Q1 2025 SoundHound AI Inc Earnings Call
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 cave on my <unk>. Please go ahead Kevin.
Thank you to everyone for joining the call today. SoundHound has another strong quarter in Q1, with over $29 million in revenue, representing an increase of over 151% year-over-year. Our bold moves with product investments and growth initiatives in 2024 are paying dividends.
We've been investing in Polaris, our multimodal, multi-lingual foundation model, and it has proven to be a real differentiator against our closest peers.
We are seeing that our average latency per query is that much as four times better. In noisy environments, we excel and are consistently finding that our sentence accuracy is around twice as good in those environments.
Our word error rate is up to 35% better and we have almost 30 languages in a mature state which is not only ahead of others but significantly decreases any barriers to expand internationally in particular with our customer service solutions.
Our Growth Initiatives in 2024 are taking shape. We acquire Sing3 with the objective of introducing innovative and advanced technology to the restaurant partners and customers and driving business expansion beyond that.
With Emilia, we similarly start lots of synergies and huge opportunity.
And then look at all sets, where the team have been tasked with bringing AI voice commerce to the market, and they're already making great strides in building technology that is attracting interest from huge global brands.
To give more precise examples of our success, harvesting the synergies we achieved.
Our first acquisition in 2004, Sing3, has already upgraded the majority of its locations to our Polaris model.
We have been able to grow their locations by over 30% and upsell SoundHound products to their growing customer base.
Our second acquisition, all set, is bringing the growing merchant locations and brands to the automotive customers that we have accumulated over the past decade to create the largest voice commerce ecosystem of its kind, allowing drivers to transact and order food while driving.
And our latest Amelia Acquisition is upgrading to Polaris, just launch a new Agendic AI platform is entering new industries and is already upselling its solutions to our merchant customers
We cannot be more thrilled. Our strategy is working. Many environmental factors and developments in the technology landscape are also playing to our fable right now.
A recent report from Stanford University highlighted a number of these trends.
A.I. performance continues to improve exponentially, creating opportunities for solution dealers like us.
Systems are also becoming more affordable and accessible, whether that's hardware cost or improvements in energy efficiency. The cost of adoption is being driven further down.
At the same time, enterprise investment is rapidly on the rise, with no business wishing to be left behind the pace of change.
And to meet this enthusiasm, we are seeing more use cases, moved from the lab to realize right across the industries.
Closer to home, we've also made a number of observations from our own specific standpoint. Selective buyers and users are driving disruptive trends, many of which are creating more strong tailwinds for SoundHound. I would like to touch on four of these key trends.
First, in Automotive, we are seeing a notable shift away from OEM's partnering with big tech platforms for their
Over recent months, we've been in discussions with a number of automakers who have proactively approached us, looking for a partner like SoundHound to help them differentiate and innovate and replace their big tech solutions.
Second, in restaurant and hospitality, we are seeing a similar kind of movement. Operators are looking to migrate from cumbersome legacy answering systems to AI ordering solutions in order to future-proof their businesses.
Third, clear momentum is growing around the idea of voice commerce. Notably, consumers are showing a strong appetite for this new convenient modality and the technology is ready to deliver.
Speaker Change: A new ecosystem of technology providers is rising to meet that demand, and of course, SoundHound is already out in front with our groundbreaking voice commerce ecosystem.
Speaker Change: And lastly, the quality of voice AI technology is a true differentiator for customer service AI agents.
Speaker Change: While the hype around agent AI persists, marrying sophisticated AI agents with next-generation voice technology is having the net effect of appending the traditional IVR space. Now customers can speak and actually be heard.
Speaker Change: We consider ourselves the best position vendor to benefit from these friends and given this context is unsurprising that our pipeline is the largest it's ever been and our time continues to expand giving us confidence that we have a massive opportunity to significantly grow our business for years to come.
Speaker Change: Of course, one of the most significant waves of fresh AI-driven disruption comes from
Speaker Change: Just this morning, we sent out a press release with the exciting details of the latest version of our Amelia AI platform, Amelia 7.0.
Speaker Change: The platform is powered by a proprietary multi-processed agentic framework, branded agentic plus, which allows businesses to deploy fleets of AI agents capable of understanding, reasoning and completing actions.
Speaker Change: These AI agents can orchestrate amongst each other and perform tasks entirely autonomously without the need for human intervention.
Speaker Change: Our AI agents use the combination of deterministic and large language models, giving the best of both worlds with control and flexibility.
Speaker Change: The platform also allows for optional human escalational intervention for peace of mind. It is also fully interoperable with a whole range of available integrations.
Speaker Change: Notably, we also believe this is the only Asian platform to equip enterprise-ready autonomous agents with world-class voice AI, enabling these smart AI agents to reason and perform complex tasks with human-like interactions thanks to our incredible advanced speech recognition.
Speaker Change: Imagine calling your doctor, reordering your prescription of a heart-to-prone-mouth medication, paying for a recent visit and making a new appointment.
Speaker Change: This is all done beyond agents that effortlessly understand what you're saying thanks to our advanced voice AI and orchestrating with a network of further sub-agents to instantly schedule, reorder and complete a billing transaction.
Speaker Change: While others continue to talk about the promise of Agentic AI, we are walking the walk and already delivering it in the real world.
Speaker Change: This is underscored by the trust our customers put in us and our solutions.
Speaker Change: Let me now share some of the great customer wins, renewals and expansions in Q1.
Speaker Change: In restaurants, in Q1 we scaled and reached thousands of locations with a large pizza chain that we signed just last year, providing our answering and ordering solutions to ensure no inbound customer calls goes unanswered.
Speaker Change: Further locations were also added with existing brands including Habby Burger, Cases, Barhouse Sup, Five Guys, White Caffel, and McElister among others.
Speaker Change: We also continue to expand across Burger King UK locations together with Acrelac, a global technology company that is reinventing the customer experience with some of the biggest brands in the world.
Speaker Change: In automotive, we joined forces with Tencent Intelligent Mobility, part of the cloud and smart industries group at the multinational conglomerate Tencent to bring world-class conversational AI to the intelligent cockpit of global auto brands.
Speaker Change: Also, multiple OEMs now are running pilots and POCs with our VoiceCommerce solution. I will talk about this in more detail later on.
Speaker Change: In healthcare, three highly regarded companies in the healthcare space chose to renew and expand with us again in this quarter. This included a prominent medical billing company, a healthcare provider that brings test results to the patients at home, and a healthcare provider in the midwest that owns and operates a dozen hospitals.
Speaker Change: These customer validations prove that our technology is adding value to our customers, and it also shows that our business is sustainable and recurring.
Speaker Change: Additionally, we are pleased to note that three of the new deals we won in Q4 have already gone live with our solutions.
Speaker Change: In retail, we signed to launch exciting strategic pilots with multiple top US fitness chains on locking potential for over 15,000 locations.
Speaker Change: We are also hoping to expand market reach through new pilot agreements and ongoing discussions with leading home services franchises, positioning SoundHound smart answering at the transformative solution for multi-unit operations.
Speaker Change: In energy, we have now launched a new AI agent with the large utilities company we signed into for last year, helping them to transform the customer experience.
Speaker Change: Furthermore, we have been forging new strategic partnerships to expand our reach into the space. Just last week, we announced that we are joining forces with PowerConnect AI, the purpose built AI platform for the energy and utility industry to launch a new era of intelligence omnichannel voice experiences designed specifically for this vertical.
Speaker Change: In Information Technology, we renewed with a large multinational conglomerate based out of Tokyo, offering a number of services in various industries and another large Tokyo-based company that offers IT services, system integration, cloud computing and information
Speaker Change: In Telecom, we had an exciting renewal of this quarter with a large British multinational telecommunication company helping to power its employee IT support desk with our best-in-class AI agents.
Speaker Change: In Travel and Hospitality, we signed a new deal with a leading resort developer in Latin America, offering concierge for inbound and outreach services, creating repeatable business across some of the largest hotel friends in the world.
Speaker Change: We also expanded with one of the largest hotels in the world offering full service hotels and resorts.
Speaker Change: In financial services, we have continued to have strong traction with some of the largest financial services companies in the world, including a win with one of the world's largest insurance companies in Europe , and significant renewals and expansions for our employee experience solutions across four financial institutions in Q1.
Speaker Change: As a reminder, we currently work with seven of the ten largest global financial institutions.
Speaker Change: Together with Channel Partners, we had wins, including with a well-known global agriculture OEM, a global tax preparation company, and a North American travel and hospitality company focused on all inclusive vacation and resort management.
Speaker Change: Additionally, we expanded services with a large systems integrator and renewed with a Japan-based multinational IT and services corporation that resell our solution to their clients and manage services offering.
Speaker Change: Now let me update you on our VoiceCommerce solution, which opens up a brand new commercial channel for consumers and businesses and delivers on the promise of transactional voice AI that has never been executed before.
Speaker Change: Our voice commerce initiative is strategically designed to leverage our existing restaurant and merchants together with our OEM networks, to unlock new revenue opportunities within our established ecosystem.
Speaker Change: Moreover, our unique positioning is enabling us to expand voice cameras to OEM's outside of our existing network, and also beyond food ordering to services like table reservations, hotel booking and prepaid parking.
Speaker Change: We unveiled this solution at CES earlier this year and gained massive interest from OEMs and restaurants.
Speaker Change: We also continue the momentum at NVIDIA GTC 2025, where we once again showcase the power of voice AI commerce and its transactional capabilities.
Speaker Change: Last quarter, we talked about the many interested audience pursuing POCs with our voice-commer solution, and I'm happy to report that we are working with the innovation team within some of the largest automakers in the world to bring our vision to life.
Speaker Change: Indeed, we've never seen OEMs move so fast for a product. We also already have over 15 large restaurant chains plugged into our network and, aside from the interest from OEMs and restaurants, we also already have partners signed up for reservations and parking services.
Speaker Change: Another very promising development that could help us monetize voice commerce in the near term.
Speaker Change: is the interesting thing from larger technology platforms that don't want to manage restaurant relationships directly themselves, but want our voice solution available to their users as a safe, convenient, hands-pre-option when ordering food from their vehicles or devices.
Speaker Change: So as you can see, in just a short period of time, we have seen some very promising opportunities with voice commerce and you're excited to explore more opportunities that this ecosystem is quickly creating.
Speaker Change: In closing, it's becoming increasingly clear that the trends we are starting to see playout with voice AI are creating the right conditions for our business to take advantage and thrive.
Speaker Change: Whether it's Voice Enable Agentic AI, our new Voice Commerce solution, or our Polaris Multilingual Foundation model, we are clearly at the forefront of this generational shift in technology.
Speaker Change: Existing enterprise brands are renewing with us at a high rate and OEMs and restaurant brands are approaching us at an equally high pace.
Speaker Change: Our three-pillar strategy is resonating with all businesses, and we are starting to see that integration of Amelia turn to amazing cross-and-upsel opportunity.
Speaker Change: With that, I'll now turn the call over to Litesh to talk about our financial performance, Key Growth Drivers, and Business Outlooks.
Thank you, Keyvan, and good afternoon, everyone.
Speaker Change: Q1 Revenue was $29.1 million, increasing 151% year-over-year. Each quarter is a passing mile marker and our pace is increasing at every turn, even when the road may get jagged.
Speaker Change: Innovation and disruption in our industry is not showing any signs of flow down, and at SoundHound we continue to pioneer new breakthroughs.
Speaker Change: Inference cost reductions and comprehensive model choice that we orchestrate and arbitrate enable us to build new agentic and voice AI solutions using best of breed to deliver better outcomes for our customers, and that builds even more customer interest in what we offer.
Speaker Change: Our technological differentiation, breadth of coverage and capabilities, and scalable infrastructure positions us well for continued chair capture.
Speaker Change: Our Q1 was heavy on enterprise momentum across financial services, health care and hospitality.
Speaker Change: That pace is roughly tenfold of what we were seeing slightly more than a year ago.
Speaker Change: and we are also gaining continued traction with our new generative AI, Agentic Envoys Commerce platforms.
Speaker Change: customer traction continues to be demonstrated with a bookings metric growing sequentially and at a high double digit rate versus prior year.
Speaker Change: That said, given the quarter to quarter volatility, we plan to update this metric only at year end going forward.
Speaker Change: to give you more flavor of underlying usage momentum of our solutions. Let me lay out a few details.
Speaker Change: Within our product pillar, we continue to see strong 50% plus growth in our active cloud users.
Speaker Change: As a reminder, we also sell edge and hybrid offerings, so this only partially reflects what we are delivering for customers.
Enterprise KPIs showed a substantial boost in Q1
Speaker Change: We added tens of millions of interactions on a monthly basis for enterprises.
Speaker Change: We handled a 5X increase in ticket volume, versus the prior quarter, and reduced our average resolution time almost 50 fold, because our automation rates increase nearly 50%.
Speaker Change: Queries into our voice AI engine overall continue to accelerate. We now have over two billion queries and less than a quarter. Not much more than two years ago, that was an annual run rate for us.
Speaker Change: All of this simply demonstrates the continued traction of momentum, and to be clear, we know we are just scratching the surface of the massive opportunity in front of us.
Speaker Change: With that, let me now discuss the first quarter financials in more detail.
Q1 revenue is $29.1 million, up 150% year-over-year.
Speaker Change: The revenue base continues to meaningfully diversify, with no single customer contributing more than 10% of our revenue in the quarter. This is much improved from historical levels, provides overall risk mitigation, and reflects our expanded serviceable markets.
Speaker Change: We are seeing strong, year-over-year growth in our customer service offerings in particular driven by location, expansion and restaurants and scaling across the enterprise business.
Speaker Change: We continue to see an increase in auto AFPs driven by our generative AI solutions in deeper product penetration that said we did see pressure in auto units this quarter because the automotive space navigates complex geopolitical dynamics.
Speaker Change: We have a strong pipeline of new OEMs, and they, along with the restaurants, are very excited about our voice commerce solution.
Speaker Change: It's still early days for this third pillar of our business, but we are optimistic with what we are seeing.
Speaker Change: In Q1, our gap growth margin was 37%, down year-over-year, primarily due to the impact of the business and product mix of recent acquisitions.
Speaker Change: Adjusted for non-cash amortization of purchase and tangible and employee stock compensation, our non-GAAP growth margin was 51%.
We are starting to realize improvements from acquisition synergies.
Speaker Change: and expect much more efficiency capture ahead. And we continue to mine certain low-margin acquired contracts and find ways to either improve them or exit.
Speaker Change: I expect this will likely be an 18 to 24 month process, given the contract links, but we are constantly evaluating ways to accelerate.
Speaker Change: R&D expenses were $24.8 million in Q1, reflecting a 66% year-over-year increase, primarily driven by our acquisitions.
Speaker Change: We increased development spend related to growth innovation and further integrated polaris into our solution portfolio. Part of that was related to our effectiveness in accessing the underlying GPU infrastructure necessary for us to train and deploy advanced models and systems.
Speaker Change: We continue to deploy our state-of-the-art automatic speech recognition engine, driving cost efficiencies and performance benefits for our customers.
Speaker Change: And as I mentioned earlier, significant reductions in inference costs are allowing us to deploy our AI applications more efficiently.
Setting the foundation for Rapid Scale and Adoption.
Speaker Change: So the marketing expenses were $12 million in Q1, reflecting a 117% year-over-year increase, primarily driven by acquisition.
We increased our go-to-market investments, both direct and indirect sales.
Speaker Change: We also invested in brand marketing and demand and lead generation.
Speaker Change: We expect a net effect will be meaningful improvements in sales attainment, retention, and overall sales effectiveness over the coming quarters, and our growing pipeline and improving close rates are early indicators of progress.
Speaker Change: DNA expenses were 18.4 million dollars in Q1, reflecting a 79% year-of-year increase, primarily driven by our acquisitions.
Speaker Change: We continue to invest in improving our overall control environment and infrastructure, consolidating ERPs and enhancing global processes as we scale and integrate our prior year acquisitions.
Speaker Change: We had non-cash employee stock compensation of $17.4 million and non-cash depreciation and re-emeritization, including the re-emeritization of intangibles of $7.8 million in Q1.
All of which are included in our gap results.
Speaker Change: As noted last quarter, this step-up in stock-based compensation in Q1 is the result of taking into account the full impact of the acquired employees' equity awards.
Speaker Change: Our Q1 financials include a gain related to the change in fair value of contingent liabilities, significantly impacting our gap income from operations in Q1 by approximately $176 million.
Speaker Change: Just a quick reminder, this stems from the acquisitions we have completed and is a non-operating and non-cash expense. As such, this item has been excluded in our non-GAAP results.
Speaker Change: Adjusted EBITDAI was a loss of $22.2 million in Q1, OINE was $2.7 million in income for the
Speaker Change: Gap net income of $130 million, and Gap diluted EPS of 31 cents were favorably impacted by the change in fair value of contingent liabilities mentioned before.
Speaker Change: non-GAAP net loss was $22.3 million, and non-GAAP net loss per share was $0.6 in the quarter. This adjusts for non-cash depreciation and amortization, M&A transaction costs, stock-based comp, and other non-cash item.
Speaker Change: Her cash and equivalence at year end was $246 million with no debt. Our net cash used in operations in Q1 improved year-over-year by 13% to $19 million.
Speaker Change: With that, let me discuss our financial outlook. We are reaffirming our prior 2025 revenue guidance of $157 to $177 million.
Speaker Change: In Q1, one of our customers went through a change of control that adversely impacted our quarterly revenue by nearly $2 million versus our expectations entering the quarter.
Speaker Change: and we now see that revenue shifting to later in 2025.
Speaker Change: Aside from that unique situation, the year, which some puts and takes, has started largely as expected despite overarching macro volatility. That demonstrates the resilience of the AI momentum and our business traction.
Speaker Change: Last quarter, I mentioned that we expect first half 2025 revenue to be greater than the historical first half mix of roughly 30 percent that we have realized the last few years.
Speaker Change: In fact, we suggested it would be closer to 40%, we still believe that.
Speaker Change: With the expected ramp in revenue, we also expect to reflect sequential improvement in adjusted EBITDA as we continue to move through the year. We remain committed to our path to profitability and have activated several cost actions to ensure we remain disciplined.
Speaker Change: Accordingly, we continue to expect to achieve a Justity Without Profitability by the end of 2025.
Thank you, and now we will move to Q&A.
Speaker Change: Thank you, and as a reminder to ask a question, you went to press Star 101 on your telephone and wait for your name to be announced. To withdraw your question, please press Star 101 again. Please stand by, looking by the Kenny Roster, one moment for the first question.
Speaker Change: Our first question of complaint from the line of Joe Luria from DA Davidson, Elaine is open.
Jill Luria: Thank you, very much appreciate that the business is now across several verticals, not just
Otto and Restaurants
Jill Luria: But as you look for the where we are now and into the rest of the year
Jill Luria: How should we think about the the levels that the first verticals are at? So how much of the business these days is coming from the restaurant vertical from the automotive vertical versus the rest of the business and how do you expect. So let's go ahead and see what we can do.
Jill Luria: The Growth to Build into the Rest of the Year. Can you, and if you just, if you do 40 percent,
Jill Luria: In the first half of the year, that means you're exiting, you're probably close to the 50 million run rate. What are the verticals that are driving us from where we are today to that exit run rate?
Thanks for the question, girl.
Thank you.
Jill Luria: I'll start by saying you know what we saw this quarter, what we've been seeing trending for the last couple quarters as well balanced contribution across industries as you noted. So we are really well split between the contribution that is from automotive, that is from restaurants, that is from financial services, that is from healthcare.
Jill Luria: It's from insurance, hospitality, so we're getting contributions across a number of verticals, all with their own unique sort of dynamics and growth opportunities, so I'll unpack the two you highlighted, but I'll also hit on Enterprise if that's okay.
Jill Luria: So first with an auto and I noted some of this in the prepared remarks you know the auto industry is going through.
A lot of stuff with the global supply chain dynamics.
Jill Luria: We continue to steal, share and gain and grow and our royalty business is one that we're very optimistic about because we're very under penetrated verses.
EMD's.
Jill Luria: especially with our voice commerce that we announced earlier this year. There's so much conversation going on because we're providing a new pathway for revenue generation so in moving away from us just being a sub component of their cost structure or the bill of materials, we're actually providing revenue opportunities.
Jill Luria: So while we did see, I'll call it relative softness in the auto space this quarter, just given the macro uncertainty, we still are very optimistic about the pathway and a contribution that the auto business will be. What we do feel good is maybe two years ago what was 80% of our business makes.
and now-
Jill Luria: You know, one of several businesses that have low double digit kind of percentage of mix. So I think that's a real positive on the other side. Restaurant, I mean, we've been really bullish about it and there's nothing changing. In fact, if anything, I think the opportunity of
Jill Luria: Billing AI integrated into the restaurant operations, particularly around ordering, but even further more into...
Jill Luria: You know, employee productivity and other use cases. We're seeing more and more of those journeys. In fact, we're in the midst of some of the cross sell opportunity across the enterprise solutions. Now we can bring into restaurants, we can go deeper into employee productivity and solutions for IT stack management, etc.
Jill Luria: So the bigger point here is that the restaurants, we've already been really bullish in the penetration. I talked about in the prepared remarks that we're not crossing 13,000 locations. We're spanning all sorts of cuisine types but getting a really great penetration with pizza and then drive through is obviously making a lot of traction.
Jill Luria: First out in the top of the first inning kind of early days of the transformation that's going to happen in restaurants and we believe we have a really strong competitive position differentiation mode and running start. So we still think that's probably one of our greater outpaced shares of growth certainly over the medium and long term, but we also expect that to continue in the near term.
Speaker Change: and then, so I think that hits your question, Gil, but if I can add on the enterprise.
Jill Luria: Part, you know, especially today, this morning we announced our new agenda solution, 7-0.
I mean, that really-
Jill Luria: First of all, it solves many important things for many of our enterprise customers across those vertical financial services of healthcare, hospitality, insurance, retail.
Jill Luria: and one of the things we're most excited about is that it is very much accelerating time to value for those customers. So the speed of us, what maybe used to take us six weeks, three months to deploy a capability to increase the use cases, that's happening in...
Scott Smith: Weak stays, and in some cases, hours we're finding. So our new solutions are allowing us to create more value for the customers, and we know that's going to not only expand the interaction base, expand the use cases, it's going to make the containment and success measures much better, and ultimately for the customer that's value and for us, it's more revenue.
So...
Nitesh Sharan: We really see opportunity across the breadth of industries and I think that from our perspective is great because maybe a couple years ago we were sort of dependent on one deal to get a car line for a quarter. We're definitely not in that circumstance anymore.
Speaker Change: Second one is for Kevan and on an agentic technology. It's a source of much controversy these days.
Speaker Change: in terms of where we are and the maturity of that technology. A lot of technology you're deploying for your customers are ones that you've been working on for 20 years and you've refined over time.
Great question. So if you...
Thank you.
Speaker Change: If you look at our 2015 demos, we've been thinking this way for 10 years.
Speaker Change: We had them with demonstrations that are things on YouTube that actually were live products that showed that agentic behavior when you have these complex compound questions and tasks
Scott Smith: He performed those tasks and we was really fast and accurate and the world is just catching up to the adoption of that vision but we've been added for more than 10 years because we unveiled it about 10 years ago. So there's the things that...
Scott Smith: Make us more mature in that is that we've been doing it, we've pioneered a lot of it. We have a lot of those experiences live in production and we have a ton of data and we have, you know, SoundHound is one of the few companies that
Speaker Change: has devoted technical founders that from Stanford Journal Room are still working on things like this and that's, you know, our heartbeat is faster than time to innovate and leapfrog others. So, I agree that it's a new...
Speaker Change: The concept that people are talking about but it's not new for us and that's why we think we have an advantage in terms of accuracy is an issue for a lot of people.
Speaker Change: Speed is another issue for a lot of people, having control over the behavior of these systems is very important because you can, this is not about having a demo that impresses people, this is about
Speaker Change: really being the AI of a business so you can't be 70% right. If you're building a demo you can be 70% right and the people forgive the rest but our audience is not forgiving so we have to be closer to 100% and that's what you're really good at.
That's great. Thank you.
Thank you, Scott. A moment for our next question.
Speaker Change: The next question come from Lionel Leo Carpio from Joseph Gunner. The line is open.
All right, good afternoon, gentlemen. I actually have two questions.
The first question is regarding the restaurant side of business.
Speaker Change: As we're going into the year and there's uncertainty about recessions and possibly speculation situation in the economy, could that possibly impact your restaurant business or is it more a case that potential recession is driving more customer interest in your technology at this point, for a fish at the gate.
Speaker Change: We get support from both sides of it, so when the economy is good, people invest in innovation that brings them to us, then it's challenging if they want to invest in automation and cost
and initially are...
Every part of our pitch for restaurant was cost-saving.
and quality, quality of the customer experience.
Speaker Change: But now we are actually able to show that the ticket size we generate with AI is bigger than
Speaker Change: The ticket size that non-AI order take care is generates so we can also include in our value proposition, increase revenue. And that's really important for restaurants. They want to increase the revenue, they also want to reduce costs and so we think the value proposition
Speaker Change: We got to assess the macro environment and sometimes one for us is bigger than the other.
Speaker Change: Okay, and then the second question is regarding the competitive environment. Have you seen any changes in the competitive landscape, any pricing pressures, any...
played her right and has actually become more aggressive.
So.
Speaker Change: Definitely more players in the space. I mean, used to be like the 4GNII, you know, us and the big tech mostly and maybe some a couple of smaller providers.
Speaker Change: but they don't have the mature state that SoundHound has in terms of technology.
Speaker Change: In terms of data, in terms of know-how, in terms of the customer based on integration, you're much more at mature states.
Speaker Change: And a lot of the other players are creating an ecosystem that benefits us. There are some pieces.
Speaker Change: of a user experience that might be necessary to complete something, and other companies might provide that, so we are very...
Speaker Change: Open to partnering, for example, today we included in our earnings announcement collaboration with Pindrop for authentication and security and there are other examples of that.
Thank you.
Speaker Change: Thank you. Once again, that star 1-1 for questions, star 1-1. One moment for our next question.
Speaker Change: Our next question will come flying out of Mike Latimore from Northland Capital Markets,
Speaker Change: He had his vision, they were for Michael Latimore. So a couple of questions. One, I'm calling what is Ross Margin for the second quarter and for the rest of the year. And secondly, how the retention rates are within Amelia.
For more information visit www.FEMA.gov
Sure. Thanks for your question. So, on the first one...
Speaker Change: We're not guiding specifically gross margin but I think I've noted in this call and prior calls that were...
Speaker Change: We're still in sort of the digestion of the acquisitions and we know the business mix and contributions, particularly with relation to the call center business that we acquired and then some of the escalation support business.
including also some of the professional service activities.
and Scott
Speaker Change: Sequential Improvement and Adjusted EBITDA through the year that we expect and I would say that's going to happen both through gross margin improvements, but also we continue to look at our overall OPEX footprint and make sure we're managing that carefully and thoughtfully. So that was your first one. Sorry, can you repeat the second question?
Thank you.
Speaker Change: You know take a close look at a number of areas and after we acquired them we saw a massive opportunity in front of us we we have reinvested in a few pockets
Speaker Change: and making sure that we really understood what was working, what wasn't in their customer environment.
Speaker Change: and very complicated customer environments and millions and millions of interactions and use cases and making sure we were delivering for those customers. So that team really, more robustly, has been up and running now for just several months. And I think they're doing a great job to kind of continue to improve retention rates. And I will say that we aren't reporting exact retention levels, but we see a real pathway to strengthen improvement in the gross retention and that retention. We are seeing a lot of, especially with new product releases and so forth in expansion of our use cases.
Speaker Change: and now with the Agentic Offering, and I talked about in Gil's question earlier about time to value. We expect great expansion.
Speaker Change: at all of these customers. So we're on a journey. I think we want to get certainly those retention levels.
Speaker Change: You know, our go-to-market motion, we're investing in both direct sales and indirect channel relationships and all of that is going to help continue to help scale this year but more importantly next year in the year after.
Good, thank you. Thank you, or moment for our next question.
Scott Buck: Our next question I can find is Scott Buck from AT Winwright, Glenn is open.
Scott Buck: Hi, good afternoon, guys. Thanks for taking my questions. Apologies, bouncy ground on some calls this afternoon, so you may have already answered these questions.
I guess first I'm curious looking at the reaffirmed guide.
Scott Buck: Should we be assuming, or maybe you can talk just about what the M&A environment looks like and you guys have done several deals in the past, are you, the environment conducive to doing a deal that gets you to
Scott Buck: to the current 157 to 177, or are you thinking of that more as an organic goal?
Thank you. Bye.
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Yeah, I'll break that question into two. Thanks, Scott.
Speaker Change: Number one, we don't need M&A to achieve the outlook we provided here, there was no embedded assumption of acquiring anything in that, and I think our organic opportunity across some of the questions I gave earlier, and opportunities across our verticals and products that is quite tremendous, and the outlook for this year will be...
Speaker Change: much smaller than the outlook we give for next year. So we're really bullish on what we're driving ourselves. That said, I think the...
Speaker Change: The opportunity for continued acquisition is there, like there is a lot of...
Speaker Change: and I will say now after having done a few last year we get a lot of active inbound inquiries.
for folks looking for sort of another stage in there.
Journey and thinking about partnerships.
Speaker Change: So I'll just go back to how we frame and think about it. I believe I mentioned this in prior call.
Speaker Change: You know, as long as an M&A is aligned to the strategic vision of what we're trying to drive and ultimately this company is about, you know, we're in, we're in the new Gen AI LLM era. We believe conversational AI and in particular, you know, the new way of how humans will interact with technology is just getting going. We're going to create the next major inflection in the human technology interface and voice AI will be the killer app in that world. And we have built a proprietary stack with deep patent portfolio and we have great engineers who have been working on this for a long time and we're building amazing
Speaker Change: and maybe professionalizing things that could have used maturity for us prior to the acquisition. As long as we have an honest strategy, we can operationalize it, and ultimately, and most importantly, you know, the right price.
Speaker Change: You know, a lot of the deals we do, we do shared economic, so even for people looking for exits.
You know, we kind of go, hey, if you have...
Speaker Change: If you can bring this to bear if you believe in what your company can do and together what we can build, let's ride the upside together.
Speaker Change: I think that's a unique proposition for companies looking for exits right now where they could kind of say hey tired I'm done with it and let's move on or a lot of times people just for circumstances organizations coming together as a real accelerant. That's kind of the partnership frame that we looked at when we think of M&A opportunity.
Speaker Change: We're openly looking, nothing's on the immediate horizon, nothing's needed for this year's outlook, but I believe over the next five years, we will continue to look and grow and I think the industry that is quite early stage will naturally...
Speaker Change: Over time, Consolidate, and I think that's just a natural part of any healthy, burgeoning you industry. And we'll be, you know, hopefully a major player in that.
Great, I appreciate that, that added color. And second, I'm curious, should should I be thinking about, um,
Speaker Change: A more challenging macro environment is potentially being a revenue catalyst given the efficiencies that you bring to the customers. Just, you know...
Speaker Change: Given the macro seems, the perception of the macro seems to change every six hours.
Speaker Change: You know, trying to think about how you guys think about, you know, potential slowdown in the economy.
Thank you.
Speaker Change: goes to go through cycles that maybe people measure in months or quarters. I mean we're really talking about a generational shift.
Speaker Change: and how humans are interacting with technology. We believe the next 15 years are going to massively inflect, and again, it's going to be conversational AI led with voice capabilities. It's going to be underpinned by a generative AI in large language models.
Speaker Change: The architectures that we can orchestrate and arbitrate between, and those are the solutions we're bringing.
and so, as Keyvan mentioned to an earlier question,
Speaker Change: We actually think the AI story has resilience on either upside innovation that's required to help company scale.
or on the downside, efficient risk protection part. And honestly, the solution with different customers, they have...
Speaker Change: and different needs. But I do think what we've seen even during these last quarter or two quarters of volatility
Speaker Change: The AI penetration of the wallet or the IT budget is not slowing down at all. In fact, it's growing. It's again, we don't think that doesn't show signs of evading.
Speaker Change: and I think what people are more curious about are, and if I take a three-year view of what's been going on in the AI, we were first like, okay, everybody needs to get the hardware pieces and the GPUs and then everybody needs a cloud service provider. We're now in clearly in the zone of applications, and how do I get outcomes that really help my customers, my end customers? That's the conversations we're having every day with our customers. And I think that has a lot of resilience, so.
Speaker Change: I don't know relative to where investors expectations because it's certainly there is volatility, but we think we've got a lot of runway ahead and we're not certainly immune to macro volatility. I don't mean to suggest that, but I think we've still got a ton of opportunity go after.
Speaker Change: I appreciate that and I think that makes a ton of sense. That's all I had guys. I appreciate it. Thank you.
Speaker Change: Thank you. Thank you. And with that, this concludes the question and answer session. Thank you for your participation in today's conference. This doesn't include the program. You may now disconnect. Everyone have a great day.
Ives, Scott Smith, Thomas Blakey
Speaker Change: [music].