Change: And some of the cheaper and more expensive in some of the one that made by US leave open source.

Brett Knoblauch: Like we've done in prior acquisitions, we like to share in the economics over time with delivery against the milestones and expectations that we're setting in concurrence with the target. All those parts are there. I think 80 is probably just a partial view just to be clear. There is again some debt components and other things and some earn out. But we do, I think maybe the essence of what your question is is value.

Speaker Change: So we built an infrastructure to be able to tap into different models.

Speaker Change: Arbitrate choose the right one.

Speaker Change: And even for a single inter.

Speaker Change: Interaction, sometimes you go to market models.

Speaker Change: Same time.

Speaker Change: That is working it seamless.

Speaker Change: The user experience is amazing they don't need to worry about where it's coming from is just get the right answer and then it's followed them as they asking questions.

Brett Knoblauch: And certainly both parties need to say there's alignment of value for any deal to make sense. And we've been going through that with them. And part of it is when you do stock transactions, there needs to be an attribution to future value of that stock. And there's a real belief both sides of what we can become and what we're starting to become. So I think when you unpack all that from deal economics, that's why this transaction was successful, why we got it to this place.

Speaker Change: Sure.

Speaker Change: Now.

Speaker Change: In terms of billings.

Speaker Change: It's.

Speaker Change: Again some of these are models that we host so the cost is mainly hosting.

Speaker Change: And.

Brett Knoblauch: Then the other question was sort of an unpacking of the various pieces of the business. So we did articulate in the press release about the 45 million of AR. They do have a strong recurring business that has been over time shifting from the licensing model. And so that transition has happened. And so that's a really, you know, that's what we value. It was a growing AR business across those industries we talked about earlier, really rich set of customers, you know, too big to fail banks in those types.

Speaker Change: For that the API like open AI on others.

Speaker Change: You can sign up for enterprise accounts to bring the cost down and get more scale with them.

Speaker Change: Something that we are doing.

Speaker Change: And then there are companies like perplexity that list prices and then we have an arrangement with them that we can.

Speaker Change: Go to then when at scale too.

Speaker Change: For example, Rev sharing arrangements or lower prices at scale. So.

Brett Knoblauch: So people that would take us a long time to really develop a system to support. And so we're very, very excited about that. But they do have other pieces. They have professional services. A lot of the deals they've had are complicated. There's implementation, customization services. And those can be very valuable. They tend to be a little lower margin. And so that's a little bit of what we were alluding to. And then they also have this piece of the business that's more call center like I think of it maybe in.

Speaker Change: Future proof that for that.

Speaker Change: But it's too early to go into specifics on it.

Speaker Change: Yes.

Speaker Change: Perfect. Thank you.

Speaker Change: Congrats on the transaction again guys.

Brett Knoblauch: Thanks, Brett.

Speaker Change: Our next question comes from Glenn Mattson bladder for Tommy.

Glenn Mattson: Hi, Thanks for taking the question building on that last question a little bit with the.

Speaker Change: <unk> new release chat GPT maybe.

Brett Knoblauch: I agree with that as escalation support type capabilities. And those are, you know, partners that we work with and revenue that they generate that is lower margin business. And we do openly, you know, need to dive in and understand contract by contract. What makes sense in a guild question earlier, I talked about what's the profile of business we're building. We're really happy is a AI centric, you know, next generation technology software provider that for my seat goes like a 70 plus percent gross margin 30 percent even margins of scale.

Glenn Mattson: Can you just talk about how you plan ahead for something like that and maybe there is.

Speaker Change: Obviously the opportunities, but perhaps is there any risks associated with maybe that could come out with some functionality that could.

Speaker Change: Potentially be competitive on the very low end or something like that so anyway.

Speaker Change: Generally speaking.

Speaker Change: Managing the evolution of this process as well as maybe you can hit on other factors of the competitive landscape when we.

Speaker Change: When you talk about this just in general whether it be colored water pillar two.

Brett Knoblauch: You know, bits and bytes that can transition on scale very quickly. But when we need to provide services to support integration environments will provide that. When there are like we had with sink three, some call center capabilities that are additive and by the way, you know, appropriately measured with the customer where there's data that we can utilize to enhance the model and enhance the technology will leverage that. So yeah, there are different pieces of business, different growth rates, and we're going to calibrate and we'll just get them going.

Speaker Change: Yeah, so in terms of.

Speaker Change: Advancements by NII and other similar companies, we positioned ourselves so that.

Speaker Change: As they do as they do better it benefits us as opposed to his heart pardon me guys. So we are able to use.

Speaker Change: Whatever they put out thats good.

Speaker Change: And if some of those.

Speaker Change: Overlap it.

Speaker Change: Nothing that we already have.

Speaker Change: We don't hesitate too.

Speaker Change: Integrated because our goal is to deliver really really good user experiences and that was one of the advantages are somehow Gwen the big Tech players.

Brett Knoblauch: So again, more details to come to a state-to-end.

Brett Knoblauch: Perfect, as you know, it's very helpful. I think you guys also talked about how you like having the optionality to kind of go back and forth between different models that you're integrated with, whether it be perplexity or chat GDT.

Speaker Change: It's oriented for more than a year or let's go build our own youre never going to work.

Speaker Change: Yes.

Speaker Change: We did it in two days.

Speaker Change: And.

Speaker Change: Thats really benefits US we were the first to go live with our customers and the AI assistance that in television.

Brett Knoblauch: I was just wondering from the call side on, from your point of view, I guess, how are they building you? Is that a usage model? Is it, you know, one time set up? See, I guess how should we think about that dynamic?

Speaker Change: Sure.

Speaker Change: So we love it when they come up with something that is good because we can make our products better.

Brett Knoblauch: Oh yeah, so something we predicted before the very main multiple models was that this is more than a year ago, but that there will be multiple models, they will be good at different things, and some will be cheaper, some will be more expensive, and some will be owned and made by us, some will be open source. So we built an infrastructure to be able to tap into different models, arbitrate, choose the right one, and even forward a single interaction, sometimes you go to multiple models at the same time.

Speaker Change: I don't think they are going after the our customers because it takes a lot of integration a lot.

Speaker Change: Sort of handholding and a lot of.

Speaker Change: Support too it's not just a model we have to integrate for example in restaurant you have to integrate with Pos.

Speaker Change: Defense and you have to integrate their menu we have to understand their their needs in automotive.

Speaker Change: The head units and the navigation software in the car the car control features.

Speaker Change: And those integrations.

Speaker Change: Even.

Speaker Change: So theyre not going to go after those be kind of a platform to enable companies like ours.

Brett Knoblauch: And that is working. It's seamless. The user experience is amazing. They don't need to worry about where it's coming from. We just get the right answer, and then it follows them as they ask different questions and for one. Now, in terms of filling, it's, again, some of these are models that we host, so the cost is mainly hosting, and for the API, like OpenAI and others, you can sign up for enterprise accounts to bring the cost and get more scale with them, and that's something that we are doing.

Speaker Change: The advantage for US is that we have a lot of core technologies to augment what they have to really enable things that other companies are waiting for something to become available. We already have that so we can go fast.

Speaker Change: I think I answered your question, but yes.

Speaker Change: Beyond that would be possibly the competitive landscape there has been any changes.

Speaker Change: Possibly then down to pillar, one or just across the board in terms of debt.

Speaker Change: Traditional competitors thanks.

Speaker Change: Yes, I'll jump in.

Speaker Change: I think.

Speaker Change: So pillar one.

Brett Knoblauch: And then there are companies like perplexity that have list prices, and then we have an arrangement with them that we can go to them when it's scaled to, for example, ref share arrangement or lower prices that scale.

Speaker Change: It was really.

Speaker Change: The same same group and we've been gaining traction we've been gaining brands and we feel great.

Speaker Change: <unk> comment around automotive.

Speaker Change: Broader than automotive into other devices that we operate in we've got a great position and we continue to gain traction there.

Brett Knoblauch: So the future proves that for that, but it's too early to go into specifics of it.

Speaker Change: Within pillar two.

Speaker Change: Hot area. They are people coming in I would say people who.

Speaker Change: We don't have the technology to compete who are struggling and.

Brett Knoblauch: Perfect. Thank you. I really appreciate it.

Brett Knoblauch: Thanks for having us.

Speaker Change: We really have felt this way we've seen it I think what we're seeing from customer traction is that we are.

Brett Knoblauch: Thanks, Brett.

Glenn Mattson: Our next question comes from Glenn Martin from Vladimard, Tom.

Speaker Change: Phil and we say this very humbly because things change in a heartbeat and tech land.

Glenn Mattson: Hi. Thanks for taking the question. I'm building on that last question a little bit with, you know, expected new release of chat GPT. Maybe, you know, can you just talk about how you plan ahead for something like that, and maybe there's obviously opportunities, but perhaps is there any risk associated with the, you know, maybe they could come out with some functionality that could potentially be competitive on a very low Anderson like that.

Phil: Step function above others in terms of technology capability and the solutions that we have and frankly, the packaged solutions that we have.

Speaker Change: Drive through phone ordering.

Speaker Change: <unk> SaaS solutions.

Speaker Change: And beyond we're moving heavily beyond just <unk>.

Speaker Change: <unk> site, but into in App into taxed et cetera, and there is a ton of engagement that we have the full portfolio of solutions. So we really think we've got a running start on the restaurant side, but yes. There is it's a very very attractive market and it's maybe one of the most.

Glenn Mattson: So anyway, just, just generally speaking, managing the evolution of this process, as well as maybe you can hit on other factors of the competitive landscape when we went when you talk about this, just in general, whether it be color, water, pillow, too. Yeah, so in terms of advancements by Othena AI and other similar companies, we position ourselves so that, as they do better, it benefits us, as opposed to it's harming us.

Speaker Change: Sort of logical use cases of AI. So I think we're going to continue to see entrants, but we look at that as a good thing. It's a sign of a healthy market, but again, we feel like we've got a really strong position and really wouldn't trade our spot with anybody else.

Speaker Change: Great. Thanks for that color you gave on thanks.

Glenn Mattson: So we are able to use whatever they could have that's good. And if some of those overlap with something that we already have, we don't hesitate to integrate it because our goal is to deliver really, really good user experience. And that was one of the advantages of SoundHound when the big tech players were kind of disoriented for more than a year, or let's go build our own, you're never going to use open AI APIs, we did it in two days.

Speaker Change: Okay, great. Thank you.

Speaker Change: Our next question comes from Leo Carpio.

Leo Carpio: Well Joseph Gunnar.

Leo Carpio: Good afternoon, gentlemen, first congratulations on the deal and on the quarter.

Leo Carpio: Turning the dial a little bit further into Amelia in terms of the deal can you just talk us through in terms of who approached who for this transaction. How did you became aware of Amelia and then looking forward post Emilia what other verticals and you may be interested in.

Speaker Change: Thinking here being that as you.

Glenn Mattson: And that's really benefit us, we were the first to go alive with our customers and the first AI assistants that inter-regionative AI I'm so on. So we love it when they come out with something that is good because they say, hey, we can make our products better. I don't think they are going after our customers because it takes a lot of integration, a lot of handholding and a lot of support to, it's not just a model, we have to integrate, for example, in restaurants, we have to integrate it with POS systems and we have to integrate their menu, we have to understand their needs, you know, automotive is integrated with the head unit and the navigation software in the car, the car control features.

Speaker Change: For voice AI and develop the capabilities you may discover second third derivative technologies that may be of interest to you that could bolster your platform and capabilities.

Speaker Change: Sure.

Speaker Change: Yes.

Speaker Change: Maybe with the framework I laid out in the prepared remarks first of all we think that.

Speaker Change: Having.

Speaker Change: Or at least being open to the idea of having programmatic M&A and being aware of who the players are.

Speaker Change: From partnership perspective.

Speaker Change: To Glenn's question on from a competitive perspective being aware of what's going on in the marketplace is just it's part of who we are so we're always aware, we've known of Emilia they've been doing some great things for a long time.

Glenn Mattson: And that's those integrations, even open AI has probably said they are not going to go after those, they're becoming a platform to enable companies like ours. And the advantage for us is that we have a lot of core technologies to augment what they have to really enable things that, you know, other companies are waiting for something to become available, we already have that so we can go fast. I think I answered your question, but Yeah, no, it's just beyond that, but it's possibly the competitive landscape, there's been any changes, you know, possibly then down to pillar one or just across the board in terms of the traditional competitors, thanks.

Speaker Change: And you can imagine in this space.

Speaker Change: In the AI space over the last I guess 18, 20 months now lot of bankers come up with ideas and so so we.

Speaker Change: We've had interactions.

Speaker Change: There were there is dialogue around partnerships and we're heavily kind of going in our verticals.

Speaker Change: As Kevin noted you got to start with the sort of overarching vision. We believe we are here to voice enable the world with conversational intelligence. We think that there is a migration happening omnichannel in essence, and its going to permeate across all industries. So the end of period at the end of incentives wasn't always okay. We're in restaurants, Don where an auto has done it.

Speaker Change: As always to sort of.

Glenn Mattson: Yeah, I'll jump in. So, you know, I think pillar one, you know, we've really kind of the same group and we've been gaining traction, we've been gaining brands and we feel great and that's a primary common around automotive, you know, broader than automotive and other devices that we operate in, we've had a great position and we continue to gain traction there. Within pillar two, you know, it's a hot area, there are people coming and I would say people who are, you know, who don't have the technology to compete who are struggling.

Speaker Change: As Kevin noted kind of evolved from our Oregon industries into beyond. So the question then is like where when and how and with whom are doing it organically and those are iteration comments that where our conversations were constantly working through.

Speaker Change: So in this case, yes, we connected.

Speaker Change: We started to explore just get to know and then it sort of move from there.

Speaker Change: Every I don't want to go into details on their situation and what they were motivated by but ultimately kind of landed in hey is there a potential for a combination and then you have to explore the complexity of the deals which we these things don't happen in short order they definitely our long journey of due diligence.

Glenn Mattson: And, you know, we really have felt this way, we've seen it, I think what we're seeing from customer traction is that we are still, and we say this very humbly, because things change in a heartbeat and tech land, we are step function above others in terms of technology capability and the solutions that we have. And frankly, the package of solutions we have from, you know, drive through phone ordering, employee assist solutions and beyond, you know, we're moving heavily beyond just at point site but into in-app, into text, etc.

Speaker Change: Getting to know one another to understand their cultures and could there potentially be a fit and so we've been we've been going on that for several months.

Speaker Change: And.

Speaker Change: Sort of landed where we were and then I think maybe just to hit the other part in terms of is this I think I think your question was like industries is this is that the right.

Speaker Change: I'll try to address it this way that.

Speaker Change: Humans have been interacting through voice and conversation forever and yet our technology is kind of chasing that play.

Glenn Mattson: And there's a ton of engagement that we have the full portfolio solution. So, we really think we got a running start on the restaurant side, but yeah, there's, it's a very, very attractive market and it's maybe one of the most sort of logical use cases of AI, so I think we're going to continue to see entrance. We look at that as a good thing, it's a sign of a healthy market. But again, we feel like we've got a really strong position and really wouldn't trade our spot with anybody else. Great. Thanks for that color, Nitesh and Keyvan. Thanks. Great. Thank you.

Glenn Mattson: Our next question comes from Leo Carpio.

Speaker Change: And we do think we're at the precipice of where human interactions with technology in all manifestations can can happen through natural conversations and there will be great places, where the touch-type swipe as the best medium, but there will be more and more opportunities where conversations and using your voice will be divested.

Speaker Change: Medium so.

Speaker Change: I don't think Theres a boundary on like this industry that industry, it's really about journeys.

Speaker Change: And consumer journeys. So again it makes sense for if you're driving your car you want to pick up coffee great well. There is a connection makes sense. When you are just at the drive thru.

Leo Carpio: Good afternoon, gentlemen. First congratulations on the deal and on the quarter. I'm going to dive a little bit further into Amelia.

Speaker Change: Order your food and it makes sense, if youre driving you want to set an appointment or book traveler, so forth or I think theres. So many interactions and so we're just getting started here.

Leo Carpio: In terms of the deal, can you have a focus through in terms of who approached who for this transaction? How did you become aware of Amelia? And then looking forward, post Amelia, what other verticals you may be interested in thinking here being that as you explore a voice AI and develop the capabilities you may discover, second, third derivative technologies that may be of interest to you that could bolster your platforming capabilities. Sure.

Speaker Change: We think this is the right action for US now and so we're excited to embark upon the journey with Amelia and continue on the journey that we've been driving for the past many years.

Speaker Change: Okay, and then a quick follow up question on the restaurant side.

Speaker Change #116: The tenor of the conversations have they switched from one where your marketing team is proactively reaching out to potential customers or are they now slipping in terms of coming their inbound calls to you.

Keyvan Mohajer: Yeah, maybe I'll start maybe with the framework I laid out and the prepared remarks. Like, first of all, we think that having, or at least being open to the idea of having programmatic M&A and being aware of who the players are, you know, from partnership perspective, you know, to Glenn's question on from a competitive perspective. So being aware of what's going on in the marketplace is just our, it's just part of who we are.

Speaker Change: Yes, we've kind of done for the last couple of quarters. It really has been a pretty significant shift towards the latter were originally call. It <unk>.

Speaker Change: <unk> 20 months ago, we were really on the outreach side.

Speaker Change: I think your question was predominantly for restaurants, if I'm not mistaken so.

Speaker Change: Certainly in that industry. It has.

Keyvan Mohajer: So we're always aware we've known of Amelia. You know, they've been doing some great things for a long time. And you can imagine in this space, it's particularly in the AI space of the last, I guess, it's 18, 20 months now. A lot of bankers come out with ideas. And so, you know, we've had interactions and, you know, there's dialogue around partnerships and we were heavily kind of going in our verticals.

Speaker Change: We're working through making sure that there isn't too much of a white await because we're working through integrations with some major <unk> is kayvon noted trying to make sure we're serving all of our customers equally with excellence and so.

Speaker Change: We're not working with everybody. So there's still more conversations to be had but were going out to conferences. We're getting leads we're talking to people. Some of those conversations take place over time. The other thing that these are a virtuous cycle. If you do if you can do well in one instance that word gets around pretty quickly.

Keyvan Mohajer: And as Kayvon noted, you got to start with the sort of overarching vision. You know, we believe we are here to voice enable the world with conversational intelligence. We think that there's a migration happening omnichannel in essence. And it's going to permeate across all industries. So the the end all period at the end of the sentence wasn't always okay. We're in restaurants done. We're in, you know, auto is done. It was always to sort of, as Kayvon noted, kind of evolve from our origin industries and to beyond.

Speaker Change: And also in a lot of these franchises that we're working with now it's not just like a brand to our brand, but if you work with.

Speaker Change: Corporate and then it gets down to the franchise level and some franchisees have.

Speaker Change: A big number of dozens and dozens of locations and some of them have.

Speaker Change: Hundreds of locations. So so again.

Keyvan Mohajer: So the question then is like, well, when and how and with whom are doing it organically. And those are iteration comments that were, our conversations were constantly working through. So in this case, yeah, we connected, you know, we started to explore, we just get to know and then it sort of moved from there. And every, you know, I don't want to go into details on their situation and what they were motivated by.

Speaker Change: It was really moved towards.

Speaker Change: Ah respond to but that doesn't mean, we're going to slow down on our outreach and we didn't really I think talk a lot about just beyond the restaurants and the smart answering capabilities well last time, we talked about in the fitness.

Speaker Change: Yes.

Speaker Change: Space with planet fitness.

Speaker Change: There's a lot going on on that side too beyond just restaurants that we're getting a lot of traction. So so just excited to keep going forward and.

Keyvan Mohajer: But ultimately kind of landed in, hey, is there a potential for a combination? And then you have to explore the complexities of deals which, you know, these things don't happen in short order. They definitely are a long journey of due diligence and getting to know one another to understand, you know, the cultures and it could there potentially be a fit. And so we've been, you know, we were going on that for several months and sort of landed where we were.

Speaker Change: As long as we deliver great products, we think the customers will will come.

Speaker Change: Okay, well congratulations on the quarter.

Speaker Change: Thank you very much.

Speaker Change: Okay.

Speaker Change: There are no further questions at this time. So this now concludes today's call. Thank.

Speaker Change: Thank you for joining you may now disconnect.

Keyvan Mohajer: And then I think maybe just to hit the other part, you know, in terms of is this, I think, I think your question was like industries, is this, is that the right? That, you know, I'll, I'll try to address it this way that humans have been interacting through voice and conversation forever. And, and yet our technology is kind of chasing that play. And we do think we're the precipice of where human interaction and with technology in all manifestations can, can happen through natural conversations.

Speaker Change: Okay.

Speaker Change: [music].

Keyvan Mohajer: And, and there will be great places where the touch type swipe is the best medium, but there will be more and more opportunities where conversations and, and, and using your voice will be the best medium. So I don't think there's a boundary on like this industry, that industry, it's really about journeys and consumer journeys. So again, make sense for, if you're driving your car, you want to pick up coffee. Great, well there's a connection.

Keyvan Mohajer: Make sense when you're just at the drive-through and you want to order your food. It makes sense if you're driving, you want to set some appointments or book traveler, you know, so forth or like there's so many interactions. And so it's, we're just getting started here. You know, we think this is the right action for us now. And so we're excited to embark upon the journey with Amelia and continue on the journey that we've been driving for, for the past many years.

Keyvan Mohajer: Okay, and then a quick follow-up question on the restaurant side. The alternative conversations have they switched from one where your marketing team is proactively reaching out to potential customers or are they now flipping in terms of coming their inbound calls to you? Yeah, we commented for last couple quarters, there really has been a pretty significant shift towards the latter where you know originally call it 15, 20 months ago we were really on the outreach side.

Keyvan Mohajer: I think your question was predominantly for restaurants if I'm not mistaken, so that certainly in that industry it has, you know, we're working through making sure that there isn't too much of a white, oh wait, because we're working through integrations with some major QSRs as Kevan noted, trying to make sure we're serving all our customers equally with excellence. And so we're not working with everybody, so there's still more conversations to be had.

Keyvan Mohajer: But we're going out to conferences, we're getting leads, we're talking to people, some of those conversations take place over time. The other thing that these are virtuous cycles, if you do, if you can do well in one instance, the order gets around pretty quickly. And also in a lot of these franchises that we're working with now, it's not just like a brand to a brand, but if you work with, you know, a corporate and then it gets to down to the franchise level and some franchisees have a number of, you know, dozens and dozens of locations and some of them have, you know, hundreds of locations. So again, it was really moved towards a response, too, but that doesn't mean we're going to slow down on our outreach.

Keyvan Mohajer: And, you know, we didn't really, I think, talk a lot about just beyond the restaurants and the smart answering capabilities. Last time we talked about in the fitness space with planet fitness. You know, there's a lot going on on that side, too, beyond just restaurants that we're getting a lot of traction. And so, just excited to keep going forward. And, you know, as long as we deliver great products, we think the customers will come.

Operator: Okay, well, congratulations on the corner. Thank you very much.

Speaker Change: [music].

Speaker Change: [music].

Speaker Change #101: Hello, and thank you for standing by the side would like to welcome you to the Sound House Q2, 2024 earnings Conference call.

Speaker Change: All lines have been placed on mute to prevent any background noise.

Speaker Change: After the Speakers' remarks, there will be a question and answer session.

Speaker Change: He would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.

Speaker Change: If you would like to withdraw your question Press Star one again.

Speaker Change: I would now like to turn the conference over to Scott Smith head of Investor Relations. Please go ahead.

Scott Smith: Good afternoon, and thank you for joining our second quarter 2024 conference call.

Speaker Change: With me today is our CEO came on Azure and our CFO and a test Sharon we will begin with some short remarks before moving to Q&A.

Speaker Change #108: We would also like to remind everyone that we'll be making forward looking statements on this call.

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

Speaker Change: Please refer to our filings with the SEC for a detailed discussion of the risks and uncertainties that could affect our business and.

Speaker Change: And for a discussion statements that qualify as forward looking statements.

Speaker Change: In addition, we may discuss certain non-GAAP measures.

Speaker Change: Please refer to today's press release for a more detailed financial results.

Speaker Change: And further details on the definitions limitations and uses of those measures and reconciliations from GAAP to non-GAAP.

Speaker Change: Also note that the forward looking statements on this call are based on information available to us as of today's date.

Speaker Change: We undertake no obligation to update any forward looking statements, except as required by law.

Speaker Change: Finally, this call is being audio webcast in its entirety on our Investor Relations website.

Speaker Change: An audio replay will be available following today's call.

Speaker Change: With that I would like to turn the call over to our CEO Kayvon Malhotra. Please go ahead kayvon.

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

Kayvon Malhotra: Before getting into the quarter I wanted to talk about the announcement, we made this morning to acquire it conversational AI leader familiar.

Speaker Change: This transaction is a natural extension of our strategy and we saw a great opportunity to partner with a company that we believe will accelerate our mission our voice, enabling the world with conversational intelligence.

Speaker Change: Our vision has always been to create a conversational AI platform that exceed human capabilities delivers value and delight end users create an ecosystem with billions of products and enables innovation and monetization opportunities for our product creators.

Speaker Change: Today's announcement is a continuation of that path and now it's the time for such a bold move.

Speaker Change #101: <unk> is a leader in voice AI and we have built a platform that we can perfect deleverage to expand into new market.

Speaker Change: Coming together with familiar is an important step along the way in this journey.

Speaker Change: And we are excited for a number of reasons.

Speaker Change: Most importantly, this significantly expands our penetration in conversational AI across new verticals and deep into hundreds of enterprise brands.

Speaker Change: We are doing this in end markets that are expected to grow massively over the coming years with enterprise spending on generative AI projected to grow 15 fold over the next three years to nearly $250 billion.

Speaker Change: Together, we combined decades of experience in conversational AI, we had a highly complementary suite of products and we believe if we can offer best in class scalable customer service support to a vast spectrum of businesses.

Speaker Change #116: <unk> today marks a significant and strategic expansion of Paramount existing customer service pillar.

Speaker Change: We are adding even more breadth and depth to these offerings that have already seen substantial growth amid the accelerated adoption of both <unk> and conversation alternative AI solutions.

Speaker Change: The test will provide some more insights into this deal and our overall M&A philosophy later on.

Speaker Change: Now onto the quarter.

Speaker Change: Once again, we are reporting strong growth.

Operator: There are no further questions at this time.

Speaker Change: Second quarter revenue was up 54% and cumulative subscription and bookings backlog roughly doubled year over year to $723 million.

Operator: So if this now concludes today's call, thank you for joining. You may now just come back.

Speaker Change: We also saw a steep increase in engagement with our technology, our annual run rate of queries is now over $5 billion.

Speaker Change: We continue to see strong demand for our products, including townhouse chat AI in pillar, one and our AI customer service solutions in pillar II.

Speaker Change: Our value propositions are resonating with the industry customers choose us because they believe our innovation cycles are at a high level and results in powerful AI technology.

Speaker Change: They also know that we help them protect their brand users and data.

Speaker Change: We have accumulated 20 years of intellectual property.

Speaker Change: And technical innovation remains in our core DNA.

Speaker Change: Last year, we announced Polaris, our multimodal multilingual Foundation model.

Speaker Change: Polaris now beat numerous benchmarks against state of the art models in the industry.

Speaker Change: A growing number of our customers are switching to Polaris.

Speaker Change: The result is higher accuracy better user experience lower internal cost and faster response times. We can also deliver Q&A on customization much faster. These customization have historically requires long and expensive machine learning training cycles.

Speaker Change: With Polaris, we can achieve them, we just steamboat configuration changes.

Operator: Thank you for your time, and I'll see you in the next video.

Speaker Change: Now, let me discuss some business updates in the second quarter.

Operator: . If you would like to withdraw your question, press start one again.

Speaker Change: In pillar one we now have cars in production in almost 20 markets and support dozens of languages.

Speaker Change: Townhome chat AI, our voice assistant regenerative AI is driving this high demand.

Scott Smith: I would like to turn the conference over to Scott Smith, Head of Investor Relations. Please go ahead.

Speaker Change: Yes automobiles became the first brand to quickly turn a trial run to live production.

Speaker Change: This was the first in vehicle assistant regenerative AI capabilities to go into production anywhere in the world.

Speaker Change: And the results have been so well received Atlantis has continued to integrate <unk> technology into a large number of models across multiple brands.

Speaker Change: In total you are now live on the road with six Atlantis brands, Hey, Joe Boxer, Opal, Citron and Alfa Romeo and of course the automobiles.

Speaker Change: John and Chad AI combines the power of large language models with our AI assistant, making it more capable and powerful.

Speaker Change #120: This is an opt out feature that will increase royalties from existing customers and our booking this quarter increased as a result.

Speaker Change: This is important to emphasize why historically there have been constant pressure from auto Oems to lower their costs for the first time, you are seeing their appetite to pay more.

Speaker Change: Want to upgrade to sound on chat AI to deliver a much better user experience to their customers and they are willing to pay the additional royalties to do so.

Speaker Change: Therefore, we expect our revenue per unit in pillar, one will increase over time as more customers adopt degenerative AI innovation in San Fran Chap AI.

Speaker Change: Last quarter, we talked about the first company to roll out this technology integrated in vehicles in Japan.

Speaker Change: And now this quarter. We are also pleased to have signed a new contract to be the first company to rollout chat GPT stock capabilities to in vehicle voice assistance in Latin America initial.

Speaker Change: Initially this will be with three brands and go into production in Brazil, Argentina and Chile.

Speaker Change: We also continue to gain interest and make progress with EV manufacturers.

Scott Smith: Good afternoon and thank you for joining our second quarter of 2024 conference call. With me today is our CEO, Kevan Mohajer and our CFO Nitesh Sharan. We will begin with some short remarks before moving to Q&A. We would 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 for discussion statements that qualify as forward-looking statements.

Speaker Change: Earlier this year, we won a deal with a prominent U S based EV maker, which will go live imminently.

Scott Smith: In addition, we may discuss certain non-gap 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 reconciliation from gap to non-gap. 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.

Operator: Finally, this call is being audio webcasts in its entirety on our Investor Relations website, and audio replay will be available following today's call.

Speaker Change: <unk> AI will be integrated across its full fleet of market leading vehicles.

Speaker Change: This will mark the first U S based Oems to integrate an assistant regenerative AI capabilities.

Keyvan Mohajer: With that, I would like to turn the call over to our CEO, Kaibon Mahajir. Please go ahead, Kaibon.

Speaker Change: Additionally, we have expanded with an existing customer a fast growing EV manufacturer in Europe to add <unk> to their digital assistant.

Speaker Change: Last quarter, we also announced that partnership with perplexity to bring cutting edge online Llm's Toussaint <unk> AI.

Speaker Change: This has allowed us to offer a truly multi faceted next generation voice assistant to phones cars and Iot devices.

Speaker Change: <unk> helps townhomes that AI provide accurate up to date responses to web based queries that static offline LMS cannot currently for sale.

Speaker Change: Expanding the timeline complexity off the questions. The assistant is able to answer.

Speaker Change: They move May 10, handset AI, the most advanced voice assistance available on the market today and we are currently in progress conversations with Oems about having this capability go live.

Speaker Change: Moving on to pillar two.

Speaker Change: This quarter, we won the business of <unk>.

Speaker Change: This means that in total we have now won deals with five of the top 15 <unk> based on the number of locations one of the key with ours, we engage in Q2, where the large well known pizza restaurants with thousands of locations throughout the U S.

Keyvan Mohajer: Thank you, Scott, and thank you to everyone for joining the call today.

Speaker Change: This means that panel is now working with two of the biggest pizza chains out there.

Keyvan Mohajer: Before getting into the quarter, I wanted to talk about the announcement we made this morning to acquire a conversational AI leader, Amelia. This transaction is a natural extension of our strategy, and we saw a great opportunity to partner with a company that we believe will accelerate our mission of voice-enabling the world with conversational intelligence. Our vision has always been to create a conversational AI platform that exceeds human capabilities, delivers value and delights and users, creates an ecosystem with billions of products and enables innovation and monetization opportunities for product creators.

Speaker Change: Each of these key with our brands represents a sizable opportunity to deploy our technology across thousands of locations.

Keyvan Mohajer: Today's announcement is a continuation of that path, and now is the time for such a bold move. TownHound is a leader in voice AI, and we have built a platform that we can perfectly leverage to expand into new markets. Coming together with Amelia is an important step along the way in this journey, and we are excited for a number of reasons. Most importantly, this significantly expands our penetration in conversational AI across new verticals, and these in 200 of enterprise brands.

Speaker Change: It's an exciting time.

Speaker Change: In a very fortunate position so how we execute the business at this time, we will be critical to our performance in this space going forward and we are mindful of this.

Speaker Change: Our customer service product portfolio is resonating with businesses of all sizes. So we are winning in large enterprises as well as small chains.

Speaker Change: Become clear to us that very few companies can offer of businesses of all sizes and affordable fast and easy to implement solution that addresses their growing needs.

Speaker Change: We own our tech we have data from real interactions and nearly 20 years of experience. We believe we are winning because of the data science and machine learning behind our proprietary software.

Keyvan Mohajer: We are doing this in end markets that are expected to grow massively over the coming years, with enterprise spending on generative AI projected to grow 15 fold over the next three years to nearly $250 billion. Together, we combine decades of experience in conversational AI. We have a highly complimentary suite of products, and we believe we can offer best-in-class scalable customer service support to a vast spectrum, of Businesses. The announcement today marks a significant and strategic expansion of SoundHound's existing customer service pillar.

Keyvan Mohajer: We are adding even more breadth and depth to this offering that have already seen substantial growth and meet the accelerated adoption of voicing and conversational agenda AI solutions. Nitesh will provide some more insight into this deal and our overall M&A philosophy later on.

Speaker Change: Last year, we introduced a product called employee assessed which uses our conversational voice AI technology to support employees like a copilot across a variety of tasks.

Keyvan Mohajer: Now on to the quarter. Once again, we are reporting strong growth. Second quarter revenue was up 54% and cumulative subscriptions and bookings backlog roughly doubled year-over-year to $723 million. We also saw a steep increase in engagement with our technology. Our annual run rate of queries is now over 5 billion. We continue to see strong demands for our products, including SoundHound Chat AI in pillar 1 and our AI customer service solutions in pillar 2.

Keyvan Mohajer: Our value of propositions are resonating with the industry. Customers choose us because they believe our innovation cycles are at a high level and results in powerful AI technology. They also know that we help them protect their brand users and data.

Speaker Change #138: Other headset or a tablet.

Speaker Change: We already have several customers benefiting from this new service.

Speaker Change: Those include some large SKU with our brands and I'm proud to announce two prominent coffee chains have also sign up this quarter.

Speaker Change: We are finding that many customers are choosing to sign up for employee assessed in combination with our drive thru solution dynamic interaction.

Speaker Change: <unk> worked together in tandem to handle and improve the customer experience while supporting their employees.

Speaker Change: <unk> dynamic interaction delivers what we believe to be the next generation of all voice interfaces. It.

Speaker Change: It is full duplex is multimodal it does not require constant use of wakeup boards and turn taking and can be seamlessly multilingual.

Speaker Change: We believe its impact on voice AI and conversational interfaces will be as meaningful as multi touch technology on touch interfaces.

Speaker Change #124: Our AI solutions save cost for our customers improve their experience. After users and also includes revenue by increasing throughput and proactively offering upsells.

Speaker Change #144: Our phone ordering solution are continuing to ramp up with existing customers like Jersey Mikes.

Speaker Change: And as mentioned earlier, we are penetrating into thousands of pizza chains locations across the U S.

Speaker Change: We announced before Brady's wherever you are already live in all corporate locations and plan to rollout to 20 states very soon.

Speaker Change: Going beyond restaurants compound smart answering is showing rapid growth within pillar II.

Speaker Change: We already have hundreds of locations live from single location small businesses to brand with multiple locations.

Speaker Change: Last quarter, we talked about planet fitness and we have already gone live and continue to rollout more we are seeing great traction in franchise retail businesses and across a number of industries. These include personal care professional services home and local services automotive services among others.

Speaker Change: We are excited about smart answering because the number of industries. It caters to opens up a massive market for us to address with millions of businesses in the United States alone.

Speaker Change: Seamless implementation capabilities allow us to scale fast and the use cases for companies of all sizes are obvious.

Speaker Change: Whether it's handling multiple calls at once 24, seven conveniently filtering out spam calls, providing verbal and SMS responses, taking configured about actions capturing leads with intelligent messaging and answering questions about policies ours products services pricing and more.

Speaker Change: We have built a competitive mode with our proprietary technology that is creating massive opportunity in customer service.

Speaker Change: On to pillar, III, where we're making great progress and accelerate that path this quarter with the acquisition of offsets.

Speaker Change: The ordering platform, we acquired through our set enables us to build a voice commerce ecosystem.

Speaker Change: The acquisition will ultimately enable consumers to use cutting edge voice AI to order food from their vehicles phones and smart devices.

Speaker Change: Additionally, the ulcer team brings a wealth of marketplace experience and knowledge that will make a voice commerce ecosystem, a reality where.

Speaker Change: Creating a new category and together, we plan to provide dynamic and convenient ways for people to order food and complete a range of other transactions just by speaking naturally.

Keyvan Mohajer: We have accumulated 20 years of intellectual property and technical innovation remains in our core DNA. Last year we announced Polaris, our multimodal multilingual foundation model. Polaris now beats numerous benchmarks against data of the art models in the industry. A growing number of our customers are switching to Polaris. The result is higher accuracy, better user experience, lower internal cost and faster response times. We can also deliver tuning and customizations much faster. These customizations have historically required long and expensive machine learning training cycles. With Polaris, we can achieve them with just simple configuration changes.

Keyvan Mohajer: Now let me discuss some business updates in the second quarter. In pillar 1, we now have cars in production in almost 20 markets and support dozens of languages. SoundHound Chat AI, our voice assistant with generative AI, is driving this high demand.

Speaker Change: And as we increase the notable names that we sign every quarter in pillar, one and two it also helps us get one step closer to mobilizing this strategy.

Speaker Change: With this strategic move we have significantly increased our addressable market, while creating new more convenient and accessible consumer experiences.

Speaker Change: Our customer engagement with distribution has always been well received with existing and prospective customers getting even more interest that over time as our portfolio of customers using voice enabled services growth.

Keyvan Mohajer: DS automobiles became their first brand to quickly turn a trial run to live production. This was the first in-t vehicle assistant with generative AI capabilities to go into production anywhere in the world. And the results have been so well received that Stellantis has continued to integrate HamHound technology into a large number of models across multiple brands. In total, you are now live on the road with six Stellantis brands, Peugeot, Boxel, Opel, Citron, and Alpha Romeo, and of course DS automobiles.

Speaker Change: We always talk about the flywheel effect with this vision and we are starting to see that takes shape.

Keyvan Mohajer: SoundHound Chat AI combines the power of large language models with our AI assistant, making it more capable and powerful. This is an optional feature that will increase royalties from existing customers and are booking this quarter increased as a result.

Speaker Change: In closing, we have consistently grown at a rate of 50% or more and continue to fortify our financial position.

Keyvan Mohajer: This is important to emphasize. While historically, there have been constant pressure from auto-OEMs to lower their costs. For the first time, we are seeing their appetite to pay more. They want to upgrade to SoundHound Chat AI to deliver a much better user experience to their customers and they are willing to pay the additional royalties, to do so. Therefore, we expect a revenue per unit in pillar 1 will increase over time as more customers adopt the generative AI innovation in SoundHoundChat AI.

Speaker Change #112: <unk> was gaining market share attracting new enterprise customers and creating some of the most innovative voice AI technology in the world. We are proud of the best in class experiences, we are creating for our customers and their customers, but our ambitions to keep aiming higher and push the boundaries continued to grow as an example of that ambition today with <unk>.

Keyvan Mohajer: Last quarter, we talked about the first company to roll out this technology integrated in vehicles in Japan. And now this quarter we are also pleased to have signed a new contract to be the first company to roll out chat GPT style capabilities to in-vehicle voice assistance in Latin America. Initially this will be with three brands and go into production in Brazil, Argentina and Chile. We also continue to gain interest and make progress with EV manufacturers.

Speaker Change: Amelia.

Speaker Change: <unk> is an innovative company that shares our passion for AI fueled conversations.

Speaker Change: We are looking forward to leveraging our shared capabilities to offer the best AI customer support solutions available anywhere.

Speaker Change: We are also pleased to welcome the team from <unk> to <unk> and are excited about what we can do together.

Speaker Change: We believe the disruption in the market for AI. We are seeing today is building towards our exact vision when we create a townhouse almost 20 years ago.

Speaker Change: A lot of our predictions are now becoming a reality.

Speaker Change: They're a strong quarter, where we beat market expectations for revenue, we couldnt be more pleased with the momentum we are seeing and the demand for our products and solutions.

Speaker Change: We look forward to continued engagement with our stakeholders as we create value.

Speaker Change: We're grateful to our amazing team that makes this all possible with their shared vision.

Speaker Change: With that I'll now turn the call over 20, Tesh to talk about our financial performance key growth drivers and outlook for the remainder of the year.

Tesh: Thank you, Kevin and good afternoon, everyone.

Tesh: Q2 revenue increased 54% year over year.

Tesh: Results are another positive mile marker on a growth journey, where we achieved $13 $5 million in revenue.

Tesh: This marks our fourth consecutive quarter exceeding $10 million in revenue.

Speaker Change: We meaningfully improved our balance sheet in the quarter by paying down our debt and completing the conversion of outstanding preferred equity.

Speaker Change: I mentioned before that our capital position is a source of strength.

Speaker Change: We want to maintain that strength because it affords us the opportunity to go on the attack when it makes sense for us.

Speaker Change: We do that through organic investments to fuel disruption partnerships to help scale aggressively.

Speaker Change: And acquisitions to accelerate our pace.

Tesh: One of the measures we use to gauge customer traction as backlog.

Speaker Change: In Q2, our cumulative subscription and bookings backlog roughly doubled year over year to $723 million.

Speaker Change: With an average duration of slightly less than seven years.

Speaker Change: Most of the expansion this quarter was in the restaurant space.

Speaker Change: Although we continue to gain traction with automotive partners for.

Speaker Change: For example, what's the latest adding five additional brands going into production with townhome chat AI today.

Tesh: Today, we announced an Kayvon noted earlier, our acquisition of conversational AI leader Amelia.

Tesh: Let me spend a minute explaining how we think about M&A.

Speaker Change: First.

Tesh: We believe having a programmatic M&A approach can be value generating.

Speaker Change: Our acquisition philosophy stems from our overall strategy and vision, which is to voice enabled the world with conversational intelligence and transform the next wave of how humans will interact with technology increasingly with voice and natural conversations.

Speaker Change: We know the requisite underpinning technology to enable this vision is here now in fact, we built a lot of it ourselves and.

Tesh: We continue to see the customer demand and adoption for these capabilities growing.

Tesh: When we acquired St. III earlier this year it was an accelerant for our restaurant business last.

Tesh: Last quarter, when we announced the <unk> acquisition it was to catalyze our monetization pillar to connect voice enabled services and products seamlessly together.

Tesh: Today's acquisition of Emilia is about accelerating more broadly in pillar two customer service and significantly expanding our industry reach the primary filters, we have been using to select appropriate acquisition targets have been one does it fit within our long term strategy to will amplify or.

Speaker Change: Celebrate our pathway to realize that strategy three can we effectively operationalize it and drive meaningful synergies and for can we buy it at the right price appreciating the risks that inherently come from such transactions.

Speaker Change: Amelia check those boxes for us.

Speaker Change: Well it would be a meaningful acquisition with a lot of complementarity, we don't take the integration effort lately and know it will take some time to get it right but.

Amelia: But the prize together was too attractive to bypass in our opinion, especially with the enterprise traction and demand we've been seeing in the marketplace.

Amelia: We just announced this today so it's still quite early and we know there will be questions. So please note that we plan to share more and dive much deeper on the opportunity we see stay tuned for more details.

Speaker Change #118: With that let me now focus on and discuss the second quarter financials in more detail Q2 revenue was $13 $5 million up 54% year over year.

Speaker Change: We continued to see growing automotive unit growth of healthy double digits. In addition to unit price expansion driven by our regenerative AI solutions and overall product expansion the quarter benefited from a minimum guarantee edge solution purchased by <unk> and.

Speaker Change: And also from a year over year basis, the contribution from <unk> III.

Speaker Change: Within restaurants, we continued to scale with customers signed meaningful new logos and further diversified product offerings.

Speaker Change: The quarter had nice balance across our pillars, where our restaurant business comprise roughly 25% of revenue.

Speaker Change #128: In Q2, our gross margins were 63% down year over year, largely resulting from the acquisition, including the mix of lower margin call Center agent business adjusting for acquisition impacts, notably the noncash amortization of purchase intangibles gross margins would've been 67%.

Speaker Change: While the acquired call Center business does weigh on our margins in the near term there is value in what this business can do for broader opportunities to come and what the data can bring to our models that said our goal overtime is to automate and modernize.

Speaker Change: R&D expenses were $15 7 million in Q2, an increase of 34% year over year.

Keyvan Mohajer: Earlier this year we wanted to deal with a prominent US-based EV maker which will go live immediately. SoundHoundChat AI will be integrated across its full fleet of market leading vehicles. This will mark the first US-based OEM to integrate an assistant with generative AI capabilities. Additionally, we have expanded with an existing customer a fast growing EV manufacturer in Europe to add SoundHoundChat AI to their visual assistant.

Speaker Change: We are prioritizing investments in disruptive innovation like our Polaris initiative to expand our suite of products to address a wider array of customer needs and we continue fine tuning the way we leverage large language models to provide even more value to customers at less cost.

Keyvan Mohajer: Last quarter, we also announced a partnership with Perplexity to bring cutting-edge online LLEMs to SoundHoundChat AI. This has allowed us to offer a truly multi-passed next-generation voice assistant to phones, cars and IoT devices. Perplexity helps SoundHoundChat AI provide accurate up-to-date responses to web-based queries that static offline LLEMs cannot currently fulfill. Expanding the type and complexity of the questions the assistant is able to answer. They move made SoundHoundChat AI the most advanced voice assistant available on the market today, and we are currently in progress conversations with OEMs about having this capability go live.

Speaker Change: For example, we will continue to be thoughtful and opportunistic about which models, we work with versus using our own and always keep the customers needs are top of mind.

Speaker Change: India and our ability to arbitrate between models is a differentiator that we will continue to expand upon.

Speaker Change: Sales and marketing expenses were $5 7 million in Q2, an increase of 11% year over year, we continue to thoughtfully invest in go to market and customer engagement to capture the strong momentum in heightened demand we are expanding reach through brand and industry marketing demand generation and high ROI lead Gen strategies.

Speaker Change: G&A expenses were $9 5 million in Q2, an increase of 48% year over year. The increase in G&A reflects two main elements that we talked about the past few quarters, our year over year comparison continues to be impacted by investments in financial and nonfinancial processes and internal controls to support requirements under Sox 404, B as we became a large accelerated filer last year.

Speaker Change: Our G&A was also negatively impacted by acquisition related costs in the quarter.

Speaker Change: All operating expense line items were impacted by the sync three acquisition noncash employee stock compensation was $7 3 million in Q2.

Speaker Change: As a result, our operating loss for Q2 was $22 million. This.

Speaker Change: This includes noncash acquisition impacts related to the fair value accounting that will likely introduce volatility into this line for the foreseeable future.

Speaker Change: <unk> was $14 7 million of net expense for the quarter compared to previous quarters. The increase in <unk> was mainly due to the one time early repayment of our debt and associated extinguishment costs.

Speaker Change: We announced earlier in the quarter that we were able to repay the existing debt on favorable prepayment terms, allowing us to avoid sizable interest payments over the coming years.

Speaker Change: And the net loss was $37 3 million in the quarter. This.

Speaker Change: This led to a GAAP net loss per share in Q2 of 11.

Speaker Change: Adjusting for noncash acquisition related amortization of purchase intangibles fair value adjustments M&A transaction costs stock based comp and other noncash items such as the gain on bargain purchase our non-GAAP EPS loss was <unk> <unk> in the quarter.

Speaker Change: Adjusted EBITDA was a loss of $13 8 million in Q2, improving sequentially by 10%.

Speaker Change: Year over year increase was driven primarily by acquisition impacts and growth investments, we've been making in the business our cash position at quarter end was $201 million.

Keyvan Mohajer: Moving on to pillar 2. This quarter, we won the business of three sizable QSRs. This means that in total, we have now won deals with five of the top 15 QSRs based on the number of locations.

Speaker Change: And no outstanding debt.

Speaker Change: We see a market that is moving fast and believe having a strong financial profile and times like these is crucial to success.

Keyvan Mohajer: One of the QSRs we engaged in Q2 was a large well-known pizza restaurant with thousands of locations throughout the US. This means that SoundHound is now working with two of the biggest pizza chains out there. Each of these QSR brands represents a sizable opportunity to deploy our technology across thousands of locations. It's an exciting time.

Speaker Change: We are in a position of strength and focused on creating long term sustainable growth and profitability.

Keyvan Mohajer: We are in a very fortunate position to how we execute the business at this time will be critical to our performance in this space going forward and we are mindful of this. Our customer service product portfolio is resonating with businesses of all sizes, so we are winning in large enterprises as well as small chains. It's become clear to us that very few companies can offer businesses of all sizes and affordable, fast and easy to implement solutions that addresses their growing needs.

Speaker Change: With that.

Speaker Change: Let me discuss our outlook for the remainder of 2024 and our prospects for 2025.

Speaker Change: We have made great progress the core business is growing our technology is permeating across and resonating with an increasing roster of amazing customers.

Speaker Change: We expect the acquisition of Amelia to improve our financial profile.

Speaker Change: There are top line synergies and we also expect to be able to extract a lot of value from the combined companies.

Speaker Change: Early in the process to be too precise so let me buildup, how we see the rest of this year and entry into next year.

Speaker Change: We are cognizant that a significant acquisition like this will require heavy integration that will take time to fully align across the enterprise we.

Speaker Change: We are baking this into our go forward assumptions.

Speaker Change: As we noted in our press release. This morning, we expect this acquisition to be accretive to earnings in the second half of 2025 and.

Speaker Change: And we now see 2020 for revenue to exceed $80 million.

Speaker Change: In 2025 revenue to exceed $150 million.

Speaker Change: There's much more potential here, but at this stage, it's appropriate for us to stay measured and calibrated on setting expectations.

Speaker Change: Amelia brings a diverse business with strong recurring revenue and also some other businesses that we are calibrating on to identify how best to fit them into our portfolio.

Speaker Change: In full transparency, there are lower growth and margin businesses, where we want to assess the lifecycle value of each contract to determine the best go forward approach.

Speaker Change: These decisions may affect the pace of our growth or our trajectory on margins. So we need some time to finalize the plan.

Speaker Change: Ultimately, though we see a combined growth profile that is even more attractive than we were stand alone with greater profitability.

Speaker Change: And we see tremendous value to share with customers employees and partners over the coming years.

Speaker Change: In conclusion.

Speaker Change: We are happy with where we are we are aggressively moving forward.

Speaker Change: We know the path forward won't be linear we have a clear vision that we are accelerating towards.

Speaker Change: We will now move to Q&A.

Speaker Change: Thank you the floor is now open for your questions. So to ask a question. This time, Please press star one.

Speaker Change: We've got a plus for just a moment to compile the Q&A roster.

Speaker Change #143: Our first question comes from.

Gil Luria: Gil Luria from.

Gil Luria: Davidson.

Gil Luria: Hi, good afternoon.

Gil Luria: One for Keith one turn to test both on the acquisition. This is a transformative acquisition. So wanted to kick up until now a lot of the strategy has been around.

Speaker Change: Are those in restaurants pillars, one two and three there was there was a very good alignment in the strategy between those end markets in that.

Speaker Change: Pillar.

Gil Luria: <unk> framework.

Speaker Change: How do you see that changing now that you are bringing that youll break amelia into the fold in terms of what verticals, you're going to have and what your focus is going to be in terms of pillars.

Speaker Change: Thanks for the question on transform as it is the right board. Thank you for mentioning that.

Speaker Change: So that strategy just gets stronger.

Speaker Change: I mean, the acquisition makes us gives us a lot more scale in pillar two.

Speaker Change: We always knew we were going to expand beyond restaurants.

Speaker Change #143: Net restaurants to our less what we expect to Amazon based service books now because everything.

Speaker Change: Just wanted to expand.

Speaker Change: In AI customer service to other industries and.

Speaker Change: When we looked at.

Speaker Change: We have an amazing tech that we can deliver to these brands but.

Keyvan Mohajer: We own our tech. We have data from real interactions and nearly 20 years of experience. We believe we are winning because of the data science and machine learning behind our proprietary software. Last year we introduced a product called Employee Assist, which uses our conversational voice area technology to support employees like a co-pilot across a variety of We are finding that many customers are choosing to sign up for employee assist in combination with our drive-through solution dynamic interaction.

Speaker Change: It takes time to panic.

Speaker Change: Penetrate the customer base and understand their needs and even integrate with their infrastructure, especially for b.

Keyvan Mohajer: They work together in tandem to handle and improve the customer experience while supporting their employees. SoundDynamic Interaction delivers what we believe to be the next generation of all voice AI interfaces. It is full duplex, it's multi-modal, it does not require constant use of wake-up words and turn-taking and can be seamlessly multilingual. We believe its impact on voice AI and conversational interfaces will be as meaningful as multi-touch technology on touch interfaces. Our AI solutions state costs for our customers improve the experience of their users and also includes revenue by increasing throughput and proactively offering upsells.

Keyvan Mohajer: Our phone ordering solution are continuing to ramp up with existing customers like Jersey Mike and as mentioned earlier we are penetrating into thousands of pizza-chains locations across the US. We announced before Brady's where we are already live in all corporate locations and plan to roll out to 20 states very soon.

Speaker Change: Enterprise customers.

Speaker Change: <unk> has accumulated 26 years our.

Speaker Change: Customers any integrations.

Speaker Change: Also a great complementary products and technologies.

Speaker Change: This just accelerates that vision it gives us a much bigger scale in pillar two and a lot of their customers also opinions Rob David.

Speaker Change #157: They've worked with retail.

Speaker Change: Pick up companies.

Speaker Change: Insurance.

Speaker Change: Financial services retail and hospitality a lot of those actually have a very nice fit into their pillar <unk>.

Speaker Change: Got it thank you and I know you're asking your prepared remarks for a little more time, but.

Speaker Change: Wanted to talk.

Speaker Change #101: You talk about managing a company that next year is going to have a $150 million.

Speaker Change: Youre, saying that accretive second half 2025, Thats strictly speaking that just means your earnings would be higher than they would've been otherwise in terms of the overall margin structure and where that could put you when you're managing a company that big does it bring closer youre breakeven in terms of your own.

Speaker Change: Cash flow.

Speaker Change #138: Adjusted operating margins.

Speaker Change: EBIT GAAP operating margins, what does it do to the timeline of hitting those milestones.

Gil Luria: Sure. Thanks Gil.

Speaker Change: So I'll put the caveat upfront more details is certainly to come you know, we just announced this today that there will be filings and certainly a lot of details for us to talk to but let me give you the high level construct and the way we see this in the way we see us moving forward certainly the near term, but more importantly, maybe over the medium and long term.

Speaker Change: So what we're really excited about here is Amelia.

Speaker Change: Software business has.

Speaker Change: Customer traction deep and generally really robust relationships that permeate over time, and where you have <unk>.

Speaker Change: Can expand in.

Speaker Change: And add up.

Speaker Change #172: Upsell cross sell.

Speaker Change: And services products and expand margins.

Speaker Change #154: They do have a multi components to their business and we will integrate that with our profile, but I've said before.

Speaker Change: Previous acquisition over the long term we should have.

Speaker Change: Our strong growth profile very healthy software margin 70, plus percent gross margins and at scale EBIT margins that are 30% plus.

Keyvan Mohajer: Going beyond restaurants, Tom Hound's smart answering is showing rapid growth within Pilar 2. We already have hundreds of locations live from single location small businesses to brand with multiple locations. Last quarter we talked about planet fitness and we have already gone live and continue to roll out more. We are seeing great traction in franchise retail businesses and across the number of industries. These include personal care, professional services, home and local services, automotive services among others.

Speaker Change: And I don't think that changes at all with the acquisition.

Speaker Change: I said also that you got to think of us in phases.

Speaker Change: Migrating to breakeven phase after sort of call it.

Speaker Change: I'll call it cash utilization phase and Thats. The next horizon for us going into next year and beyond I think you should think of us as investing in these tremendous growth opportunities because we do think of these as generational shift.

Speaker Change: And how humans interact with technology increasingly through natural conversations and increasingly through voice and so we're going to be in sort of I'll call. It that breakeven zone for a bit and will be bundling incremental dollars into our our growth opportunities because we there are tremendous growth opportunities.

Keyvan Mohajer: We are excited about smart answering because the number of industries it cater to opens up a massive market for us to address with millions of businesses in the United States alone. The seamless implementation capabilities allow us to scale fast and the use cases for companies of all sizes are obvious. Whether it is handling multiple calls at once 24-7, conveniently filtering out MAM calls, providing verbal and SMS responses, taking configurable actions, capturing leads with intelligent messaging and answering questions about policies, hours, products, services, pricing and more. We have built a competitive mode with our proprietary technology that is creating massive opportunity in customer service.

Speaker Change: And so I think from an EBIT margin and even what I mentioned about sort of accretive in the second half to your point that's earnings related but even our profile is generally capital light and so that translates very seamlessly into cash flow as well.

Speaker Change #157: So maybe to synthesize all of that is the combination with <unk>.

Speaker Change: We'll have to integrate there will be synergy opportunities there are cost opportunities as well as we look across both firms that we'll be working through but as you get into next year, certainly we see earnings accretion we see cash.

Keyvan Mohajer: On to Pilar 3, where we are making great progress and accelerated that path this quarter with the acquisition of all sets. The ordering platform we acquired through all sets enables us to build a voice commerce ecosystem. The acquisition will ultimately enable consumers to use cutting-edge voice AI to order foods from their vehicles, phones and smart devices. Additionally, the all set team brings a wealth of marketplace experience and knowledge that will make a voice commerce ecosystem a reality.

Speaker Change: And cash flow benefit.

Speaker Change: And I think as you start to think into 2025 into 2026, you're going to see a much more scaled still strong growth company very healthy gross margins software like and and EBIT margins that are not at our full potential because we're going to be investing those incremental dollars in our growth opportunities, but certainly shortly thereafter, I think you can think of us as that.

Speaker Change: That 30 plus percent EBIT margin profile business.

Speaker Change: Alright, thank you.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Ben <unk> from.

Ben <unk>: From Wedbush Securities.

Ben <unk>: And great quarter can you just talk about how conversations with prospective customers have changed.

Speaker Change #149: Over the last three six months compared to even a year ago.

Ben <unk>: Can you just maybe anecdotally talk about that just given where everything's going from a technology perspective, new verticals and so I think the view of sound right is obviously changing dramatically in the market. Thanks.

Speaker Change: Yes so.

Speaker Change #144: In pillar, one way or Repower automotive devices.

Speaker Change: The big change is that they are willing to pay more for generative AI.

Ben <unk>: Whereas.

Speaker Change #106: We have 20 years of history here and there is always pressure to constant pressure to lower.

Speaker Change: But.

Speaker Change: For the first time, you're seeing that that when we say hey, if you want to upgrade to the final answer AI, which brings AI.

Speaker Change: The royalties that you have to pay and they're willing to pay.

Speaker Change: Anecdotal.

Speaker Change: Two the pillar one.

Speaker Change: Question.

Speaker Change: In pillar two.

Speaker Change: The big changes that are for AI customer service.

Speaker Change: <unk> are coming to us.

Speaker Change #115: We used to go to them, who used to knock on their door I'm used to.

Speaker Change: Getting a meeting to pitch our value proposition with a big win.

Speaker Change: But now we actually have to calibrate how to handle all the incoming inbound demand.

Speaker Change: I want to move faster they always want to be first.

Speaker Change: Want to go from pilot to production they want to make.

Speaker Change: Sure, we can scale with them and.

Speaker Change: And that's a much better challenge for us to deal with compared to.

Speaker Change: Just getting getting meetings Thunder.

Speaker Change: Yeah.

Speaker Change #150: Great and then just a follow up I mean kind of like Gil asked but even.

Keyvan Mohajer: We are creating a new category and together we plan to provide dynamic and convenient ways for people to order food and complete a range of other transactions just by speaking nationally, and as we increase the notable names that we sign every quarter in pillar one and two, it also helps us get one step closer to mobilizing this strategy. With this strategic move, we have significantly increased our addressable market while creating new, more convenient and accessible consumer experiences.

Speaker Change: That does it really feel like.

Speaker Change: Just given the momentum Youre seeing now is the time you would deal with this.

Speaker Change #102: Yes, I'll take that one.

Speaker Change: It's a great time to do a deal.

Speaker Change #101: I think first of all.

Speaker Change #100: We're seeing our technology can permeate into different ecosystems that we built the core proprietary tech.

Speaker Change: Over many many years and we're seeing it live in action and getting a lot of traction across when we extended from autos into restaurants, and really now bringing in Amelia into the fold does it a few different things some of which we highlighted in our.

Speaker Change: Press release, but there's really a lot more here, it's the diversification of industry, it's really scale that integration.

Speaker Change: They have a great ecosystem of channel partners by the way, which we can leverage across other avenues of our work and there is a great intersection of products synthesis. So when you look at other products that we've been deploying around our smart answering our employees. There's a great synergy that we can bring into their ecosystem as well.

Speaker Change: So when we look at things again, I kind of laid out in the prepared remarks, the framework when we think of inorganic versus organic opportunities.

Speaker Change #142: When we when we see the market momentum ultimately to your first question what are customers, saying, they're really thirsting for solutions not just buys out there it's like how do you utilize it.

Speaker Change: This technology to help their customers and help them grow and it's not only productivity, it's actually about generating new revenue, we see that with the restaurants. For example, it's not only about productivity. Obviously they have workers in store that are they're overworked and strained and free up their resources is one thing, but we see consistent improvements in upsell and art.

Keyvan Mohajer: Our customer engagement with this vision has always been well received, with existing and prospective customers getting even more interested over time as our portfolio of customers using voice enabled services grows. We always talk about what the slide will affect with this vision and we are starting to see that take shape.

Speaker Change: <unk> never shied away from asking for that large drink or that extra French fries and those types of things are actually revenue and really meaningful ticket items for our customers. So I think we're seeing those demand. We think yes totally cognizant of as I mentioned in prepared remarks that anything meaningful there is integration effort and so forth, but I really.

Keyvan Mohajer: In closing, we have consistently grown at a rate of 50% or more and continue to fortify our financial position, all while gaining market share, attracting new enterprise customers and creating some of the most innovative voice AI technology in the world. We are proud of the best in class experiences we are creating for our customers and their customers, but our ambitions to keep aiming higher and push the boundaries continue to grow.

Keyvan Mohajer: As an example of that ambition, today we acquired Emilia. Emilia is an innovative company that shares our passion for AI field conversations. We are looking forward to leveraging our shared capabilities to offer the best AI customer support solutions available anywhere. We are also pleased to welcome the team from Emilia to SoundHound and are excited about what we can do together. We believe the disruption in the market for AI we are seeing today is building towards our exact vision when we created SoundHound almost 20 years ago.

Speaker Change: I think the way we look at is.

Keyvan Mohajer: A lot of our predictions are now becoming a reality. With another strong quarter where we beat market expectations for revenue, we couldn't be more pleased with the momentum we were seeing and the demand for our products and solutions. We look forward to continued engagement with our stakeholders as we create value. We are grateful to our amazing team that makes this all possible with their shared vision.

Speaker Change: Over the long term.

Nitesh Sharan: With that, I'll now turn the call over to Nitesh to talk about our financial performance, key growth drivers, and outlook for the remainder of the year. Thank you, Kevan, and good afternoon everyone. Q2 revenue increased 54% year over year. The results are another positive mile marker on our growth journey, where we achieved $13.5 million in revenue.

Speaker Change: When we when we look at the.

Speaker Change: So the calibration of risks and opportunities. This is the time to be aggressive and this is the time to be thoughtful but definitely to be and go mode. Because we are hearing it directly from the customers. So I think.

Nitesh Sharan: This marks our fourth consecutive quarter exceeding $10 million in revenue. We meaningfully improved our balance sheet in the quarter by paying down our debt and completing the conversion of outstanding preferred equity. I mentioned before that our capital position is a source of strength. We want to maintain that strength because it affords us the opportunity to go on the attack when it makes sense for us. We do that through organic investments to fuel disruption, partnerships to help scale aggressively, and acquisitions to accelerate our pace.

Speaker Change: I think we've combination with Amelia is something we're very excited about.

Nitesh Sharan: One of the measures we use to gauge customer traction is backlog. In Q2, our 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 rest... Space, although we continue to gain traction with automotive partners. For example, with Philantis adding five additional brands going into production with SoundHound Chad AI.

Speaker Change #102: Great. Thanks.

Sam: Thanks Sam.

Speaker Change: Our next question comes from Mike Latimore from Northland Capital markets.

Nitesh Sharan: Today we announced, and Keyvan noted earlier, our acquisition of Conversational AI Leader Amelia. Let me spend a minute explaining how we think about M&A. First, we believe having a programmatic M&A approach can be value-generating. Our acquisition philosophy stems from our overall strategy and vision, which is to voice-enable the world with conversational intelligence, and transform the next wave of how humans will interact with technology, increasingly with voice and natural conversations. We know the requisite underpinning technology to enable this vision is here now.

Mike Latimore: Thanks, guys. Congrats on all the developments here looks great.

Nitesh Sharan: In fact, we've built a lot of it ourselves, and we continue to see the customer demand and adoption for these capabilities growing. When we acquired Sync3 earlier this year, it was an accelerant for our restaurant business. Last quarter, when we announced the offset acquisition, it was to catalyze our monetization pillar to connect voice-enabled services and products seamlessly together. Today's acquisition of Amelia is about accelerating more broadly in pillar two, customer service, and significantly expanding our industry reach.

Speaker Change: Yes, my query the query volume growth was 90% in the last quarter it was 60% year over year.

Speaker Change #112: Part of that acceleration.

Speaker Change: Yes. It is.

Speaker Change: So what are your partners that upgraded to stay around chat AI.

Speaker Change #111: You mentioned that when you operate you Chaz AI because AI feature.

Speaker Change: The usage went up so consumers that actually interacting with a lot more.

Speaker Change: Pilot in order of magnitude.

Speaker Change #112: So that's one.

Speaker Change: <unk>.

Speaker Change: Also just scaling in pillar two having more.

Nitesh Sharan: The primary filters we have been using to select appropriate acquisition targets have been, one, does it fit within our long-term strategy? Two, will amplify or accelerate our pathway to realize that strategy? Three, can we effectively operationalize it and drive meaningful synergies? And four, can we buy it at the right price, appreciating the risks that inherently come from such transactions? Amelia checked those boxes for us. While it would be a meaningful acquisition, with a lot of complementarity, we don't take the integration effort lightly, and know it will take some time to get it right. But the price together was too attractive to bypass in our opinion, especially with the enterprise traction and demands we have been seeing in the marketplace.

Speaker Change: Service customers.

Speaker Change: Okay great.

Speaker Change: And then on Amelia.

Speaker Change #115: Can you talk a little bit about the core technology here.

Speaker Change #168: Is it that they have a kind of a platform that can handle orchestration integration and data security.

Nitesh Sharan: We just announced this today, so it's still quite early, and we know there will be questions, so please note that we plan to share more and dive much deeper on the opportunity we see.

Nitesh Sharan: Stay tuned for more details. With that, let me now focus on and discuss the second quarter financials in more detail. Q2 revenue was $13.5 million of 54% year over year. We continue to see growing automotive unit growth of healthy double digits in addition to unit price expansion driven by your generative AI solutions and overall product expansion. The quarter benefited from a minimum guarantee edge solution purchased by Solentus and also from a year over year basis the contribution from Sync 3.

Speaker Change #101: <unk> agents on that when we can bring and eurotech or maybe just talk a little bit about kind of what the core elements of their platforms.

Speaker Change #115: Yes.

Speaker Change: Product.

Speaker Change: Customer service.

Speaker Change: Somewhat.

Speaker Change: The channel.

Speaker Change: The first text and voice following.

Speaker Change: But.

Speaker Change: For both.

Speaker Change: They are facing and so you're facing.

Speaker Change: And.

Speaker Change: There is a lot of synergies on using our test to power that.

Speaker Change: For example for speech recognition.

Speaker Change: They are using third party API is you would replace that with ours.

Speaker Change: Opportunity for improving accuracy and also.

Speaker Change: Cost savings.

Speaker Change: There was a cloud migration.

Speaker Change: Bring their cloud to our cloud and other cost saving opportunity.

Speaker Change: And.

Speaker Change: Just the way it works, we think we can.

Speaker Change: Improved a lot off the user experience but.

Speaker Change: It's not just a complete replacement. They also have done a lot of innovation over 26 years. So there is an opportunity to take the best of both we saw that also we think <unk>. When we bought them. We thought let's go on and look at the best of both and.

Nitesh Sharan: Within restaurants, we continue to scale with customers by meaningful new logos and further diversified product offerings. The quarter had nice balance across our pillars, where a restaurant business comprises roughly 25% of revenue. In Q2, our growth margins were 63% down year over year largely resulting from the acquisition, including the mix of lower margin call center agent business. Adjusting for acquisition impact notably the non-cash amortization of purchase and tangibles, growth margins would have been 67%. While the acquired call center business does weigh on our in the near term, there is value in what this business can do for broader opportunities to come and what the data can bring to our models.

Speaker Change: And create something better and we've done exactly that.

Nitesh Sharan: That said, our goal over time is to automate and modernize. R&D expenses were $15.7 million in Q2, an increase of 34% year over year. We are prioritizing investments in disruptive innovation like our Polaris Initiative to expand our suite of products to address a wider array of customer needs and we continue fine-tuning the way we leverage large language models to provide even more value to customers at less cost. For example, we will continue to be thoughtful and opportunistic about which models we work with versus using our own and always keep the customers' needs at top of mind.

Speaker Change: Yes.

Speaker Change #164: Excellent great best of luck.

Mike Latimore: Thank you thanks, Mike.

Nitesh Sharan: In the end, our ability to arbitrate between models is a differentiator that we will continue to expand upon. Sales and marketing expenses were $5.7 million in Q2, an increase of 11% year over year. We continue to thoughtfully invest and go to market and customer engagement to capture the strong momentum and heightened demand. We are expanding reach through brand and industry marketing, demand generation, and high ROI lead-gen strategies. GNA expenses were $9.5 million in Q2, an increase of 48% year over year.

Speaker Change: Our next question comes from Scott.

Speaker Change: From a cheaper right.

Scott: Hi, Good afternoon, guys. Thanks for taking my questions first I was just curious with the closing of Emilia do you now have all the tools in the toolbox necessary to.

Scott: Complete the three pillar strategy and do it successfully.

Speaker Change: Okay.

Speaker Change #163: Well, we've had we have we've had the tools, we just needed the scale.

Speaker Change: Yes.

Speaker Change: We've reached a point, where we thought we had that scale earlier this year.

Speaker Change: Millions of cars and.

Speaker Change: Double digit thousand.

Speaker Change: And locations for in pillar, two so just connecting them together.

Speaker Change: It seemed like the right time, you also have national coverage of certain brands like Chipotle for example.

Speaker Change: And the acquisition of <unk>.

Speaker Change: Earlier.

Speaker Change: <unk> is going to accelerate the integration now we just need to do the integration of bringing those PDR to customers into pillar one products.

Speaker Change: And.

Speaker Change: With Amelia.

Speaker Change: Just massively increased our scale in pillar two so going from <unk>.

Speaker Change: <unk> thousand locations, mostly in restaurants now VR in.

Speaker Change: Almost 200.

Speaker Change: <unk> enters enterprise brands in new vertical for us. So we are in retail now Javier in hospitality.

Speaker Change: Financial services insurance and healthcare.

Speaker Change: Okay. So there are no holes in tech that you still need to fill its now just.

Speaker Change: Accelerating grilli, absolutely absolutely yes.

Speaker Change #105: Okay perfect. That's helpful. And then you've had some nice wins and then obviously some big opportunities out in front of you I am curious from an implementation capacity standpoint.

Speaker Change: Whether or not you need to.

Speaker Change: Go through a process of significant hiring or.

Speaker Change: Tween your own team and the team youre, bringing on through Amelia you have.

Speaker Change: I guess the hands on deck to to meet that.

Speaker Change: To meet that demand.

Speaker Change: Alright.

Speaker Change: Yes.

Speaker Change #123: Yes, I think we're in a good spot we have been steadily hiring in pockets, where we've needed it to accelerate.

Speaker Change: I think overall, we've been in a good spot where attrition has been low and we have our talent he's really passionate about what they are driving and sometimes they do need additional resources are scaling with customers.

Speaker Change: So there has been measured measured hiring.

Speaker Change: I think.

Speaker Change: We know in pockets, where if we see an opportunity to go faster. We don't I think we've talked about this maybe a quarter or two ago like we don't want a customer waiting for six months.

Speaker Change: So we really wanted to get the resources to be able to start to.

Speaker Change: Activate.

Speaker Change: But.

Speaker Change #116: I'd say generally no no major holes, but because there is growth there is going to be some hiring to support that and then I would also add that again across the company. There is there is there synergy opportunities both on revenue upsell and cross sell and leveraging that omni channel opportunity what do they bring to the table to amplify our voice capabilities and I think there is.

Speaker Change: Some overhead things that naturally there is going to be cost synergies. So that's the work that we're picking up really honestly.

Speaker Change: But yes to your point on or maybe the prior like from a tech stack no major holes from a product capabilities no major holes from a resourcing no major holes, but when youre growing youre constantly expanding and you're kind of adding to as you go in and that's kind of what we're always mindful of to make sure that we have what we need to grow.

Nitesh Sharan: The increase in GNA reflects two main elements that we talked about the past few quarters. Our year over year comparison continues to be impacted by investments in financial and non-financial processes and internal controls to support requirements under SOC's 404B as we became a large accelerated filer last year. Our GNA was also negatively impacted by acquisition-related costs in the quarter. All operating expense line items were impacted by the SYNC-3 acquisition. Non-cash employee stock competition was $7.3 million in Q2.

Nitesh Sharan: As a result, our operating loss for Q2 was $22 million. This includes non-cash acquisition impacts related to the fair value accounting that will likely introduce volatility into this line for the foreseeable future. OINE was $14.7 million of net expense for the quarter. Compared to previous quarters, the increase in OINE was mainly due to the one-time early repayment of our debt and associated extinguishment costs. We announced earlier in the quarter that we were able to repay the existing debt on favorable prepayment terms, allowing us to avoid sizable interest payments over the coming years.

Nitesh Sharan: And the net loss was $37.3 million in the quarter. This led to a gap net loss per share in Q2 of 11 cents. Adjusting for non-cash acquisition related amortization of purchase and tangibles for value adjustments, M&A transaction costs, stock-based comp and other non-cash items such as the GAN on bargain purchase, our non-gap UPS loss was $4 cents in the quarter. Adjusted EBITDA was the loss of $13.8 million in Q2, improving sequentially by 10%. The year-over-year increase was driven primarily by acquisition impacts and growth investments we have been making in the business.

Nitesh Sharan: Our cash position at quarter-end was $201 million and no outstanding debt. We see a market that is moving fast and believe having a strong financial profile in times like these is crucial to success. We are in a position of strength and focus on creating long-term sustainable growth and profitability.

Speaker Change #144: Yes, that's helpful guys I appreciate the added color that's it for me.

Speaker Change #101: Thank you great. Thank you.

Nitesh Sharan: With that, let me discuss our outlook for the remainder of 2024 and our prospects for 2025. We have made creeps. Progress. The core business is growing, our technology is permeating across and resonating with an increasing roster of amazing customers. We expect the acquisition of Amelia to improve our financial profile. There are top-line synergies and we also expect to be able to extract a lot of value from the combined companies. It's a little early in the process to be too precise, so let me build up how we see the rest of this year and entry into next year.

Speaker Change: Our next question comes from Brett Knoblauch.

Nitesh Sharan: We are cognizant that a significant acquisition like this will require heavy integration and will take time to fully align across the enterprise. We are baking this into our Go Forward assumptions. As we noted in our press release this morning, we expect this acquisition to be accreted to earnings in the second half of 2025 and we now see 2024 revenue to exceed $80 million and 2025 revenue to exceed $150 million. There's much more potential here but at this stage it's appropriate for us to stay measured and calibrated on setting expectations.

Brett Knoblauch: From Cantor Fitzgerald.

Brett Knoblauch: Hey, guys. Thanks for taking my question Congrats on the acquisition I guess, just kind of digging a bit deeper there I think in your prepared remarks, you guys talked about there being some slower growth lower margin businesses and probably the flip side, some higher growth higher margin businesses.

Speaker Change #121: Maybe you can provide a framework for what that business is growing at an.

Speaker Change: Additionally, walk us through why they sold for $80 million with expectations to do $45 million of revenue. It seems like a phenomenal purchase price for you guys, but I guess why the seller has agreed to that I guess.

Nitesh Sharan: Amelia brings a diverse business with strong recurring revenue and also some other businesses that we are calibrating on to identify how best to fit them into our portfolio. In full transparency, there are lower growth and margin businesses where we want to assess the life cycle value of each contract to determine the best Go Forward approach. These decisions may affect the pace of our growth or our trajectory on margins, so we need some time to finalize the plan. Ultimately though, we see a combined growth profile that is even more attractive than we were standalone with greater profitability and we see tremendous value to share with customers, employees and partners over the coming years.

Speaker Change #126: That has not had an interim anymore. I guess can you just talk about how that process happen as well.

Speaker Change #138: Yeah. Thanks, Brett I'll say, a couple of things first again more details to come.

Speaker Change #101: See a lot more.

Speaker Change #101: <unk>.

Speaker Change #101: The breakout in the details of the.

Speaker Change: The financial profile of the 8-K that we filed this morning on the transaction actually walk through the the deal economics. So maybe I'll just start there so theyre actually where multiple components. So there was sort of an upfront piece.

Speaker Change: Some cash some stock and there is also a part of the assumption of debt and we paid back part of that debt that was announced concurrently and then like we've done in prior acquisitions, we like to share in the economics over time with delivery against the milestones and expectations that we're setting in concurrence with the target.

Speaker Change: And so all of those parts of their I think 80 is probably just a partial view just to be clear. So there is again, some debt components and other things and some earn out.

Speaker Change: But we do I think maybe the essence of what your question is this value and certainly both parties need to say there is alignment of value for any deal to make sense and we've been going through that with them and parse part of it is when you do stock transactions there needs to be an attribution to future value of that stock and there is a real belief both sides of what we can become and what we're starting to become.

Nitesh Sharan: In conclusion, we are happy with where we are, we are aggressively moving forward and while we know the path forward won't be linear, we have a clear vision that we are accelerating towards.

Nitesh Sharan: Thank you, we will now move to Q&A. Thank you.

Speaker Change: When you unpack all of that from deal economics.

Operator: The floor is now looking for your questions, so to ask a question this time, please press tower one. We've got to pause for just a moment to compile the Q&A roster.

Speaker Change: That's why this transaction was successful why we got it to this place.

Speaker Change: Then your other question was sort of unpacking of the various pieces of the business. So we did articulated in the press release about the $45 million and they are they do have a strong recurring business that has been over time shifting from a licensing model and so that transition has happened and so that's a really that's what we valued really it was growing.

Gil Luria: The first question comes from Gil Luria from the D.A. Good afternoon.

Speaker Change: Our.

Speaker Change: Business across those industries, we talked about earlier really rich set of customers.

Speaker Change: Too big to fail banks and those types of people that will take us a long time to really do.

Speaker Change: Develop a system that support and so we're very very excited about that but they do have other pieces and professional services a lot of them.

Speaker Change #120: <unk> had a complicated there is implementation customization services.

Speaker Change: And those can be very valuable they tend to be a little lower margin and so that's a little bit of a deal. What we are alluding to and then they also have this.

Speaker Change: The piece of the business.

Speaker Change: Our call center like think of it maybe in.

Ed: I agree with Ed.

Ed: Escalation support type capabilities and those are.

Ed: Partners that we work with and revenue that they generate is lower margin business and we do openly need to dive in and understand contract by contract what makes sense.

Speaker Change: Gail's question earlier, I talked about what's the profile of the business we're building.

Speaker Change #159: We're really happy as a AI centric in our next generation technology software provider that from my seat goes like Hey, 70, plus percent gross margin, 30% EBIT margins at scale.

Ed: Bits and bytes, they can transition and scale very quickly.

Gil Luria: One for K-Von, one for Natasha, both on the acquisition.

Speaker Change: But when we need to provide services to support integration environments, we'll provide that when there are like we had with think three some call center capabilities that are additive and by the way appropriately measured with the customer where there is data that we can utilize to enhance the model.

Gil Luria: This is a transformative acquisition, so I wanted K-Von up until now, a lot of strategies have been around. Autos and restaurants, pillars one, two and three, there's a very good alignment in the strategy between those end markets and that pillar framework.

Keyvan Mohajer: How do you see that changing now that you're bringing, that you'll bring Amelia into the fold in terms of what verticals you're going to have and what your focus is going to be in terms of pillars?

Speaker Change: Enhance the technology will leverage that.

Ed: So yes, there are different pieces of our business the different growth rates.

Speaker Change: And we're going to calibrate and we're just we're just getting going so again more details to come so stay tuned.

Speaker Change: Perfect. Thank you.

Speaker Change: So.

Speaker Change #116: I think you guys also talk about how you like having the optionality to kind of.

Speaker Change: Go back and forth between different.

Speaker Change #154: Models that you're integrated with whether it be perplexity or chat GTT I was just wondering from the cost side on from your point of view I guess how are they below you is that a usage model is it a onetime setup fee I guess, how should we think of.

Keyvan Mohajer: Thanks for the question and transformative is the right word. Thank you for mentioning that. So the strategy just gets stronger.

Keyvan Mohajer: The Amidiac position makes us give us a lot more scale in pillar two. We always knew we were going to expand beyond restaurants, we said that restaurants to us are like what books were to Amazon, they started with books now, they said everything and we've always wanted to expand in AI customer service to other industries and when we looked at, we have an amazing tech that we can deliver to these brands but it takes time to penetrate the customer base and understand their needs and even integrate with their infrastructure, especially for bigger enterprise customers.

Speaker Change #106: About that dynamic.

Speaker Change: Yes so.

Speaker Change: Something to be predicted before the break my multiple models, but that it's more than a year ago.

Speaker Change: There will be multiple models.

Speaker Change: There will be a different thing.

Speaker Change: And some of the cheaper and more expensive and some will be.

Speaker Change: Made by us on when we open source.

Speaker Change: So we built an infrastructure to be able to tap into different models.

Speaker Change: Arbitrate choose the right one.

Speaker Change: And even for a single.

Speaker Change: Interaction, sometimes you go to market models.

Speaker Change: Same time.

Speaker Change #101: <unk> is working it seamless.

Speaker Change #101: The user experience is amazing they don't need to worry about where it's coming from is just get the right answer and then it's followed them as they asked good questions.

Speaker Change: Sure.

Speaker Change: No.

Speaker Change: In terms of billings.

Speaker Change: It's.

Speaker Change: Again some of these are models that we host the cockpit mainly hosting.

Speaker Change: And.

Keyvan Mohajer: Amelia has accumulated 26 years of customers and integrations and they also have great complementary products and technologies so this just accelerates that vision, it gives us a much bigger scale in pillar two and a lot of their customers also feed into our pillar three. They work with retail, the ticket companies, insurance, financial services, retail, hospitality and a lot of those actually have a very nice fit into the pillar three.

Speaker Change: For the API like <unk> and others.

Speaker Change: You can sign up for enterprise accounts to bring the cost down and get more scale with them.

Gil Luria: Thank you.

Nitesh Sharan: And Nitesh, I know you're asking your prepared remarks for a little more time, but I want to talk as you talk about managing a company that next year's going to have $150 million, you're saying that a creative second after 2025 that's strictly speaking, that just means your earnings would be higher than they would have been otherwise in terms of the overall margin structure and where that could put you when you're managing a company that big.

Speaker Change: Something that we are doing.

Speaker Change: And then there are companies like perplexities.

Nitesh Sharan: Does it bring closer your your break even in terms of your ability to drink cash flow, adjusted operating margins, and then even gap operating margins, what does it do to the timeline of hitting those milestones? Sure, thanks, Gil.

Nitesh Sharan: So yeah, I'll put the caveat up front. More details are certainly to come. You know, we just announced this today that there will be filings and certainly a lot of details for us to talk through, but let me give you the high level construct and the way we see this and the way we see us moving forward over certainly the near term, but more importantly, maybe over the medium of long term.

Speaker Change: List prices and then we have an arrangement with them that we can.

Nitesh Sharan: So what we're really excited about here is Amelia is a software business has, you know, strong customer traction, deep and generally really robust relationships that permeate over time, and where you have, you can expand and, you know, and, you know, add up sell, cross sell, expand services, products, and expand margins. They do have multi components to their business, and we will integrate that with our profile, but I've said before, sort of pre this acquisition over the long term, we, we should have, you know, strong growth profile, very healthy software margins, 70 plus percent gross margins, and at scale, even margins that are 30 plus. And, and I don't think that changes at all with the acquisition.

Speaker Change: Go to then when its scale too.

Speaker Change: For example, Rev sharing arrangements or lower prices at scale. So.

Nitesh Sharan: I said also that you got to think of us in phases, you know, we are migrating to break even phase after sort of call it, call it cash utilization phase. And that's the next horizon for us going into next year beyond, I think you should think of us as investing in these tremendous growth opportunities because we do think of these as generational shifts in how humans interacting with technology increasingly through natural conversations and increasingly through voice.

Nitesh Sharan: And so we're going to be in sort of call it that break even zone for a bit and we'll be funneling incremental dollars into our growth opportunities because we there are tremendous growth opportunities. And so I think from an even margin and even what I mentioned about sort of a creative in the second half to your point that's earnings related, but even our profile is generally capital light. And so they're that that translates very seamlessly into cash flow as well.

Speaker Change: Future proof that for that.

Speaker Change: But it's too early to go into specifics on it.

Nitesh Sharan: So maybe to synthesize all of that is the combination we will have to integrate there will be synergy opportunities there are cost opportunities as well as we look across both firms that will be working through. But as you get into next year, certainly we see earnings accretion, we see cash benefits and cash flow benefits. And I think as you start to think through end of 2025 into 2026, you know, you're going to see a much more scaled still strong growth company, very healthy growth margins software like and and even margins that are not at our full potential because we're going to be investing those incremental dollars in our growth opportunities.

Speaker Change: Yes.

Speaker Change #161: Perfect. Thank you.

Speaker Change #167: Congrats on the transaction again guys.

Brett Knoblauch: Okay. Thanks, Brett.

Speaker Change #149: Our next question comes from Glenn Mattson from Ladenburg Thalmann.

Glenn Mattson: Hi, Thanks for taking the question building on that last question a little bit with the.

Speaker Change #105: Expected new release of <unk>.

Speaker Change #101: <unk> maybe.

Glenn Mattson: Can you just talk about how you plan ahead for something like that and maybe there is.

Speaker Change #155: Obviously opportunities, but perhaps is there any risks associated with maybe that could come out with some functionality that could.

Speaker Change #149: Potentially be competitive on the very low end or something like that so anyway.

Nitesh Sharan: But certainly shortly thereafter, I think you could think of us as that that 30 plus percent even margin type profile business.

Nitesh Sharan: Thank you.

Speaker Change: Generally speaking.

Speaker Change: Managing the evolution of this process as well as maybe you could hit on other factors of the competitive landscape when we.

Speaker Change: When you talk about this just in general whether it be pillar one pillar two.

Dan Ives: Our next question comes from Dan Ives, from Wet Bush Securities.

Dan Ives: And great quarter, can you just talk about how conversations with prospective customers have changed? You know, with over the last three, six months, compared to even a year ago, can you just maybe anecdotally talk about that? That's just given where everything is going from the technology perspective, new verticals, and studying the view of SoundHound rise, obviously changing dramatically in the market. Thanks. Yeah, so in pillar one, where we power like automotive and devices, the big change is that they are willing to pay more for generative AI.

Speaker Change #103: Yes, so in terms of.

Speaker Change: Advancements by NII and other similar companies and be positioned ourselves so that as.

Dan Ives: Whereas, you know, we have 20 years of history here, and there's always pressure to constant pressure to lower their costs. But we see it support the first time you're seeing that when we say, hey, if you want to upgrade to the SoundHound chat AI, we bring generative AI, there's additional royalty that you have to pay, and they're willing to pay it.

Speaker Change: As they do as they do better.

Speaker Change #138: Pizza as opposed to it.

Speaker Change #103: So we are able to use.

Speaker Change #101: Whatever they put out thats good.

Speaker Change #101: And if some of those.

Dan Ives: So that's the anecdotal answer to the pillar one question.

Brett Knoblauch: Overlap it.

Keyvan Mohajer: In pillar two, the big changes that are for AI customer service brand are coming to us. We used to go to them, we used to knock on their door, and we used to, you know, getting a meeting to pitch our value proposition with a big win. But now we actually have to calibrate how to handle all the incoming inbound demands, and they all want to move faster, they all want to be first. They want to go from pilot to production, they want to make sure we can scale with them. And that's a much better challenge for us to deal with compared to just getting meetings from them.

Brett Knoblauch: That we already have.

Brett Knoblauch: We don't hesitate to.

Speaker Change #109: Integrated because our goal is to deliver really really good user experiences and that was one of the advantages are somehow Gwen the big Tech players were kind of bit oriented for more than a year Oh, let's go build our own youre never going to <unk>, we did it in two days.

Brett Knoblauch: And.

Speaker Change #165: That's really benefit you were the first to go live with our customers.

Brett Knoblauch: The first.

Speaker Change: In television.

Speaker Change: Sure.

Speaker Change #160: So we love it when they come out with something that is good because say hey, we can make our product better.

Speaker Change #122: I don't think they are going after the our customers because it takes a lot of integration.

Brett Knoblauch: A lot of handholding and a lot of.

Brett Knoblauch: Support too it's not just a model we have to integrate for example in restaurant you have to integrate with POS defense and you pick up their menu we have to understand their their needs in automotive it's going to be there.

Brett Knoblauch: <unk> units and the navigation software in the car the car control features.

Brett Knoblauch: And.

Brett Knoblauch: Those integrations.

Brett Knoblauch: Even okay as products that theyre not going to go after those theyre kind of get platform to enable companies like ours.

Brett Knoblauch: The advantage for US is that we have a lot of core technologies to augment what they have to really enable things that other companies are waiting for something to become available. We already have that so we can go faster.

Brett Knoblauch: I think I answered your question, but yes.

Speaker Change #118: Beyond that possibly the competitive landscape there has been any changes.

Speaker Change #101: Possibly then down to pillar, one or just across the board in terms of debt.

Speaker Change #177: Traditional competitors thanks.

Speaker Change #167: Yes, I'll jump in and so.

Speaker Change #106: So I think.

Speaker Change #128: So pillar one.

Speaker Change #106: It is really.

Speaker Change #106: Kind of the same same group and we've been gaining traction we've been gaining brands and what we feel great.

Speaker Change #106: Primary comment around automotive.

Speaker Change: Broader than automotive into other devices that we operate in we've got a great position and we continue to gain traction there within pillar two it's a hot area. They are people coming in I would say people who.

Speaker Change: We don't have the technology to compete who are struggling.

Speaker Change: And.

Speaker Change: We really have felt this way we've seen it I think what we're seeing from customer traction is that we are.

Keyvan Mohajer: And then just follow up, I mean, kind of like Gil asked, but even to take that, does it really feel like there's given the momentum you're seeing now is the time to do a deal like this?

Speaker Change: Phil and we say this very humbly because things change in a heartbeat and tech land.

Speaker Change: Step function above others in terms of technology capability and the solutions that we have and frankly, the packaging solutions that we have.

Speaker Change #145: Drive through phone ordering.

Speaker Change #118: <unk> assist solutions.

Speaker Change #118: And beyond we're moving heavily beyond just <unk>.

Speaker Change: <unk> site, but into in App into tax et cetera, and there is a ton of engagement that we have the full portfolio of solutions. So we really think we've got a running start on the restaurant side, but yes, it's a very very attractive market and it's maybe one of the most.

Speaker Change: Sort of logical use cases of AI. So I think we're going to continue to see entrants.

Speaker Change: Look at that as a good thing it's a sign of a healthy market, but again, we feel like we've got a really strong position and really wouldn't trade our spot with anybody else.

Speaker Change #108: Great. Thanks for that color you gave on thanks.

Speaker Change #103: Alright, great. Thank you.

Speaker Change #109: Our next question comes from the coffee.

Joseph Gunnar: Joseph Gunnar.

Joseph Gunnar: Good afternoon, gentlemen, first congratulations on the deal and on the quarter.

Joseph Gunnar: Just wanted to dive in a little bit further into Amelia in terms of the deal can you just talk us through in terms of who approached who for this transaction. How did you became aware of Amelia and then looking forward post Emilia what other verticals you may be interested in.

Joseph Gunnar: Thinking here being that as you.

Speaker Change #150: <unk> voice AI and develop the capabilities you may discover second third derivative technologies that may be of interest to you that could bolster your platform and capabilities.

Joseph Gunnar: Sure.

Joseph Gunnar: Yes.

Bart: Bart maybe with the framework I laid out in the prepared remarks like first of all we think that.

Bart: Having.

Speaker Change #101: Or at least being open to the idea of having programmatic M&A and being aware of who the players are.

Speaker Change #101: From a partnership perspective.

Speaker Change #101: To Glenn's question on from a competitive perspective, so being aware of what's going on in the marketplace. So just or it is.

Speaker Change #101: Part of who we are so we're always aware we've known of Amelia.

Speaker Change #112: <unk> been doing some great things for a long time.

Speaker Change: And you can imagine in this space.

Speaker Change: Particularly in the AI space over the last.

Speaker Change: It's 18 20 months now lot of bankers come up with ideas and so so.

Speaker Change: We've had interactions.

Speaker Change: There were there is dialogue around partnerships and we're heavily kind of going in our vertical then.

Speaker Change: As Kevin noted you got to start with the sort of overarching vision. We believe we are here to voice enable the world with conversational intelligence. We think that there is a migration happening omnichannel in essence, and its going to permeate across all industries. So the end of period at the end of incentives wasn't always okay. We're in restaurants, Don where an auto has done it was all.

Keyvan Mohajer: Yeah, I'll take that one. We think it's a great time to do a deal. I mean, I think, first of all, you know, we're seeing our technology can permeate into different ecosystems. We've built the core proprietary tech, you know, over many, many years. And we're seeing it live in action and getting a lot of traction across, you know, when we spend it from autos and to restaurants. And really now bringing in a million to the fold does a few different things, some of which we've highlighted in our press release. But there's really a lot more here.

Speaker Change #149: The way to sort of.

Keyvan Mohajer: It's a diversification of industry. It's really skilled at integration. They have a great ecosystem of channel partners, by the way, which we can leverage across other avenues of our work. And there's a great intersection of product synthesis. So, when you look at other products that we've been deploying around our smart answering or employee assist, there's a great synergy that we could bring into their ecosystem as well.

Speaker Change #108: As Kevin noted kind of evolved from our origin industries into beyond. So the question then is like well when and how and with whom are doing it organically and those are iteration comments that where our conversations were constantly working through.

Keyvan Mohajer: So, when we look at things again, I kind of lay down the prepared remarks, the framework, when we think of inorganic versus organic opportunities. You know, when we see the market momentum, ultimately to your first question, what are customers seeing the really thirsting for solutions? It's not just buzz out there. It's like, how do you utilize this technology to help their customers and to help them grow? And it's not only productivity, it's actually about generating new revenue.

Keyvan Mohajer: We see that with the restaurants, for example. It's not only about productivity, obviously they have workers in store that are overworked and strained and freeing up their resources. One thing, but we see consistent improvements in upsell. And automation never sheds away from asking for that large drinker that's extra french fries. And those types of things are actually revenue and really meaningful ticket items for customers. So, I think we're seeing those demands. We think, yes, totally cognizant of, as I mentioned in prepared remarks, that anything meaningful, there's integration effort and so forth. But I really, I think the way we look at it is.

Speaker Change #190: So in this case, yes, we connected.

Keyvan Mohajer: Over the long term, when we look at the calibration of risks and opportunities, this is a time to be aggressive, and this is the time to be thoughtful, but definitely to be in go mode, because we're hearing it directly from the customer, so I think we have a combination with Amelia as something we're very excited about.

Speaker Change #113: We started to explore just get to know and then it sort of move from there.

Keyvan Mohajer: Great, thanks.

Speaker Change #113: I don't want to go into details on their situation and what they were motivated by but ultimately kind of landed in hey is there a potential for a combination and then you have to explore the complexity of the deals which we these things don't happen in short order they definitely our long journey of due diligence.

Keyvan Mohajer: Thanks, Anne.

Mike Latimore: Our next question comes from Mike Latimore from Northland, Capitol Markets. Thanks, Anne. Congrats on all the development there. Looks great. Yeah, the query volume growth was 90% and the last quarter it was 60% near over here. What was that acceleration? A lot of it is automotive partners that upgraded to SoundHound Chat AI. We did mention that when you operate the Chat AI, because of the generated AI feature, the usage went up, so consumers are actually interacting with the system a lot more. In some pilots, it was an order of magnitude, so that's one. And also just scaling in Pilar to having more customer service customers.

Speaker Change #103: Getting to know one another to understand.

Speaker Change #103: The cultures and could there potentially be a fit and so we've been we've been going on that for several months.

Speaker Change #103: And.

Speaker Change #103: Sort of landed where we were and then I think maybe just to hit the other part in terms of is this I think I think your question was like industries is this is that the right.

Speaker Change #103: Yes.

Speaker Change: I'll try to address it this way that.

Speaker Change #143: Humans have been interacting through voice and conversation forever and our technology is kind of chasing that play and we do think we're at the precipice of where human interactions with technology in all of manifestations can can happen through natural conversations and there will be great places where the.

Speaker Change #143: Touch-type swipe as the best medium, but there will be more and more opportunities where conversations and using your voice.

Speaker Change #103: The best medium so.

Speaker Change #101: I don't think Theres a boundary. Unlike this industry that industry, it's really about journeys and consumer journeys. So again makes sense for if you're driving your car you want pick up coffee great well. There is a connection makes sense. When you are just at the drive thru.

Speaker Change #103: I want to order your food and it makes sense, if youre driving you want to set some appointments or book travel or so forth or I think theres. So many interactions and so we're just getting started here.

Mike Latimore: And then on Amelia, can you talk a little bit about the core technology here? Is it that they have a kind of a platform that can handle orchestration, integration of data security, you know, develop agents on that, and then they can bring in your tech? Or maybe you talk a little bit about kind of what's the core elements of their platform? Yeah, so they have productized customer service on the channel. So it supports text and voice, phone and chatbots for both user-facing and employee-facing.

Speaker Change #113: We think this is the right action for US now and so we're excited to embark upon the journey with Amelia and continue on the journey that we've been driving for the past many years.

Mike Latimore: And there is a lot of synergies on using our tech to power that. For example, for speech recognition, they are using third-party APIs. We would replace that with ours. This opportunity for improving accuracy and also cost savings. There was a cloud migration for them to bring their cloud to our cloud and other cost savings opportunity. And just the way AI works, we think we can improve a lot of the user experiences.

Speaker Change #177: Okay, and then a quick follow up question on the restaurant side.

Speaker Change #165: The conversations have they switched from one where your marketing team is proactively reaching out to potential customers or are they now slipping in terms of upcoming their inbound calls to you.

Mike Latimore: But it's not just complete replacement. They also have not a lot of innovation over 26 years. So there's an opportunity to take the best of both. We saw that also we think three. When we bought them, we thought let's go and look at the best of both and create something better and we've done exactly that.

Mike Latimore: Excellent, great.

Mike Latimore: Best of luck.

Speaker Change #103: Yes.

Speaker Change #178: Yes, we've come into this for last couple of quarters. It really has been a pretty significant shift towards the latter were originally call. It <unk>.

Speaker Change #103: <unk> 20 months ago, we were really on the outreach side.

Speaker Change #175: I think your question was predominantly for restaurants, if I'm not mistaken so.

Mike Latimore: Thank you.

Speaker Change #108: That's certainly in that industry. It has.

Mike Latimore: Thanks, Mike.

Speaker Change #103: We're working through making sure that there isn't too much of a white await because we're working through integrations with some major <unk> is kayvon noted trying to make sure we're serving all of our customers equally with excellence and so.

Scott Buck: Our next question comes from Scott Buf from HEWingright. Good afternoon guys. Thanks for taking my questions.

Scott Buck: First, I'll just curious with the closing of Amelia, do you now have all the tools in the toolbox necessary to complete the three-pillar strategies? And do it successfully? Well, we've had the tools. We just needed the scale. And we reached the point where we thought we had that scale earlier this year. We are now in millions of cars and you know, double digit thousand locations for in pillar two. So just connecting them together seems like at the right time.

Scott Buck: You also have national coverage of certain brands like Chipotle, for example. And the acquisition of all sets earlier is going to accelerate the integration. Now we just need to do the integration of bringing those pillar two customers into pillar one product. And with Amelia, we just massively increased our scale in pillar two. So going from double digit thousand locations mostly in restaurants. Now we are in almost 200 large enterprise brands in new verticals for us. So we are in retail now, we are in hospitality, we are in financial services, insurance, and healthcare.

Speaker Change #145: We're not working with everybody. So theres still more conversations to be had but we are going out to conferences. We're getting leads we're talking to people. Some of those conversations take place over time. The other thing that these are a virtuous cycle. If you do if you can do well in one instance.

Keyvan Mohajer: Okay, so there are no holes in tech that you still need to fill. It's now just about accelerating the drilling. Absolutely, absolutely.

Keyvan Mohajer: Yes. Okay, perfect. That's helpful. And then, you know, you've had some nice wins and then obviously some big opportunities out in front of you.

Speaker Change #108: It gets around pretty quickly.

Keyvan Mohajer: I'm curious from an implementation capacity standpoint, whether or not you need to go through a process of significant hiring or between your own team and the team, you know, you're bringing on to Amelia, you have the, I guess, the hands-on deck to meet that demand. Yeah, I'll jump. Yeah, I think we're at a good spot. We have been steadily, you know, hiring in pockets where we've needed it to accelerate. I think overall we've been at a good spot where attrition has been low and you know, we have our talent who's really passionate about what they're driving and sometimes they do need additional resources are scaling with customers and so there have been measured, measured hiring.

Speaker Change #108: And also in a lot of these franchises that we're working with now it's not just like a brand to brand, but if you work with.

Keyvan Mohajer: And we, I think, you know, we know in pockets where if we see an opportunity to go faster, we don't, I think we talked about this maybe a quarter or two ago, like we don't want a customer waiting for six months, so we really want to get the resources to be able to start to activate. But, you know, I'd say generally no major hold, but because there's growth, there's going to be some hiring to support that.

Speaker Change #108: Our corporate and then it gets down to the franchise level and some franchisees have.

Keyvan Mohajer: And then I also add that, you know, again, across the companies, there's there's synergy opportunities both on revenue upsell and cross sell and, you know, leveraging that omnichannel opportunity where they bring to the table to amplify our voice capabilities and I think there's just some overhead things that naturally there's going to be cost energy, so that's the work that we're taking off really earnestly. But, you know, to your point on, or maybe the prior, like from a tech stack, no major holds, from a product capabilities, no major holds, from a resourcing, no major holds, but when you're growing, you're constantly expanding and you're kind of adding to as you go and that's kind of what we're always mindful of to make sure that we have what we need to grow. Yeah, that's helpful, guys. I appreciate the added color.

Scott Buck: That's it for me.

Speaker Change #138: <unk>, a big number of dozens and dozens of locations and some of them have.

Speaker Change: Hundreds of locations. So so again.

Scott Buck: Thank you, Ray. Thank you.

Speaker Change: It was really moved towards.

Speaker Change: Ah respond to but that doesn't mean, we're going to slow down on our outreach and we didn't really I think talk a lot about just beyond the restaurants into smart answering capabilities well last time, we talked about in the fitness.

Brett Knoblauch: Our next question comes from Brett Knoblauch from Canter Fitzgerald. Hey guys, thanks for taking my question and congrats on the acquisition. I guess just kind of taking a bit deeper there. I think you're prepared to march. You guys talked about there being some slower growth, lower margin businesses and probably in the flip side. Some higher growth, higher margin businesses.

Brett Knoblauch: Maybe you provide a framework for what that business is growing at and additionally walk us through why they sold for about 80 million with expectations to do 45 million revenue. It seems like a phenomenal purchase price for you guys, but I guess why the sellers agreed to that. I guess that it's not having any more. I guess you just talk about how that process happened as well. Yeah, thanks, Brett. I'll say a couple of things.

Brett Knoblauch: First again, more details to come. We'll see a lot more around the breakout and the details of the financial profile. The 8K that we filed this morning on the transaction actually walked through the deal economics and maybe I'll just start there. So there are actually multiple components. So there was sort of an upfront piece, some cash, some stock. There's also a part of the assumption of debt and we pay back part of that debt that was announced concurrently.

Speaker Change: Yes.

Speaker Change #108: Space with planet fitness.

Brett Knoblauch: And then, you know, like we've done in prior acquisitions, we like to share in the economics over time with delivery against the milestones and expectations that we're setting in concurrence with the target. And so all those parts are there. I think 80 is probably just a partial view just to be clear. So there is again some debt components and other things and some earn out. But we do, I think maybe the essence of what your question is is value.

Speaker Change: There's a lot going on on that side too beyond just restaurants that we're getting a lot of traction. So so just excited to keep going forward.

Brett Knoblauch: And certainly both parties need to say there's an alignment of value for any deal to make sense. And we've been going through that with them. And part of it is when you do stock transactions, there needs to be an attribution to future value of that stock. And there's a real belief both sides of what we can become and what we're starting to become. So I think when you unpack all that from deal economics, that's why this transaction was successful, why we got it to this place.

Speaker Change: As long as we deliver great products, we think the customers will come.

Speaker Change #110: Okay, well congratulations on the quarter.

Speaker Change #125: Thank you very much.

Speaker Change: Okay.

Speaker Change #169: There are no further questions at this time. So this now concludes today's call. Thank.

Speaker Change #130: Thank you for joining you may now disconnect.

Brett Knoblauch: Then the other question was sort of an unpacking of the various pieces of their business. So we did articulate in the press release about the 45 million of AR. They do have a strong recurring business that has been over time shifting from a licensing model. And so that transition has happened. And so that's a really, you know, that's what we valued really. It was a growing ARR business across those industries we talked about earlier, really rich set of customers, you know.

Brett Knoblauch: Too big to fail banks in those types. So people that would take us a long time to really develop a system to support. And so we're very, very excited about that. But they do have other pieces. They have professional services. A lot of the deals they've had are complicated. There's implementation, customization services. And those can be very valuable. They tend to be a little lower margin. And so that's a little bit of what we're alluding to.

Brett Knoblauch: And then they also have this piece of the business that's more call center-like. I think of it maybe in the escalation support type capabilities. And those are partners that we work with and revenue that they generate that is lower margin business. And we do openly need to dive in and understand contract by contract. What makes sense? In a guild question earlier, I talked about what's the profile of business we're building. We're really happy as a AI centric, you know, next generation technology software provider that from my seat goes like, hey, 70 plus percent gross margin, 30 percent even margins of scale.

Brett Knoblauch: You know, bits and bytes that can transition on scale very quickly. But when we need to provide services to support integration environments will provide that. When there are, like we had with Sync3, some call center capabilities that are additive and by the way, you know, appropriately measured with the customer where there's data that we can utilize to enhance the model and enhance the technology. We'll leverage that. So yeah, there are different pieces of business, different growth rates, and we're going to calibrate and we'll just get them going. So again, more details to come to the state team.

Brett Knoblauch: Perfect, I think you guys also talked about how you like having the optionality to kind of go back and forth between different models that you're integrated with, whether it be perplexity or chat GZT.

Brett Knoblauch: I was just wanting from the call side on, from your point of view, I guess how are they building you? Is that a usage model? Is it one time set up? See, I guess how should we think about that dynamic?

Brett Knoblauch: Yeah, so something we predicted before the very minimal model was that this is more than a year ago, but that there will be multiple models, they will be good at different things, and some will be cheaper, some will be more expensive, and some will be owned and made by us, some will be open source. So we built an infrastructure to be able to tap into different models, arbitrate, choose the right one, and even for a single interaction, sometimes you go to multiple models at the same time.

Brett Knoblauch: And that is working, it's seamless. The user experience is amazing, they don't need to worry about where it's coming from, just get the right answer, and then it follows them as they ask different questions and so on.

Brett Knoblauch: Now, in terms of filling, it's, again, some of these are models that we host, so the cost is mainly hosting, and for the APIs, like OpenAI and others, you can sign up for enterprise accounts to bring the cost down and get more scale with them, and that's something that we are doing. And then there are companies like Perplexity that have list prices, and then we have an arrangement with them that we can go to them when it's scaled to, for example, ref share arrangement or lower prices at scale. So the user proves that for that, but it's too early to go into specifics of it.

Brett Knoblauch: Perfect, thank you. I really appreciate it.

Brett Knoblauch: Thanks for having us.

Brett Knoblauch: Thanks, Brett.

Glenn Mattson: Our next question comes from Glenn Mattson from Vladimir Talman.

Glenn Mattson: Hi, thanks for saying the question. I'm building on that last question a little bit with, you know, expected new release of ChatGPT. Maybe, you know, can you just talk about how you plan ahead for something like that, and maybe there's obviously opportunities, but perhaps is there any risk associated with the, you know, maybe they can come out with some functionality that could potentially be competitive on a very low end or something like that.

Keyvan Mohajer: So anyway, just generally speaking, managing the evolution of this process as well as maybe you can hit on other factors of the competitive landscape when we went when you talk about this, just in general, whether it be color, water, pillow, too. Yeah, so in terms of advancements by alternate AI and other similar companies, we position ourselves so that as they do better, it benefits us as opposed to its harm to guys.

Keyvan Mohajer: So we are able to use whatever they put out that's good and it's some of those overlapped with something that we already have. We don't hesitate to integrate it because our goal is to deliver really really good user experience. And that was one of the advantages of SoundHound when the big tech players were kind of disoriented for more than a year. Or let's go build our own, you're never going to use open AI APIs, we did it in two days.

Keyvan Mohajer: And that's really benefit of us. We were the first to go alive with our customers and we were the first AI assistants that interrogated AI on so on. So we love it when they come out with something that is good because they say, hey, we can make our products better. I don't think they are going after our customers because it takes a lot of integration, a lot of hand holding and a lot of support to, it's not just a model.

Keyvan Mohajer: We have to integrate, for example, in restaurants, we have to integrate with POS systems. And we have to integrate with their menu. We have to understand their needs. In automotive, it's integrated with the head unit and the navigation software in the car, the car control features. And those integrations, even open AI APIs, probably said they are not going to go after those. They are becoming a platform to enable companies like ours.

Keyvan Mohajer: And the advantage for us is that we have a lot of core technologies to augment what they have to really enable things that, you know, other companies are waiting for something to become available. We already have that, so we can go faster. I think I answered your question.

Keyvan Mohajer: Yeah, not just beyond that, but possibly the competitive landscape. There's been any changes, you know, possibly then down to pillar one or just across the board in terms of the traditional competitors. Thanks. Yeah, I'll jump in. So, you know, I think pillar one, you know, we was really kind of the same group and we've been gaining traction. We've been gaining brands and we feel great. And that's a primary common around automotive, you know, broader than automotive and other devices that we operate in.

Keyvan Mohajer: We've had a great position and we continue to gain traction there. Within pillar two, you know, it's a hot area. There are people coming and I would say people who are, you know, who don't have the technology to compete, who are struggling. And, you know, we really have felt this way. We've seen it. I think what we're seeing from customer traction is that we are still, and we say this very humbly because things change in a heartbeat and tech land.

Keyvan Mohajer: And we are step function above others in terms of technology capability and the solutions that we have. And frankly, the package of solutions that we have from, you know, drive through phone ordering employee assist solutions and beyond, you know, we're moving heavily beyond just at point site, but into in app and to text, et cetera. And there's a ton of engagement that we have the full portfolio solution. So we really think we got a running start on the restaurant side, but yeah, there's, it's a very, very attractive market and it's maybe one of the most sort of logical use cases of AI.

Keyvan Mohajer: So I think we're going to continue to see entrance. We look at that as a good thing. It's a side of a healthy market. But again, we feel like we've got a really strong position and really wouldn't trade our spot with anybody else.

Keyvan Mohajer: Great, thanks for that color, Natasha and Keyvan, thanks.

Keyvan Mohajer: Great, thank you.

Leo Carpio: Our next question comes from Leo Carpio, Joseph Gunman. Good afternoon, gentlemen.

Leo Carpio: First congratulations on the deal and on the quarter. I'm going to dive a little bit further into Amelia in terms of the deal. Can you have a talk us through in terms of who approached who for this transaction? How did you became aware of Amelia? And then looking forward post Amelia, what other verticals you may be interested in thinking here being that as you explore voice AI and develop the capabilities you may discover second, third derivative technologies that may be of interest to you that could bolster your platform and capabilities.

Leo Carpio: Sure. Yeah, I mean, I'll start maybe with the framework I laid out and the prepared remarks. Like, first of all, we think that having or at least being open to the idea of having programmatic M&A and being aware of who the players are, you know, from partnership perspective, you know, to Glenn's question on from a competitive perspective. So being aware of what's going on in the marketplace is just our, it's just part of who we are.

Leo Carpio: So we're always aware we've known of Amelia, you know, they've been doing some great things for a long time. And you can imagine in this space, it's particularly in the AI space of the last, I guess, it's 18, 20 months now. A lot of bankers come out with ideas. And so, so, you know, we've had interactions and, you know, there's dialogue around partnerships and we were heavily kind of going in our verticals.

Leo Carpio: And as Kayvon noted, you got to start with the sort of overarching vision. You know, we believe we are here to voice enable the world with conversational intelligence. We think that there's a migration happening omnichannel in essence, and it's going to permeate across all industries. So the end all period at the end of sentence wasn't always, okay, we're in restaurants done. We're in, you know, auto is done. It was always to sort of, it's Kayvon noted, kind of evolved from our origin industries and to beyond.

Leo Carpio: So the question then is like, well, when and how and with whom are doing it organically. And those are iteration comments that were conversations were constantly working through. So in this case, yeah, we, we connected. You know, we started to explore, we just get to know and and then it sort of moved from there. And every, you know, I don't want to go into details on their situation and what they were motivated by, but ultimately kind of landed in.

Leo Carpio: Hey, is there a potential for a combination. And then you have to explore the complexity of the deal, which, you know, these things don't happen in short order. They definitely are long journey of due diligence and getting no one another to understand the, you know, the cultures. And it could their potentially be a fit. And so we've been, you know, we were going on that for several months and sort of landed where we were.

Leo Carpio: And then I think maybe just to hit the other part, you know, in terms of is this, I think, I think your question was like industries. Is this is that the right set. You know, I'll, I'll try to address it this way that humans have been interacting through voice and conversation forever and yet our technology is kind of chasing that play. And we do think we're the precipice of where human interactions and with technology in all manifestations can can happen through natural conversations.

Leo Carpio: And there will be great places where the touch type swipe is the best medium, but there will be more and more opportunities where conversations and and using your voice will be the best medium. So I don't think there's a boundary on like this industry, that industry, it's really about journeys and consumer journeys. So again, make sense for if you're driving your car, you want to pick up coffee. Great. Well, there's a connection makes sense when you're just at the drive through and you want to order your food.

Leo Carpio: It makes sense if you're driving, you want to set some appointments or book traveler, you know, so forth or like there's so many interactions. And so it's we're just getting started here. You know, we think this is the right action for us now.

Keyvan Mohajer: And so we're excited to embark on the journey with Amelia and continue on the journey that we've been driving for the past many years.

Keyvan Mohajer: Okay, and then a quick follow-up question on the restaurant side. The alternative conversations have they switched from one where your marketing team is proactively reaching out to potential customers or are they now flipping in terms of coming their inbound fall to you. Yeah, we commented for last couple quarters there really has been a pretty significant shift towards the latter where you know originally call it 15, 20 months ago, we were really on the outreach side.

Keyvan Mohajer: I think your question was predominantly for restaurants if I'm not mistaken, so that certainly in that industry it has, you know, we're working through making sure that there isn't too much of a weight. Oh, wait, because we're working through integrations with some major QSRs is Keyvan noted trying to make sure we're serving all our customers equally with excellence. And so we, you know, we're not working with everybody, so there's still more conversations to be had.

Keyvan Mohajer: But we're going out to conferences, we're getting leads, we're talking to people, some of those conversations take place over time. The other thing that these are virtuous cycles, if you do, if you can do well in one instance, the word gets around pretty quickly. And also in a lot of these franchises that we're working with now, it's not just like a brand to a brand, but if you work with, you know, corporate and then it gets to down to the franchise level.

Keyvan Mohajer: And some franchises have a big number of, you know, dozens and dozens of locations and some of them have, you know, hundreds of locations. So, so again, it was really moved towards a respond to, but that doesn't mean we're going to slow down on our outreach.

Keyvan Mohajer: And, you know, we didn't really, I think talk a lot about just beyond the restaurants and the smart answering capabilities were last time we talked about in the fitness space with planet fitness. You know, there's a lot going on on that side too beyond just restaurants that we're getting a lot of traction. And so just excited to keep going forward. And, you know, as long as we deliver great products, we think the customers will come.

Keyvan Mohajer: Okay, well, congratulations on the corner. Thank you very much.

Operator: There are no further questions at this time, so this now concludes today's call.

Operator: Thank you for joining me now.