SOUNDHOUND AI, INC. (SOUN)·Q4 2024 Earnings Summary

Executive Summary

• Q4 2024 revenue was $34.5M, up 101% YoY, with GAAP EPS at $(0.69) driven by a non-cash mark-to-market increase in contingent acquisition liabilities; non-GAAP EPS was $(0.05) .
• Gross margins compressed on acquisition mix: GAAP gross margin 39.9% and non-GAAP 52.1%; adjusted EBITDA loss widened to $(16.8)M .
• Management raised FY2025 revenue outlook to $157–$177M, up from $155–$175M previously; expects adjusted EBITDA profitability by end-2025 and ~40% of FY revenue in 1H25, less back-end loaded than past years .
• Backlog expanded to nearly $1.2B, customer concentration improved materially (largest customer ~14% of FY24 vs nearly half in FY23; top five ~one-third in Q4), and YE cash was $198M with no debt after paydowns .
• Catalysts: raised guidance, early traction in “agentic AI” and unveiled voice commerce ecosystem with multiple OEM POCs; automotive pipeline robust despite macro unit headwinds .

What Went Well and What Went Wrong

• What Went Well

  • “We had our strongest quarter on record with $35 million in revenue, representing an increase of over 100% year-over-year” and reached the top end of the raised FY revenue range .
  • Backlog reached nearly $1.2B with duration slightly over six years; customer concentration reduced sharply (largest customer ~14% of FY24 revenue) .
  • Strategic momentum: launched voice commerce ecosystem; POCs underway with two Japanese and two German OEMs, plus U.S. and Korean OEMs; expanding across QSRs and healthcare .

• What Went Wrong

  • Gross margin compression on acquisition mix and full-quarter impact of Amelia: GAAP 39.9% (vs 49% in Q3), non-GAAP 52.1%; management pruning lower-margin contracts and targeting long-term return to 70%+ .
  • Automotive unit growth hampered by broader industry macro pressures, even as unit pricing showed double-digit expansion .
  • GAAP EPS and operating loss heavily impacted by non-cash mark-to-market increase in contingent acquisition liabilities (~$221M in Q4), obscuring underlying operating performance .

Financial Results

Segment breakdown (disclosed qualitatively; no numerical segments provided):

KPIs and Balance Sheet

Non-GAAP adjustments (Q4 highlights): change in fair value of contingent acquisition liabilities ($220.9M), stock-based comp ($9.9M), D&A ($7.9M); reconciliations provided in 8-K exhibits .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We had our strongest quarter on record with $35 million in revenue, representing an increase of over 100% year-over-year” .
• “Agentic AI is…a network of autonomous agents…This shift allows businesses to focus on defining objectives, while AI handles the execution” .
• “We finished the year with cumulative subscriptions and bookings backlog of nearly $1.2 billion…our largest customer represented slightly more than 14% of revenue in 2024 versus nearly half in 2023” .
• “GAAP loss from operations in Q4 [was impacted] by approximately $220 million [change in fair value of contingent liabilities]…non-operating and non-cash” .
• “We feel confident increasing our revenue outlook to $157 million to $177 million [for 2025]…and expect to achieve adjusted EBITDA profitability by the end of 2025” .

Q&A Highlights

• POC timing and revenue: Automotive POCs targeted for 1H25; voice commerce monetization not assumed for FY25, but enhances Pillar 1 and 2 adoption .
• Backlog composition: Duration slightly >6 years; strong diversity with outpaced growth in restaurants and new energy deal; increased mix of recurring revenue .
• Pricing/contracting: Mix of SaaS-like subscriptions and interaction-/containment-based pricing; usage tiers with higher pricing above thresholds .
• Margin trajectory and mix: Near-term margins weighed by acquisition mix and services; pruning lower-margin contracts; aim to return to 70%+ gross margins over time .
• Automotive macro: Unit growth hampered by industry pressures; maintained double-digit unit price expansion on gen-AI features .

Estimates Context

• S&P Global consensus estimates could not be retrieved in this session due to request limits; therefore, we cannot assess beat/miss versus Street for Q4 or FY guidance in a standardized way. Management did not provide explicit comparisons to consensus on the call or in the release .
• Given the raised FY2025 revenue outlook ($157–$177M), sell-side models may need to align with management’s range to reflect updated phasing (~40% in 1H25) .

Key Takeaways for Investors

• Hypergrowth intact: Q4 revenue +101% YoY to $34.5M; FY revenue $84.7M at high end of raised range; backlog ~$1.2B supports multi-year visibility .
• Guidance raised and phasing clarified: FY2025 revenue increased to $157–$177M; ~40% expected in 1H25 vs ~30% historically—reduces back-end loading .
• Near-term margin pressure: GAAP/non-GAAP gross margins down on acquisition mix; management targeting long-term return to 70%+ and pruning lower-margin portfolios .
• GAAP optics distorted by non-cash liability marks: $(0.69) GAAP EPS driven by contingent acquisition liabilities mark-to-market (~$221M) tied to stock price; non-GAAP EPS $(0.05) better reflects operations .
• Automotive pipeline strong despite industry headwinds: Double-digit unit price expansion; POCs for voice commerce broaden TAM; expect 2025 unit growth improvement .
• Diversification reducing risk: Customer concentration improved materially; expanding in healthcare, energy, telecom, and financial services .
• Execution focus: Integration synergies (cloud migration, tech stack, data leverage) and disciplined GTM investments underpin path to adjusted EBITDA profitability by end-2025 .

Additional Notes

• Liquidity: YE cash and equivalents of $198M; no outstanding debt after paydowns; ATM on file for flexibility .
• Non-GAAP reconciliations provided in exhibits; major Q4 adjustments include $220.9M contingent liabilities, $9.9M SBC, $7.9M D&A .