Q3 2024 SoundHound AI Inc Earnings Call
Turn the conference over to Scott Smith head of Investor Relations. Please go ahead.
Speaker Change: Nitesh Sharan. We'll begin with some short remarks before moving to Q&A. We'd also like to remind everyone that we'll be making forward-looking statements on this call. Actual results could differ materially from those suggested by our forward-looking statements.
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 for discussion statements that qualify as forward-looking statements.
Speaker Change: In addition, we may discuss certain non-GAAP measures. Please refer to today's press release for more detailed financial results and further details on the definitions, limitations, and uses of those measures and reconciliations from GAAP to non-GAAP.
Speaker Change: 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.
Speaker Change: Finally, this call is being audio webcast in its entirety on our Investor Relations website. An audio replay will be available following today's call. With that, I would like to turn the call over to our CEO, Keyvan Mohajer. Please go ahead, Keyvan.
Keyvan Mohajer: Thank you, Scott, and thank you to everyone for joining the call today.
Keyvan Mohajer: This quarter, we have seen an acceleration of our mission to voice-enable the world with conversational intelligence.
Keyvan Mohajer: We are seeing strong demand across all businesses. We increased revenue by 89% year-over-year and exceeded $25 million in a quarter for the first time ever.
Keyvan Mohajer: We achieved a run rate of over 6 billion queries annualized, up over 100% year-over-year. And that's excluding the impact of our recent acquisition. We are thrilled to be setting records.
Keyvan Mohajer: While we are seeing massive success in our business, our vision has not wavered. We are pioneering the business evolution of AI founded on our two predictions.
Keyvan Mohajer: First, voice is becoming the preferred way for users to interact with billions of devices and is finally meeting the science fiction quality expectations.
Keyvan Mohajer: Users are adopting it enthusiastically and product creators can embrace it with just a small inexpensive microphone and a partner like SoundHound.
Keyvan Mohajer: Second, AI customer service will become as necessary to all businesses as Wi-Fi and electricity.
Keyvan Mohajer: And thanks to the incredible strides Voice AI has made in recent years, we believe users will prefer to have their questions and transactions handled by a consistent, accurate conversational AI agent than by a human.
Keyvan Mohajer: Sam Helm is a leader in enterprise conversational AI and we are reaching scale as a pure play AI software company significantly expanding into new verticals with our AI agent customer service solutions which are embedded deep in hundreds of enterprise brands.
Keyvan Mohajer: Moreover, our swift expansion is into end markets that are projected to grow massively over the coming years. So not only are we growing fast, but the markets we operate in are also growing fast. And just as exciting, our broader addressable market is also expanding rapidly.
Keyvan Mohajer: The breadth of our portfolio is growing and we have seen a massive shift in the way businesses are talking about AI. For most companies, AI adoption is no longer an exploration within their innovation budget. It is a mandate.
Keyvan Mohajer: We are in a position of strength and building a moat with our integrations and arbitration engine across multiple LLMs. And most importantly, our biggest differentiator is our technology, which is becoming more penetrated in the market with more businesses, more consumers, and a growing ecosystem of partners.
Keyvan Mohajer: Our AI agents for customer service now span multiple industries and offer solutions that drive efficiencies for companies by improving both employee and customer experience.
Keyvan Mohajer: For employees, we have best-in-class, agent-led HR and IT solutions. And for companies looking to deliver the very best experience to customers, our AI agents are able to answer queries and initiate all kinds of transactions. This is substantiated by the customers we work with.
Keyvan Mohajer: For example, Aeromexico, American Heritage Credit Union, Aviana Healthcare, BNP Paribas, Hoffman Financial Group, Nordic Bank, Resort World Las Vegas, and Sterling National Bank among hundreds of others.
Keyvan Mohajer: We also work with financial services organizations of all sizes from regional banks to credit unions to seven out of top ten financial institutions globally.
Keyvan Mohajer: These customers are using our AI agents for a variety of tasks, from flight booking, to bank transfer, to health queries, hotel reservations, and on and on. Our automotive portfolio continues to grow, and we are seeing strong traction in the EV space.
Keyvan Mohajer: We won a large deal with a new and up-and-coming ED OEM in the Middle East this quarter. In total, we have signed four EDs and two of them already have our technology live on the road.
Keyvan Mohajer: We continue to show momentum with Stellantis in various markets, but more importantly, seven of their brands have now rolled out our Generative AI Enhanced Digital Assistant, SanHanChat AI, with Lancia in Europe being the latest.
Keyvan Mohajer: This technology was the first of its kind solution, leveraging the strength of generative AI to delight drivers and increase usage of voice technology within the car.
Keyvan Mohajer: This has been driving strong usage growth over the past two quarters now. Our technology has broken through, and we are seeing tremendous interest with other brands that we hope to announce very soon.
Keyvan Mohajer: We've also won new partnerships that increase our presence in the Chinese market in a substantial way.
Keyvan Mohajer: We have partnered with Dain Tech, one of the leading Tier 1 software suppliers to automotive manufacturers in China. Additionally, we are beginning another partnership with one of the largest Chinese multinational technology companies in the world, supporting their focus on China's accelerating automotive industry.
Keyvan Mohajer: This is another great accomplishment for our team as we continue to increase our reach globally.
Keyvan Mohajer: And this quarter, we also grew within the Indian market. We signed a new deal with VE Commercial Trucks, a joint venture between Volvo and Eicher, to provide them voice AI assistance.
Keyvan Mohajer: and there is more to come. In a phased manner, we plan to roll out many more languages such as Bangla and Punjabi.
Moving on to our AI agent customer service portfolio.
Keyvan Mohajer: I'm very pleased with the way we have grown this business over the course of this year. Winning new logos organically, expanding with existing customers, growing our ecosystem of partners, and making smart acquisitions.
Keyvan Mohajer: We have now expanded our enterprise customer brands deep into some major industries like financial services and healthcare among others.
Keyvan Mohajer: and we see opportunities in our pipeline for new verticals such as energy and going deeper into retail.
Keyvan Mohajer: Channel and broader technology partnerships are also critical as we build out our ecosystem.
Keyvan Mohajer: We work with Deloitte, Epic, EXL, Fujitsu, General Dynamics Information Technology, Jack Henry, Kindrel, NICE, Oracle Therner, and ServiceNow, among others, making our world-class technology available to a whole host of businesses across a range of verticals.
Keyvan Mohajer: We have two robust offerings for enterprise AI. First is a sophisticated omni-channel conversational AI solution that allows our customers to power seamless phone and chat experiences for their customers.
Keyvan Mohajer: The second is an AI automation offering that helps enterprise IT leaders manage, resolve, and document thousands of events in their IT infrastructure to dramatically speed resolution time and lower label costs.
Keyvan Mohajer: In retail torrid signed with us to improve the shopping experience for its popular fashion brand.
Keyvan Mohajer: And government and military together with general dynamics information technology, we renewed our federal government contract within a branch of the U S military.
Keyvan Mohajer: Finally, one of the largest multinational payment card services companies in the world renewed for another three more years.
Keyvan Mohajer: Those are some great wins with our enterprise AI agent offerings, but we're also excited about our opportunity for Smbs with smart answering.
Keyvan Mohajer: This low touch highly scalable offering is seeing a strong and growing pipeline that includes individual brands with over 1000 locations.
Keyvan Mohajer: We estimate this massive tam to be over 30 million businesses, just in North America alone.
Keyvan Mohajer: We have solutions to cover the market from Smbs to enterprise across a growing number of industries. So the opportunity in front of us is very exciting.
Keyvan Mohajer: For restaurants, we continue to expand our offering across drive through phone ordering and supporting their staff with employee assessed.
Keyvan Mohajer: Our drive through solutions continued to penetrate new brands and expand with existing ones.
Keyvan Mohajer: While our customers realize efficiencies during the ordering process for their customers. What they are also excited about is the upsell per order our solution is creating for them.
Keyvan Mohajer: Repower the AI drive thru for Panda Express in dozens of locations in multiple states and continue to add new locations.
Keyvan Mohajer: We also just went live with churches, Texas chicken and the feedback from the restaurant staff is incredible they're delighted with how much faster, they're able to accept orders.
Keyvan Mohajer: We continue to expand in more locations with White Castle.
Keyvan Mohajer: Our earliest drive thru customer is also our largest deployment.
Keyvan Mohajer: Last quarter, we implemented innovation related to speeding up the hardware deployments that we believe can help us scale, even faster going forward.
Keyvan Mohajer: Because of our tech and our ability to navigate different languages and acoustic variations, we already have drive thru locations in three continents, and they're just getting started.
Keyvan Mohajer: It's also our trusted partners that help make this happen.
Keyvan Mohajer: We are deepening our relationship with hardware and platform partners like H M E. Although Oracle Micros, Samsung Sapient square toast and many others to build out a scalable packet solution that can improve the speed of rollout overtime.
Keyvan Mohajer: The demand for our phone ordering continues to accelerate we just recently signed yet another top 10-Qs our brand in pizza and that makes for three of the top pizza brand globally that we now have as customers.
Keyvan Mohajer: Of late we are also seeing demand from brands to power their mobile apps. This is such a powerful and convenient modality for so many consumers and you're excited to have signed a new enterprise restaurant brand to power their native consumer facing mobile application with voice AI, which includes order, Inc, and business quality functionality.
Keyvan Mohajer: As off premise ordering continues to grow we see mobile based voice AI ordering as an emerging channel further increasing our addressable market.
Keyvan Mohajer: With our drive thru phone ordering kiosk mobile apps or even adding efficiencies in the kitchen with employee assessed we're seeing tremendous demand from coffee shops to some of the premier <unk>, our Burger and chicken restaurants in the world.
Keyvan Mohajer: Some of the wins this quarter include torches tacos, and a large restaurant chain with hundreds of stores that serves homestyle foods and sell unique retail products.
Keyvan Mohajer: We also expanded within existing customers, we have franchise wins, we'd firehouse subs five guys Panda express and beef up <unk> as well as one of our larger pizza chains.
Keyvan Mohajer: And with Applebee's, we're not penetrated in two thirds of their locations, adding to the expansion, we see every quarter with Chipotle and Casey's to remain fully implemented in all of their locations.
Keyvan Mohajer: Our AI customer service product portfolio is resonating with businesses of all sizes.
Keyvan Mohajer: We are the market leader in phone ordering solutions for restaurants. Additionally, we are proud to say that our phone ordering solutions have crossed the milestone of handling 100 million interactions that's more than 100 million inbound consumer calls exclusively with AI.
With that I wanted to share with you some of our trusted brands that have been using our solutions along the way.
Keyvan Mohajer: Chipotle, Casey's Applebee's Jersey, Mikes firehouse subs, five guys habit Burger noodles, Aimco Mod Pizza, California, Pizza kitchen, coronary bakery Blaze Pizza Mcallister as Delhi, Schlotzky's, Katherine Xu pause and Blake Lauder Burger.
Keyvan Mohajer: Basically you can go Monday through Sunday, using sound hands voice AI solutions to get anything from burritos, two burgers or pizza pies with speed and convenience.
Speaker Change: We own our tech have hundreds of patents 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 solutions.
Speaker Change: <unk> built a competitive moat with a proprietary technology that is creating a massive opportunity and customer service.
Speaker Change: I'm also happy to announce today that we will have a prominent presence at CES 2025 in January.
Speaker Change: There, we will be showcasing several automotive technologies and AI solutions some for the very first time.
Speaker Change: This will include our work with Nvidia to bring Voyce generative AI to the edge without cloud connectivity.
Speaker Change: Our live demonstration at CES will show, how the solution empowers automakers to enhance in car experiences by bringing the intelligence of cloud based llm's directly into vehicles.
We will demonstrate how drivers can have meaningful interactions. We then in car assistant using voice generative AI as well as seamless access to efficient car control capabilities that understand context without the need for cloud connectivity.
Speaker Change: We believe technology like this will ultimately redefine the way drivers interact with their cars.
Speaker Change: A new standard for the driver experience.
Speaker Change: We will also demonstrated at CES 2025, what we believe will be the voice commerce ecosystem of the future.
Speaker Change: You are creating a new category altogether and are excited to share with all of you that dynamic and convenient ways for people to do voice commerce from ordering food to buying tickets, making appointments and completing a range of other transactions just by speaking naturally from an ecosystem of devices that would be power.
Speaker Change: More details to come.
Speaker Change: We look forward to taking part this year at CES 2025.
Speaker Change: Before closing I wanted to give an update on our Polaris Foundation model.
Speaker Change: Our multimodal multilingual foundation model that elevates, our proprietary automatic speech recognition technology to the next level.
Speaker Change: Polaris built on two decades I've worked it has learned from billions of real conversations and over 1 million hours of audio in dozens of languages that Samsung has carefully accumulated over the years.
Speaker Change: We've been rolling at Polaris and production and the results are exceptional.
Speaker Change: Seeing impressive increases in accuracy, while also reducing hosting costs.
Speaker Change: And because we built it ourselves, we can adapt and improve efficiency and with minimal human efforts.
I'm delighted to say that Polaris is now powering approximately one third of all AI interactions Hassan on handles for restaurant customers.
Speaker Change: And we expect this exceptional Samsung tablet technology will soon be the AI engine to power all of our customer experiences.
Speaker Change: As we continue to develop Polaris, who will also released a number of groundbreaking features that we'll continue to revolutionize the way our technology understand speech intense and the full meaning of conversational exchanges.
These exciting engineering innovation keeps us at the cutting edge of conversational AI and allows us to deliver consistently superior technology to our customer base.
Speaker Change: In closing, we have a winning position in all pillars of our business.
Speaker Change: In automotive, we continue to take market share.
Speaker Change: We see ourselves add up the competition in the adoption of generative AI technologies and AI in the cloud.
Speaker Change: We are leading in the EV space and with new companies that are choosing their technology partners to bring anybody products to the world.
Speaker Change: This speaks to our technology and offerings.
Speaker Change: In customer service, our AI agent offerings are now more than half of our business and growing at a rapid rate.
Speaker Change: We are working with Premier Fortune, 500, enterprise brands, and adding major system integrator partners to capitalize our business growth.
Speaker Change: We've had a consistent vision over the years and that vision is now being noticed more than ever before companies partners stakeholders and most importantly users of our technology of realizing the amazing experiences we've created.
Speaker Change: We are grateful to all of the collaboration and engagement to all who play a role in our continued joint success, especially our amazing team.
Speaker Change: With that I'll now turn the call opportunity Tesh to talk about our financial performance key growth drivers and business outlook.
Speaker Change: Thank you, Kevin and good afternoon, everyone Q.
Tesh: Q3 revenue increased 89% year over year, we had over $25 million in revenue this quarter once again exceeding 50% growth and we are just getting started.
Before we dive into the financials for the quarter, Let me contextualize, how we view the shifting technology landscape and what we're building here.
Tesh: We believe natural language conversations will be the next major interface and how humans interact with technology and.
Tesh: And generative AI and <unk> are catalyzing that opportunity at an exponential pace.
Tesh: In this new World Order, we believe voice AI is the killer App.
Tesh: This is a generational shift.
Tesh: We are building a foundation for the next 510 and 20 years.
Tesh: Our heritage and innovation uniquely positions us to succeed.
Tesh: The basis of our capital activities and investments this year in particular have been to set ourselves up for the shifting reality.
Tesh: As we gear up to finish 2024 and transition into 2025. It is with this lens that we organize and align ourselves.
Tesh: Our financial position remains strong.
Tesh: 2024, our capital position has been a source of strength and we want to maintain that strength because it affords us the opportunity to grow invest strategically.
Tesh: Extend our reach and deepen our customer footprint.
Tesh: Our cumulative subscriptions and bookings backlog metric is a measure of customer activity and gives value to our current customer contracts.
It continues to grow as we further deepen our automotive partnerships and scale of the restaurant business.
Tesh: Excluding the Emilia acquisition. It is double what we reported in the prior year period again this quarter.
Tesh: And its inclusion substantially increases our enterprise customer base.
Tesh: The Emilia team utilizes their own measure of bookings and we are midstream in aligning all our key metrics suffice to say this expansion into financial services banking health care insurance and more as a meaningful broadening to our customer portfolio and book of business as.
Tesh: As one quick measure if we combined on a like for like basis. This metric across the full enterprise.
We would now be talking about a customer metric in excess of $1 billion and with the duration of approximately six years.
Tesh: That said when we report our annual results early next year, we will share more on the most appropriate metrics to describe how we are making progress collectively and comprehensively.
With that let me now discuss our third quarter financials in more detail.
Tesh: Q3 revenue was $25 1 million up 89% year over year.
Tesh: We continued to see double digit automotive unit growth and we saw double digit unit price expansion in the quarter driven by our generative AI solutions and overall product expansion.
Tesh: As a reminder, we are anniversarying a period, where we had significant point in time revenue from our largest customer within the automotive business.
Tesh: Thanks to our scale and diversification of customers that contribute more SaaS like revenue, we have reduced our reliance on such large point in time deals.
Tesh: Within restaurants, we've continued to scale with customers side meaningful new logos and further diversified product offerings.
We now count seven of the top 20 quick service restaurants as customers.
The quarter also benefited from the acquisition and at a company level, we have a much more diversified customer geographic and industry base.
Tesh: One key measure of that is customer concentration last year, we reported 72% of our revenue came from one customer and now that number has improved to just 12% this quarter.
Tesh: Breast another way.
Tesh: Last year, our top five customers represented over 90% of our business. This year, our top five comprises less than a third.
Tesh: This was an area of risk highlighted by investors in the past and so it seemed important to emphasize the tremendous diversification we have experienced over the past 12 months.
Tesh: In Q3, our gross margin was 49% down year over year due to the impact of the business mix from recent acquisitions.
Tesh: Which we expect will deliver significant value over time.
Tesh: Adjusted for noncash amortization of purchase intangibles, our non-GAAP gross margin was 60% while.
Tesh: While the acquired businesses weigh on our margins.
Tesh: They provide deep customer relationships and essential enterprise grade data assets.
Tesh: We anticipate margin recovery as we realize synergies from cloud data center migration Tech stack integration and cost rationalization.
Tesh: Additionally, meaningful reductions in insurance costs provide a favorable tailwind for our deployments.
Tesh: R&D expenses were $19 $5 million in Q3, reflecting a 53% year over year increase primarily driven by our acquisitions.
Tesh: We are committed to delivering innovative products that exceed our customers' expectations and that enhance their experiences.
Tesh: Our focus includes advancing our voice AI engines, integrating leading LLM architectures to elevate our offerings and investing in high impact innovations such as the Polaris initiative, which is Kayvon mentioned is an exciting breakthrough not only for sound hound, but for the industry as a whole.
Tesh: With efficient model training as a priority we are well positioned to pioneer next generation solutions that push boundaries and deliver measurable results.
Tesh: Sales and marketing expenses were $8 4 million in Q3, an increase of 87% year over year.
Tesh: The increase is primarily due to the impact from acquisitions. This quarter. We also continued to invest in go to market, both across restaurants, and automotive and both indirect indirect.
Tesh: Our emphasis continues to be in demand generation lead generation and improving close rates with speed and efficiency.
Tesh: G&A expenses were $17 million in Q3, an increase of 146% year over year. The increase is primarily due to acquisitions in particular related to transactional costs that are onetime in nature note that these are excluded from adjusted EBITDA and non-GAAP earnings the increase in G&A also continues to reflect growing.
Tesh: <unk> and system and process improvements and enhancements to internal controls ultimately to drive better standardization and cost efficiencies.
Tesh: Noncash employee stock compensation was $9 $1 million and noncash amortization of intangibles was $5 $1 million in Q3 as a result, our operating loss for Q3 was $33 8 million.
Tesh: Hawaii was a positive $1 $5 million for the quarter. This includes the interest expense of $1 $1 million on our debt.
Tesh: We also had a onetime benefit on the tax expense line of approximately $11 million related to the release of valuation allowances related to the Emilia transaction.
Note that this onetime benefit is excluded in our reported non-GAAP metrics.
Tesh: Net loss was $21 $8 million in the quarter GAAP net loss per share in Q3 was <unk> adjusting for noncash acquisition related amortization of purchase intangibles fair value adjustments M&A transaction costs stock based comp and other noncash items, our non-GAAP EPS loss was <unk> in the quarter.
Adjusted EBITDA was a loss of $15 9 million in Q3, the year over year increase was driven primarily by strategic acquisitions and growth investments, we've been making in the business.
Tesh: Our cash and equivalents as of September 30, it was $136 million and we have $39 million of debt that remains outstanding from our most recent acquisition <unk>.
Tesh: Last week, we announced a new at the market equity program, we have utilized Atms previously to provide capital flexibility and improve our balance sheet. Our current outstanding debt is roughly 15% annual cost. So we believe their economic savings to achieve.
Tesh: We will be thoughtful about when we execute on the program and as I have said before our capital position is strong and we do not need incremental capital to achieve a breakeven operating profile.
Tesh: With that.
Tesh: Let me discuss our financial outlook.
Tesh: We now expect 2020 for revenue to be in a range of $82 million to $85 million.
Tesh: And while we will share more details regarding 2025 in our next earnings call. We thought it would be helpful to lay out an early view.
Tesh: We continue to scale, our automotive AI agent and restaurant businesses, we are integrating the acquisitions and we see significant revenue synergies.
Tesh: And we expect to drive meaningful opportunities for upsell and cross sell across the full portfolio.
Tesh: As such we expect revenue for 2025 to be in a range of $155 million to $175 million.
Tesh: We also expect to drive cost synergies and continue to rationalize our portfolio to capitalize on the most meaningful investment opportunities.
One of our biggest priorities is ensuring we continue to operate with agility and urgency.
Tesh: We wanted to make sure we aren't short changing opportunities either so we will balance moving fast to capture market opportunities with driving efficiencies to move towards profitability.
Tesh: In accordance we expect to achieve adjusted EBITDA profitability by the end of 2025.
Tesh: I'd like to close by emphasizing factors that underpin our financials, which may not be obvious on the surface.
Tesh: Over the past year, we have meaningfully diversified our customer base product set and industry and geographic coverage.
Tesh: We have solidified the capital base and extended our reach into what is clearly generational and foundational technological shifts that are only just beginning.
Tesh: Another way to view. This is that we are steadily derisking, our financial profile, while concurrently accelerating growth vectors.
Tesh: That certainly doesn't suggest that we arent elevated beta as we are fundamentally a disruptor. It does though portend that we are better situated to drive sustainable alpha for the long term.
Tesh: I have said several times before that our pathway will not always be linear.
Tesh: That is partly by design because we are thinking exponentially.
Speaker Change: Thank you and now we will move to Q&A.
Tesh: Yeah.
Speaker Change: Thank you at this time, we will conduct a question answer session. As a reminder to ask a question you will need to press star one on your telephone and which we need to be announced.
Speaker Change: To withdraw your question Press Star, one where again, please standby, while we compile the Q&A roster.
Speaker Change: Our first question confirm Gil Loria with da Davidson. Your line is now open.
Good afternoon.
Speaker Change: Three months ago, when you announced the Emilia acquisition, you talked about the fact that you were looking at various parts of the business to decide which ones youre going to incorporate into the future somehow and there was a possibility that you may want to discontinue some of those business that you had acquired.
Speaker Change: With this three months worth of work and perspective on that can you give us a sense for how much of the Emilia business youre going to be retaining.
Speaker Change: How much you may be discontinuing and then whats the accounting going to be for that.
Speaker Change: Sure Hey, Joe.
Speaker Change: So to be fair, we're still in the process of that and you're right. We're three months in.
Speaker Change: Jack.
Speaker Change: There's a lot that we've been learning in bringing the teams together I think there's a lot. We're excited about that we're going to accelerate there is product cross sell upsell opportunity. We've talked about there is integration across our technology stack that we're going to do and.
Speaker Change: And in terms of the composition directly to your question. They have multiple pieces one of which is this kind of.
Speaker Change: And this future of a gentex sort of space that they have real integrations that we're going to accelerate and Thats. One we absolutely will keep high margin.
Speaker Change: Keep integration.
Speaker Change: Conversations with customers that I think we talked about also last time, where one of the big areas. They saw a lot of opportunity with voice enabled with our own proprietary tech and sort of displacement of third parties that is an area absolutely we will.
Speaker Change: Double down on and grow and highly excited about that.
Speaker Change: Another sort of maybe more employee facing capability. They have a solution called AI ops, that's one where we're probably going to double down and accelerate investment in and we think that gives us deeper into.
Speaker Change: Many of those enterprise brands, where we can provide full suite solutions and employee facing conversations customer base in conversations the two pieces, we talked about previously that we're sort of still admittedly in contemplation around what's the future hold.
One is professional services the second is.
Speaker Change: Related to what I'll just call it escalation support pass through.
Speaker Change: Support the threat.
Speaker Change: Service is actually a strategic and I think the question isn't binary in or out it's more about where and how.
Speaker Change: So for example, doing more of these professional services to go deeper into integrations with large enterprises that have hundreds of thousands of interactions monetize well interactions that stuff. We are we see a positive return on will go faster, but we wanted to do over time to standardize that so that youre not really every deployment doing more and more professional services that are at a lower margin clip.
Speaker Change: But that is going to be a journey and quite openly we probably don't have the full answer for you, but over time in the coming quarters, we'll definitely share progress on the escalation support that has lower margin today and the question is we really benefit from the direct customer connection we benefit certainly which is probably understated value proposition to the enterprise grade data assets that come with that.
Speaker Change: And how we can quickly refine and automate our models to improve.
Speaker Change: Ultimate delivery for customers. So that we're already starting out of the gate learning growing we believe that business probably will become less but it will also become more automated so I don't have a precise number on.
Speaker Change: What the puts and takes are we gave a bit of a range next year, because we probably still need to keep going through this exercise a lot of it is going to end up being in some sense industry by industry and customer by customer.
Speaker Change: But I think ultimately if I, if I lift that answer up a bit too.
Speaker Change: Something I've said previously which is look we want to be a the profile we are a software business.
Speaker Change: We think that deploying bits and bites are much easier. We're certainly in some of our parts of our business outside of the Emilia question to ask but certainly on the restaurant side, where integration tight integration with hardware deployments scale drive things does the things we want to look at to be faster.
But these are the conversations that are happening every day here and.
Speaker Change: And so we're going to actively every quarter to try to give you an update but.
Speaker Change: But hopefully that gives you a little bit of a flavor of how we're thinking through things.
Speaker Change: Yeah I appreciate it and then the second question I would like to.
Speaker Change: Talk about the technology, if you're talking about the foundation of the model could you help us understand how you benchmark that model and what are the important benchmarks are how many parameters was trained on how big of a cluster of Gpus.
Speaker Change: Specific benchmarks and what other models are you comparing it to two to assess how much it can contribute to making your products better.
Speaker Change: Yes, I'll take that one thank you for the question.
Speaker Change: So we've been building models for almost two decades.
Speaker Change: And we have a ton of data and we have data for training we have data for.
Speaker Change: <unk> that our.
Speaker Change: Standardized tests out there.
Speaker Change: Also have more difficult test from real life interactions that are.
Actually on assets.
Speaker Change: Give us a better indication of our performance.
Speaker Change: And we have fee recognition.
Speaker Change: Mark and then we have natural language understanding benchmarks.
Speech recognition or the benchmark is usually at a rate.
Speaker Change: And there is also no latency and speed.
Speaker Change: We beat.
Speaker Change: They're not that many companies actually that provides speech recognition.
One of the few that has that technology in house.
Speaker Change: Generally we consistently beat the big tax.
Speaker Change: In accuracy and speed when it comes to speech recognition.
Speaker Change: And then in terms of natural language understanding.
There hasn't been a shifted it used to be you would measure.
Speaker Change: In 10 recognition and so on now we are measuring hallucination because.
Speaker Change: Llm's really understood always understand but sometimes they understanding correctly.
Speaker Change:
Speaker Change: And if you look at what <unk>.
Speaker Change: <unk> one of our vendors, we have our own tech use other tech arbitrate across Alabama.
Yes.
Speaker Change: But open AI does is they put their innovation and product users in their consumer facing apps.
Speaker Change: Yes.
Speaker Change: It can work mind blowing amazingly.
Speaker Change: Let's say 70, 80% of the time and if it doesn't work, 20%, 30% that their audience is forgiving because their audience is getting a glimpse of what the future looks like but our audience is not forgiven you cannot be 20 to 30 per cent hallucination menu or providing an AI agent for an enterprise.
So when you spend a lot of time.
Speaker Change: Bringing our own IP into the equation and are oriented to the equation to reduce debt hallucinations. So our goal is a 100%.
Speaker Change: Samsung really shines in that area because of the experience and the data that we have.
Speaker Change: You asked about GPU costs.
Speaker Change: So again, we've been building models for almost two decades, we have spent a ton of collecting data and building models.
Speaker Change: We're off to a company that's just starting they have to gone great hundreds of millions of dollars to get started.
Speaker Change: That investment is already accumulated for us, but we are increasingly spending more on gpus to iterate on.
Speaker Change: And the models that we have.
Speaker Change: Got it thank you very much.
Thanks, Jeff.
Speaker Change: Thank you William for next question.
Speaker Change: Our next question comes from the line of Scott Berg of HC Wainwright <unk> co. Your line is now open.
Speaker Change: Hi, Good afternoon, guys. Thanks for taking my questions.
Speaker Change: First of all I wanted to I appreciate the breakout by kind of industry vertical that you included in the release, but I'm curious as you look towards 25 and the opportunity to lead within each one of those.
Speaker Change: Your capacity looks like and maybe how you are moving are allocating resources.
Restaurants, and kind of broader retail or auto.
Speaker Change: He kind of color you could provide there would be great.
Scott Berg: Sure. Thanks, Scott.
Speaker Change: So we do see a lot of opportunity.
Speaker Change: And we are seeing are long.
Speaker Change: A long history of building and scaling our relationships with automotive partners is continuing to grow we've talked about new partners that we've been adding particularly on the EV side Evs can scale faster by the way so that that gives us confidence. So we wanted to keep doing that and driving that on the device side I think where we're really if I were to marginally kind a go or where we see the.
Speaker Change: Outsized pace, we've talked about this you see this actually in the midst of businesses in our pillar two opportunity and I'll unpack that a bit into the industry dynamics as you as you are talking about but more broadly just our opportunity to take those AI agents and deploy them across our ecosystem of customer service partners.
Speaker Change: Absolutely expect that again next year to be outpace growth.
Speaker Change: So to Doubleclick the restaurant one.
Speaker Change: It's one that we're very very excited about we talked on the prepared remarks here about 7% top 20, <unk> that were already working with many of these when we gave sort of our indication of scope of opportunity. We talk about the current contracts that we're working with sort of a deployment into tens or hundreds of locations, but the reality is across a lot of.
Speaker Change: Those kiosks, our fleets they have thousands of locations. So we see a lot more unlocking and a lot of time and these restaurants are largely the same menu set so you get it right you get to 85, plus order completion rates you have the structure in place if it's a drive through you've got the hardware packaging all combined you've got a scalable.
Speaker Change: Opportunity and so I mean, we've been talking about that will now for several quarters I think the restaurant opportunity continues to be very very exciting for us.
Speaker Change: Certainly now the new.
Industries, we talked about.
Speaker Change: When you get a large enterprise in a large money center banks for example, or another financial institution.
Speaker Change: Or or some of those other enterprise spaces, there's just such high volume that we can continue to extend and again here, we're doing both employee facing opportunities as well as customer facing so so those will continue to be big areas. I've mentioned briefly in a prior question about a solution we have internally called AI ops integration with the Internet.
Tech stack.
Speaker Change: That that is another one that we think we can deepen our roots with customers into <unk>.
Speaker Change: It budgets.
Speaker Change: And that should allow us to scale and penetrate.
Speaker Change: Over more of if I take a more of a medium term answer to your questions.
Speaker Change: I think just generically the healthcare opportunity is one we're very very excited about today, we're integrating with several different both insurance companies, but also sort of front end commentaries at Amtrust dentists.
Speaker Change: Medical centers for appointments for understanding what happened in your report.
Speaker Change: For getting.
Speaker Change: Theres just a lot more there it's the largest industry.
Speaker Change: More and more of it we see the demand.
Speaker Change: So quite openly I'd say those are a couple of them but.
Speaker Change: For us we're a horizontal platform play.
Speaker Change: We really believe that we're trying to shift to.
Speaker Change: More and more voice first natural conversations, but while we have an omnichannel play.
Speaker Change: And so where we see consumers.
Speaker Change: That can benefit from this we're going to deploy that and some of our solutions like smart answering actually are easily addressable across industries.
Speaker Change: So we see a lot of opportunity across restaurants financial services health care, but frankly, it's about deploying the technology horizontally and getting scale across even more.
Speaker Change: Great I appreciate all that detail and then my second one on the.
Speaker Change: The increased outlook.
Speaker Change: Is it something you are seeing from directly from one of the acquisitions is it something you're seeing from the legacy business or is it just the combination of the two that's pushing that higher both for.
Speaker Change: Fourth quarter and 25.
Speaker Change: It's a combination of the two both separately, but also them coming together.
Speaker Change: Continue to be really excited about just even in answering to your prior question like the the automotive business has a lot more scale opportunity, we're still a smaller share of the total market and we are disrupting the major incumbent player in gaining share all the time. So we think theres a lot more that we can deploy in growth on the restaurant side I mentioned, we already with enough partners to really get a ton of <unk>.
Speaker Change: Organic growth just from those partnerships, but we're adding more and more all the time and scaling units across and then.
Speaker Change: And then I think with respect to the acquisitions the cross sell upsell opportunity is tremendous so so we absolutely.
Speaker Change: We do see.
Speaker Change: It's a great opportunity across all of those.
Speaker Change: It's both both organic and across the M&A.
Great well I appreciate the added color guys. Thank you for the time.
Scott Berg: Thanks Scott.
Speaker Change: Thank you Amit for next question.
Speaker Change: Our next question comes from the line of Glenn Mattson of Ladenburg Thalmann. Your line is now open.
Speaker Change: Hi, yes, thanks for taking the question so in relation to that guidance I'm curious I think I saw in the filing that there is a for.
Speaker Change: For the quarter you'd be like $40 million. This quarter, if you had a million for the full.
Speaker Change: Quarter, correct me, if I'm wrong, there and then so if you were to annualize that that's like a $160 million next year.
Speaker Change: Can you just square away perhaps.
Speaker Change: That's kind of like ballpark.
Speaker Change: Mid point of your range. So maybe there is.
Speaker Change: Some some cushion built in there perhaps there's some seasonality can you sort of explain Oh I understand.
Speaker Change: The guidance in relation to that number.
Speaker Change: Yeah, I think Theres a couple of things there one is like we talked about it I think in <unk> question. There are certain things we are actually looking at in terms of how we're going to pursue that going forward and what mix is it's not just about growth its growth and profitability I also indicated sort of trying to get towards.
Speaker Change: Adjusted EBITDA positive so we're trying to be mindful of both the growth and.
Speaker Change: Sort of margin profile, but I don't think thats totally off I think there is still some seasonality in our business, but as we're moving more towards SaaS, a greater share of our business SaaS. So I think youll see that stabilized and hopefully you won't see it but we are continuing to grow.
Speaker Change: And if I, maybe unpack the guidance this way and it's sort of at the lower end of it to the higher end of it we gave a bit of a range we want to be prudent in the estimates were giving out there just so we continue to give ourselves a bit of the room to breathe.
Speaker Change: Delivering outpace and make the right investments for the long term so all of those sort of coming into the calibration around.
Speaker Change: The numbers and I will say, yes, youre starting to see some disclosures, we actually had disclosure come out recently with respect to details of the business but.
A lot of our acquisitions and for us to get at it.
Speaker Change: Prices that we feel were attractive.
Speaker Change: A lot of things that we have to work on through integration to rightsize the ship to invest in the right place to get go to market Recalibrated and so we're doing a lot of that real time, and that's why looking at the past isn't always the best indicator of the future. Those are the things that we're driving with the integration. So hopefully that gives you a little more sense of how we are driving it.
Speaker Change: Yeah, Yeah. That's helpful. Thanks, and then just on the business side.
You said seven of the top 20, <unk> now and can you just talk in the past you've talked about.
Speaker Change: With these larger deployments, sometimes it's a little harder to get.
Speaker Change: Whatever if it's all.
Speaker Change: The franchisees on board or something like that or just didn't procure the equipment.
Speaker Change: Time to install everything and everything can you just talk about your sense of how that process is going from the from the wind to the actual actual deployment.
Speaker Change: Yes, they are a lot of different flavors and a lot of different point of sale systems and integrations that are required all of may.
Speaker Change: Maybe repeat something that Kayvon brought up on the prepared remarks that we're excited about is yes, you're right. There were kind of if I think of the franchise locations. There is you got to have a second conversation with franchisees. So we have now activated and are investing in franchise sales and getting the right people because that sales motions different then.
Speaker Change: New customer acquisition, and so we are investing to make sure.
Speaker Change: Big partners that we have msas with that have <unk>.
Speaker Change: A large footprint of franchisee how do we have those multiple conversations with support from corporate to deploy.
Speaker Change: That's something we are definitely scaling it and then Kevin I'll mentioned white castles one of our earliest partners and one of the really exciting things. This last quarter was how our team got very creative because one of the challenges was the hardware footprint and retrofitting a lot of their locations and frankly in some cases they have.
Speaker Change: You got to get a permit in a certain location to retrofit the drive through and that could be a multi month, if not year process and our team was really creative in coming up with a more agile approach with the post an a and a visual footprint that we could.
Speaker Change: Deploy it quickly get it activated quickly get to high order completion rate and let customers start using our technology.
Speaker Change: So it's those types of innovations that we're doing that we're partnering with many of the hardware vendors that KBR noted.
Speaker Change: For both the headset screens all the capabilities that are required for drive through and that's the way we're going to calibrate. It. So I would say our pace continues we continue to try to aggressively drive this forward relative to last quarter. I think we would just continue to learn so much and I would say the team is.
Speaker Change: Frankly, going even faster as we learn.
Speaker Change: And the partnership ecosystem is getting more and more solidified that we feel confident we're going to continue to.
Speaker Change: To scale this.
Speaker Change: And.
Speaker Change: I guess the last thing you didn't really exactly ask this but I'll hit it if it's okay in terms of the interest and momentum we brought this up last time.
Speaker Change: That maybe a year ago, we were going out sourcing customers and now we really.
Speaker Change: I will say this full humility like we believe we're absolutely the industry leader driving this and so more and more restaurant franchises are coming to us and trying to partner with us and we have with limited resources the constraint and challenge of how do we prioritize all of these and when you move from.
Speaker Change: Top 20 conversations to top 10 conversations to top five we just have to be mindful and edit and set the right expectation and our goal here is to.
Speaker Change: Exceed expectations and delight, our customers and certainly their end consumers and so that's just a continued calibration that we're constantly trying to battle, but net net I would just summarize that by saying feeling really good about the momentum we're investing in the right spot. We think this is absolutely on trend where the world is moving next year the year after five years down.
Speaker Change: The road this is where it's going.
Speaker Change: And we're just super excited about what we're driving here.
That's very helpful and if I could just squeeze in one quick.
Speaker Change: Keeping on the backlog I think you said two X last year, but I don't remember the figure for last year, because you had.
Speaker Change: You know when you convert it to the new backlog number at some point I think.
Speaker Change: After that point is there.
Speaker Change: Our dollar you can give us or just.
Speaker Change: Is that the only reason we would do last year as reported it was <unk>.
Speaker Change: 300, mid three hundreds and then Youre right. After you normalize it it's over 400.
Speaker Change: Which I don't think it was reported so the doubling of it you can just do the rough math, but I think the bigger point I was trying to raise and now we got to conform with what Amelia brings to bear and they had a very different way of measuring it and so we just we will share more next time, but it's well north of 1 billion was what I conveyed in the prepared remarks as a combined business really nice diversification I would say if I were to <unk>.
It's sort of like if I put 1 million aside probably the outpaced growth or not probably but the outpaced growth continued to be in the restaurant side as we're signing up more.
Speaker Change: Customers, but not only that but activating more locations, but we continue to see strength across multiple parts of that that customer base.
Great. Thanks again.
Speaker Change: Sure. Thank you.
Speaker Change: Thank you for our next question.
Speaker Change: Our next question comes from the line of Leo Carpio of Joseph Garner. Your line is now open.
Speaker Change: Good afternoon, gentlemen, first congratulations on the quarter I have a couple of questions. The first question is what's your M&A appetite.
Speaker Change: As you seek to consolidate the voice AI space any industries or sectors that look appealing and could you provide a little more color on the energy and retail sector comment it sounds like you're wanting to explore a little bit more deeper in there.
Speaker Change: Sure. Thanks.
Speaker Change: Thanks for the question I'll take the first part of that.
Speaker Change: Yes.
You May have mentioned this last quarter the quarter before like I really believe that having a programmatic M&A muscle is imperative, especially in fast moving industries and quickly calibrating, new horizons, which is what we believe we're in with this generative AI and conversational AI space and we've seen the benefits of that getting really attractive.
Speaker Change: Strategic partnerships sync three all set Amelia and we're much stronger as I compare I must like each earnings call when I compare to what we said last time, we're moving so quickly and expanding and growing the business.
Speaker Change: This is the right thing to have as a toolkit.
Speaker Change: That doesn't mean that we are dependent on it that doesn't mean that we're just actively sourcing anything but we do have a dedicated team and we have a lot of great banking partners, who are and we have actually now that we've done a few and get a lot of companies inbounds that are sending ideas.
But we're just judicious ultimately for US we have built that and Kayvon and team in particular built an amazing technological foundation deep rooted hundreds of patents deep tech stack innovators, we're constantly pushing the envelope and the question is how do we leverage that to.
Speaker Change: To go faster and driving and getting deep customer relationships was one of the major Dcs. This year and we were able to do that both in restaurants, but also into other verticals.
Speaker Change: So going forward, we'll be mindful I think we're in a good spot there is a lot to digest and there was a lot of work in the integration of the ones. We've done. So we also want to be measured and thoughtful about.
Speaker Change: How were you know what.
Speaker Change: We're asking of the teams so we're not actively looking.
Speaker Change: Or in dialogue like but we're not also going to close up shop or put our head in the sand we're going to be actively looking in the lens. We do is not always ultimately M&A is to understand who else is out there, there's new players constantly and who might be good partners.
Speaker Change: Suppliers, there's going to be a lot of different angles and so that's just all part of the strategic planning that we do.
Speaker Change: So that's part one I guess on part two.
Speaker Change: Because we do have horizontal solutions, we are going after different we can.
Speaker Change: Hit different industries.
Speaker Change: I think you mentioned energy and.
Speaker Change: Well I'll tell you what the other one was but.
Speaker Change: But yes, there is a lot of pipeline and there's a lot of need for our solutions, particularly the conversational agent side capabilities that we're bringing so.
Speaker Change: I think that is an area. We will focus on these are massive tims again now that we're talking about if you're seeing industry wide healthcare 10 trillion Tam or whatever it is financial services also multi trillion dollar tram energy multi trillion dollar. These are spaces that are ripe for automation and something that we will look at or edit it always will be governed by capacity in <unk>.
Speaker Change: The sources and prioritizing our highest growth and where our capabilities are best suited to Tibet.
Speaker Change: Okay, and then speaking of partnerships any plans to collaborate with the large <unk> companies like anthropic open AI or are there existing relationships with them.
Speaker Change: Although we do use.
Speaker Change: Pharmaceuticals that we use of NII as one of our vendors.
Speaker Change: And the broad chat GBT into our these are actually kind of in cars.
Speaker Change: We also have disclosed our architecture that you can arbitrage across multiple lamps.
Speaker Change: A lot of the queries are handled by our own models, but for certain things we can go to.
Speaker Change: The fish actually PD models to answer.
Speaker Change: Couple questions.
Speaker Change: And then if you have a <unk>.
Speaker Change: Question is about.
Speaker Change: Real trends.
Speaker Change: Muse.
Speaker Change: Can use model perplexity.
Speaker Change: So we've tried to build our.
Speaker Change: Architecture to be kind of agnostic.
And.
As I mentioned, we are also building our own Polaris Foundation model.
Speaker Change: Okay, and then in the restaurant pillar amongst the tone of the conversation last quarter, you indicated youre getting a lot of inbound calls.
Speaker Change: And given the roster of restaurants that you've been working with.
Speaker Change: What do you think.
Speaker Change: The extra that you need to top with cracked into the top five restaurants, so the firewall global chains.
Speaker Change: While we are in the <unk>.
Speaker Change: Seven of the top 20.
Speaker Change: And that number has.
Speaker Change: Uh huh.
Speaker Change: Increased a lot quarter over quarter.
Speaker Change: So yes, we are winning.
Speaker Change: New logos, we also believe VR the leader in AI for restaurants, we recently announced that'd be surpassed.
Speaker Change: Processing $100 million inbound calls purely with AI.
Speaker Change: And.
Another thing that we have disclosed in the past.
Speaker Change: I mentioned during our remarks.
We are going to bring.
Speaker Change: Bring it altogether so.
Speaker Change: Power automotive and PV products, and Repower restaurants have not beyond.
Speaker Change: We're going to bring those.
Speaker Change: Customer service solutions into the devices and we're going to demonstrate that.
Speaker Change: <unk>.
Speaker Change: Yes.
Speaker Change: You're driving your car you're already talking to your car that is powered by our AI. So youre asking two car control navigation turning to radio or asked for whether it's stock prices sports scores.
And if you are also powering the drive thru.
Speaker Change: AI dropped throughout the restaurant why do you actually have to drive to the drive through and getting line you should be able to talk to your car and.
Speaker Change: And you talked to the AGM that the card the agents the car talk to the agents at the restaurant is all powered by us.
Speaker Change: And you can basically place your order in advance before you get there so we will demonstrate that.
Yes, it won't be just limited to ordering food you can.
Speaker Change: Okay appointments buy tickets do all sorts of voice commerce.
Speaker Change: Alright, well, thanks, gentlemen, and congrats again on the quarter.
Thank you.
Speaker Change: Oh.
Speaker Change: Thank you I'm showing no further questions at this time. Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
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