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shares of Soundhound AI (Thorn 17.04%) Shares fell 21.4% in after-hours trading Thursday after the artificial intelligence (AI)-powered voice solutions provider released its fourth-quarter 2023 report.
The stock decline was due to sales and profits for the quarter falling below Wall Street consensus estimates, as well as expectations that the company would deliver positive earnings before interest, taxes, depreciation, and amortization (EBITDA). This is due to the postponement of the date. Last quarter, management reaffirmed that it expected to achieve this goal in the fourth quarter of 2023. But that didn’t happen. This metric was negative $3.7 million in the quarter. This goal is currently scheduled to be achieved in 2025.
It remains to be seen whether the decline in stock prices is just a blip in the recent massive rally. SoundHound AI stock soars after AI chip leader Nvidiadisclosed through a February 14 filing with the Securities and Exchange Commission (SEC) that it owns a small stake in SoundHound. Specifically, Nvidia owns approximately 1.73 million shares, giving him less than 1% ownership.
Image source: SoundHound AI.
SoundHound AI Key Quarterly Numbers
| metric | Q4 2022 | Q4 2023 | change |
|---|---|---|---|
| revenue | $9.5 million | $17.1 million | 80% |
| GAAP operating income | ($29 million) | ($12.4 million) | Losses reduced by 57% |
| GAAP net income | ($30.9 million) | ($18 million) | Losses reduced by 42% |
| GAAP earnings per share (EPS) | ($0.15) | ($0.07) | Losses reduced by 53% |
Data source: SoundHound AI. GAAP = Generally Accepted Accounting Principles.
Year-over-year revenue growth accelerated significantly from 19% in the third quarter.
Wall Street was expecting a loss of $0.06 per share on revenue of $17.75 million, so SoundHound missed both expectations, albeit by no means. Revenue was near the low end of the company’s guidance range of $16 million to $20 million.
For the full year 2023, SoundHound used $68.3 million in cash to operate its operations, which was an improvement from 2022’s cash use of $94 million.
CEO’s statement
Here’s what CEO and co-founder Keyvan Mohajer said on the earnings call:
This year was a breakthrough year for SoundHound as we rapidly integrated powerful new generative AI capabilities. Our real-world voice AI applications are already in production, driving consumer engagement across vehicles, devices, and customer service businesses. We also acquired SYNQ3, establishing SoundHound as the largest voice AI provider for restaurants. Our speed and agility within this AI revolution puts us ahead of the curve in terms of delivering real commercial value.
SoundHound announced its acquisition of SYNQ3 in early December. At the time, the company said it would pay $25 million upfront for the acquisition, a ratio of approximately 80% stock and 20% cash.
In its press release, SoundHound said SYNQ3 “adds major brands across drive-thru, fast-casual, casual segments, and convenience stores to SoundHound’s rapidly growing customer base, totaling more than 25 national and multinational chains. “It will be.”
Guidance for 2024 and 2025
Management expects full-year 2024 sales to be in the range of $63 million to $77 million, representing annual growth of 37% to 68%. The outlook had a midpoint of $70 million, in line with Wall Street’s forecast of $69.7 million.
Management also announced its outlook for 2025.
- Revenues exceed $100 million. Assuming the company’s 2024 revenue falls within the guidance range, the 2025 outlook would be for annual growth to exceed his 30% to 59%.
- Adjusted EBITDA is positive.
worth seeing
Last quarter, I wrote that SoundHound AI stock was worth watching, and that’s still my opinion. I’ll repeat my summary with a few updates.
SoundHound AI revenue increases [substantially]On the other hand, operating loss, net loss, and negative operating cash flow all improved compared to the same period last year. Another notable positive is that the company expects adjusted EBITDA to remain positive in the fourth quarter. [This didn’t happen in Q4, which slightly weakens the bullish thesis.]
The company operates in the field of artificial intelligence, which has strong long-term growth potential. I would like to keep an eye on this along with the progress towards monetization. However, it faces stiff competition, including several large tech companies.
I also advised investors last quarter to pay close attention to Soundhound’s liquidity position, as Soundhound’s cash burn rate was very high relative to its cash position. Investors still need to monitor liquidity, but this issue has improved considerably. Assuming an operating cash burn rate of $68.3 million in 2023, the company’s $109 million in cash at the end of the year will only last for about 1.6 years. However, SoundHound stated in its earnings call that its current cash balance exceeds $200 million. At 2023 operating cash burn rate, this cash will last him at least 2.9 years.
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