Leo Carpio

Leo Carpio of Joseph Gunnar questioned the sustainability of the EBITDA pivot point, asking if future EBITDA would be driven by one-offs or pure efficiency. He also explored the current talent acquisition environment, including the ability to find mid-tier talent and the prevailing economics, as well as the company's strategy regarding acquisitions and the broader industry trends in advertiser spending, including specific demographics or categories.

Answer

Ryan Carhart (CFO, PodcastOne) stated that Adjusted EBITDA is expected to continue growing in future quarters, driven by sustained improvements rather than solely one-off events. Kit Gray (President and Founder, PodcastOne) described a competitive but healthy talent environment, noting an increase in new podcast launches and the company's focus on smart deals and expanding existing relationships. He mentioned ongoing discussions for both larger and smaller M&A opportunities. Gray also highlighted increasing media spending levels from major brands like Amazon, Progressive, and State Farm, attributing it to the podcasting medium's growth, technology, and measurable ROI.

Leo Carpio asked about the sustainability of the adjusted EBITDA, questioning if it was primarily driven by one-offs or efficiency. He also inquired about the talent acquisition environment, specifically the ability to find mid-tier talent and the prevailing economics. Additionally, he asked about potential acquisitions on the horizon and the overall industry trend in advertiser spending.

Answer

Ryan Carhart, CFO, affirmed expectations for continued adjusted EBITDA growth in future quarters, clarifying that Q3's one-off benefits did not solely drive the EBITDA. Kit Gray, President and Founder, noted a healthy industry with increasing new podcast launches, emphasizing PodcastOne's strategy of making smart deals and expanding existing long-term talent relationships. He confirmed active discussions for both larger and smaller M&A opportunities. Mr. Gray concluded that advertiser spending is robust and growing, with major brands shifting budgets to podcasting due to proven ROI and attribution technology.

Leo Carpio of Joseph Gunnar & Co. asked about the current advertising environment amid economic uncertainty, the talent acquisition landscape, the specific terms and thresholds of the Amazon Art19 deal, and the strategic rationale for launching a crypto podcasting initiative.

Answer

President Kit Gray reported a good advertising quarter with higher CPMs and diversified revenue streams, noting that while competition is tough, PodcastOne's engaged talent and strategic positioning are key advantages. He described the talent acquisition environment as strong, with a good pipeline of shows seeking their services. Gray detailed the Art19 deal as a three-year agreement with a tiered minimum guarantee based on impression volume, with the first tier at 90 million impressions and the next at 110 million. On the crypto initiative, Gray and Vice Chairman Steve Lehman explained it targets a passionate, loyal fan base, creating an opportunity to build a powerful new content vertical and attract a new slate of advertisers, such as Bitcoin miners.

Asked about Q3 revenue drivers and the Q4 outlook, the timing of the Art19 deal's financial impact, its effect on talent acquisition, and the company's reaction to Netflix entering the video podcast space.

Answer

Executives attributed Q3 revenue to advertising seasonality and the success of new shows. They confirmed the financial impact of the Art19 deal will begin in the current quarter (Q4). The partnership enhances their competitive position for talent by providing better revenue forecasting. They welcomed Netflix's entry into video podcasting as a positive industry development that validates the space.

Inquired about summer seasonality's effect on revenue, podcasting's potential as a reliable news source attracting ad dollars, the status of the talent and M&A pipeline, and sought clarification on the full-year revenue guidance.

Answer

The executive stated that while some seasonality exists, factors like iOS changes and YouTube's growth have made it a unique year. He affirmed that podcasting's long-form, intimate nature makes it a powerful medium. The talent pipeline remains robust with 100+ shows being evaluated, and the M&A funnel is even stronger. Regarding guidance, the company is confident in exceeding $51 million, with the final figure dependent on a few large, pending deals.

Leo Carpio of Joseph Gunnar & Co. asked about the impact of summer seasonality on revenue, whether podcasting is becoming a more reliable news source, the current status of the talent and M&A pipelines, and sought clarification on the full-year revenue guidance.

Answer

President Kit Gray acknowledged summer seasonality but noted its effects were compounded by Apple's iOS download changes, which he sees as a long-term positive for advertiser confidence. He affirmed that long-form podcast interviews are becoming a powerful and trusted medium. Gray described the talent pipeline as robust with over 100 shows in evaluation and noted the M&A funnel is even stronger. Regarding guidance, he confirmed the company expects revenue of 'at least $51 million,' clarifying that reaching the higher end of a previous range depends on several large deals not yet finalized.

Leo Carpio questioned the revised 2025 guidance, asking why the Q2 revenue beat was not fully passed through and whether the outlook incorporates future acquisitions. He also asked for background on the Red Lobster contract.

Answer

CFO Nitesh Sharan explained the guidance reflects the lumpy nature of large enterprise deals and a prudent planning approach, confirming it is purely organic and does not include potential M&A. Regarding Red Lobster, he clarified it's an existing partner that SoundHound supported through its bankruptcy journey and is now scaling again, demonstrating AI's value for businesses in all situations.

Leo Carpio asked whether a potential economic recession would negatively impact the restaurant business or act as a catalyst for technology adoption. He also inquired about any recent changes in the competitive landscape or observed pricing pressures.

Answer

CEO Keyvan Mohajer stated that SoundHound's value proposition is resilient in any economic climate, as businesses invest in innovation during good times and automation for cost savings during challenging times. He noted that their AI now also drives higher revenue through larger ticket sizes. Regarding competition, Mohajer acknowledged that more players have entered the market with the rise of GenAI, but he asserted that they lack SoundHound's maturity in technology, data, and customer integrations. He added that the growing ecosystem creates partnership opportunities, referencing a recent collaboration with Pindrop.

Leo Carpio asked if SoundHound's platform has any missing technologies that might require future acquisitions. He also inquired about the speed at which automotive POCs can convert into full contracts and generate revenue.

Answer

CEO Keyvan Mohajer responded that SoundHound aims to be a one-stop shop with primarily in-house technology, but maintains a flexible partnership strategy to offer third-party solutions when preferred by customers. Regarding auto POCs, he clarified that for existing customers, deploying new features is as fast as 'a flip of a switch,' while the process is longer for new OEMs, though the new voice commerce pillar is accelerating new OEM interest.

Leo Carpio of Joseph Gunnar asked about SoundHound's M&A appetite, potential interest in sectors like energy and retail, and plans for collaboration with major LLM companies. He also inquired about the strategy for securing contracts with the top 5 global QSR chains.

Answer

CFO Nitesh Sharan stated that while the company maintains a programmatic M&A capability, the immediate focus is on integrating recent acquisitions. CEO Keyvan Mohajer clarified that they already partner with companies like OpenAI and utilize an LLM-agnostic architecture. To win top QSRs, Mohajer pointed to their market leadership, the milestone of processing over 100 million calls, and the upcoming CES demonstration of a unified voice commerce ecosystem connecting their automotive and restaurant platforms.

Leo Carpio of Joseph Gunnar & Co. asked for an update on the FDA review process for the 12-lead synthesis software and questioned how the new AccurKardia partnership enhances the company's competitive offering.

Answer

CEO Robert Eno reported that the FDA review is proceeding productively and without disruption, with clearance still expected by year-end. He emphasized that the AccurKardia partnership is competitively crucial, as it adds an automated rhythm assessment for routine recordings. This feature encourages frequent patient use and makes the overall product offering more complete and compelling for the target market.

Asked for an update on the FDA approval process, whether there have been any disruptions at the FDA, and how the AccurKardia partnership strengthens their competitive position and market proposition.

Answer

The company has not experienced any disruptions or delays from the FDA and continues to have productive discussions, expecting clearance by the end of the year. The AccurKardia partnership is crucial as it provides an automated rhythm assessment for routine, asymptomatic recordings, which fills a hole in the product offering, makes the overall package more compelling, and opens possibilities for future collaborations.

Inquired about the source of recent operating cost savings, the potential for future cuts, the company's current cash runway, and the average deal size for opportunities with the Competitive Carrier Association (CCA).

Answer

The cost savings came from Q3 actions that exceeded initial targets, with no further cuts planned for 2025. The cash position consists of the Q3-end balance of $1.5M plus approximately $6.4M from the recent capital raise. CCA deal sizes vary widely but are expected to provide a significant collective revenue increase.

Leo Carpio inquired about the source of the incremental operating cost savings, the potential for future cuts, the company's current cash runway, and the average deal size for the Competitive Carrier Association (CCA) partnerships.

Answer

CEO William Smith explained that CCA member carriers range from small to having a few million subscribers, which should provide a nice collective revenue increase. He also stated that no further cost reductions are planned for 2025. CFO James Kempton noted that Q3 cost-saving actions achieved more than initially targeted and detailed the post-capital raise cash position, allowing analysts to model the runway with the reduced loss rate.