SOUNDHOUND AI, INC. Q1 FY2022 earnings

SoundHound reported $4.29 million of revenue for the quarter ended March 31, 2022, with nearly all of it coming from product royalties. The period was the company's last as a private business. SoundHound closed its merger with Archimedes Tech SPAC Partners Co. on April 26, 2022, and its shares began trading on Nasdaq under the ticker SOUN on April 28. Management framed the release around three revenue pillars: royalties from voice-enabled products, subscriptions for voice-enabled services, and monetization that connects the two.

The operating loss widened to $0.49 million from $0.08 million a year earlier, and the net loss widened to $0.39 million from $0.08 million. Diluted loss per share was $0.02, versus a loss of $2.38 a year earlier. Operating margin was negative 11.4%. Operating cash flow was negative $0.22 million, compared with negative $0.19 million, and capital expenditures were $0.61 million.

Revenue stayed concentrated. Product royalties made up the bulk of the top line, helped by scaling of Houndified products with large automotive and device makers. Revenue in both periods came mainly from customers in the automotive and IoT sectors. Four customers generated 59% of revenue in the quarter, and three customers accounted for 72% of accounts receivable at March 31, 2022. That reliance on a handful of partners is a recurring theme in the filings.

Usage metrics grew quickly. Queries into the voice AI platform rose 90% year over year in the quarter, after the company doubled traffic to more than 100 million queries per month and exceeded 1 billion queries in 2021. Cumulative bookings backlog reached $230 million, made up of agreements running from 1 year to more than 7 years, with a roughly 4-year weighted-average contract length. SoundHound also pointed to new relationships with Qualcomm and Netflix and to a new chief revenue officer.

Guidance covers the full year, not the quarter. For full year 2022, the company expects revenue of $27 million to $33 million, with a midpoint consistent with its pre-merger expectations. It expects that revenue to be back-half weighted because of seasonality and the payoff from sales and marketing investment. Management also said it will keep issuing annual rather than quarterly guidance.

The merger reshaped the balance sheet. SoundHound raised gross proceeds of $118 million from the transaction, including $113 million from PIPE investors and roughly $5.4 million held in trust by Archimedes after redemptions. Net proceeds came to $93 million after about $25.3 million of transaction expenses. On a pro forma basis, cash and cash equivalents would have been $101.3 million at March 31, 2022, against the $8.2 million reported on the balance sheet.

The filings lay out the risks plainly. SoundHound has run recurring losses and negative operating cash flow, carries an accumulated deficit of $411.8 million, and expects to keep spending heavily on research and development. It plans to fund operations through a mix of private equity offerings, debt financing, revenue and other sources. The company also cites the COVID-19 pandemic and its effect on automotive production and chip supply, supply chain interruptions, and the Russia-Ukraine conflict and the sanctions that followed. Management expects to reach break-even in 2024, and its first priority for the merger proceeds is sales and marketing.